Subsidies: The Mother’s Milk of Corporatism and Grifting

Here’s how Reuters explains that small issue in the story’s opening paragraph:

Without a single sales contract in hand, Dutch fertilizer company OCI (OCI.AS) is building a $1 billion plant in Texas to produce ammonia with low greenhouse gas emissions, a gamble requiring heavy government subsidies, new markets and a contingency plan.

Oh.

But hey, no worries: There’s those “heavy government subsidies” sitting out there, courtesy of Joe Manchin’s vote to pass last year’s Inflation Reduction Act, just waiting to flow to speculative projects like this one.

Reuters expands on that particular theme with this sentence, in which its writers say the quiet part out loud:

The $430 billion IRA aims to cut carbon emissions across the U.S. economy, mostly through technologies that are uneconomic without subsidies. [Emphasis added]

Oh.

You say technologies like “green” ammonia are “uneconomic without subsidies”? Who could have ever seen that one coming?

But that’s not all: In the very next paragraph, Reuters explains that even with the IRA subsidies, projects like this one will require the enactment of even more subsidies to help the “customers” for this ammonia (which, remember, do not even exist currently) afford the stuff, because it’s certainly going to cost a hell of a lot more than the non-”green” ammonia.

Check it out:

But even with U.S. support, blue ammonia economics hinge on further government incentives. This time the incentives are expected from Japan and South Korea for utilities to produce electricity with less emissions, using coal and 20% ammonia. That is the percentage utilities consider technologically feasible for now without causing emissions of another pollutant, nitrous oxide, to increase. [Emphasis added]

Oh.

But wait: What happens if the governments in Japan and South Korea decide to stop saddling their citizens with massively higher costs for fertilizers, energy and food and fail to enact those further incentives? Well, OCI has a plan for that eventuality, too, and it also hinges on yet another country, and you will never guess which one.

Take a look:

If utility premiums don’t emerge, OCI plans to use its Texas blue ammonia to make fertilizer in The Netherlands, where the company has under-utilized its plants due to high natural gas prices. [Emphasis added]

That’s right: The Netherlands, whose government has spent the last 2 years moving to destroy its domestic farming sector in the name of – you guessed it – lowering the use of the exact same nitrogen-based fertilizers this ammonia is designed to produce. Of course, that government collapsed over the weekend, so maybe OCI is betting our government’s billion dollars on it being replaced by a friendlier, more sensible regime.

Perhaps this multi-level, multi-national subsidy scheme will all work out, but it seems like a hell of a lousy and risky way to build a business. This all seems destined to end up creating an entire new class of Solyndras over the next few years.

You just cannot make this stuff up, folks, and who would ever even want to try?

This article originally appeared at the excellent Energy Transition Absurdities (subscribe today!) and is reposted here with the permission of the author.