Mitigating Renewable-Induced Risks for Green and Conventional Ammonia Producers through Coordinated Production and Futures Trading

TL;DR

This paper introduces renewable ammonia futures and a game-theoretic trading model to reduce revenue risks for both renewable and conventional ammonia producers caused by renewable energy variability.

Contribution

It develops a novel financial instrument and integrated production-trading framework that enhances profit stability for ammonia producers under renewable energy uncertainty.

Findings

Renewable ammonia futures improve profit stability for producers.

The model increases CVaR utilities by over 5% and 10%.

Sensitivity analysis confirms robustness under different renewable scenarios.

Abstract

Renewable power-to-ammonia (ReP2A), which uses hydrogen produced from renewable electricity as feedstock, is a promising pathway for decarbonizing the energy, transportation, and chemical sectors. However, variability in renewable generation causes fluctuations in hydrogen supply and ammonia production, leading to revenue instability for both ReP2A producers and conventional fossil-based gray ammonia (GA) producers in the market. Existing studies mainly rely on engineering measures, such as production scheduling, to manage this risk, but their effectiveness is constrained by physical system limits. To address this challenge, this paper proposes a financial instrument termed \emph{renewable ammonia futures} and integrates it with production decisions to hedge ammonia output risk. Production and trading models are developed for both ReP2A and GA producers, with conditional value-at-risk (CVaR) used to represent risk preferences under uncertainty. A game-theoretic framework is established in which the two producers interact in coupled ammonia spot and futures markets, and a Nash bargaining mechanism coordinates their production and trading strategies. Case studies based on a real-world system show that introducing renewable ammonia futures increases the CVaR utilities of ReP2A and GA producers by 5.103% and 10.14%, respectively, improving profit stability under renewable uncertainty. Sensitivity analysis further confirms the effectiveness of the mechanism under different levels of renewable variability and capacity configurations.