Iron ore billionaire Andrew Forrest has long pledged to transform Australia’s energy landscape with green hydrogen made from renewable energy, even attending the Cop28 climate conference in 2023. In a ship called the “Green Pioneer”.
But experts questioned whether the green dream had become a reality after Fortescue’s victory. Announced this week It has cut 700 jobs across its businesses globally in a bid to stay “lean”, with an unspecified number in its power unit.
Here we take a look at the emerging green hydrogen industry and the headwinds and tailwinds it faces.
What is green hydrogen?
Hydrogen, as periodic table enthusiasts will remember, is the simplest and most abundant element in the universe. It makes up about 73% of the mass of the Sun and one-tenth of the mass of the Earth.
Refineries use hydrogen to crack heavy oil into gasoline and diesel, and to make ammonia for fertilizers. It’s also an important energy source that could one day replace gas or other fossil fuels, used in everything from power generation to metal production and heavy transportation.
But hydrogen typically needs to be separated from other elements, and that requires energy. According to the International Energy Agency, hydrogen production and use is associated with emissions of 900 million tonnes of carbon dioxide in 2022, or nearly twice Australia’s total emissions.
The energy source used to split hydrogen is classified into: to twelve colors.
CSIRO highlights a few of the With green hydrogen extracted without greenhouse gas emissions, usually via wind, solar or hydro-powered electrolysers.
So-called blue hydrogen uses steam to separate hydrogen from natural gas, isolating the resulting emissions. If not isolated, it is gray hydrogen. If coal is used (as in nuclear power plants) The Japanese were looking forward to Victoria.), which is brown or black in color, depending on the type of coal. There is also “pink hydrogen” if nuclear energy is the energy source.
Is Fortescue pulling out of the green hydrogen scene?
Fortescue said it “remains steadfast in its commitment to be the world’s leading green technology, energy and metals company with a strong focus on achieving true zero.” [by cutting 90% of emissions] By 2030″.
The cost reductions relate to the consolidation of the metals and energy divisions into one division “to simplify its structure, remove redundancies and achieve cost efficiencies.”
“We are in no way backing away from our commitment to green hydrogen,” Forrest said in a statement to Guardian Australia. “In fact, we are doing everything we can to support green hydrogen in Australia by investing in renewable energy and hydrogen technology every day.
“Energy pricing remains a challenge in Australia, due to fossil fuels and subsidies for fossil fuels.”
According to investment bank UBS, Fortescue Proposed green ammonia plant On Gibson Island in Queensland, electricity needs to cost between $20 and $30 per megawatt hour to be viable, but recent long-term contracts for large wind and solar farms are offering between $70 and $90 per megawatt hour.
These price gaps must be closed if we are to realize the hopes of “green steel” or other green metals that use hydrogen.
Meanwhile, AGL Energy confirmed on Friday that Fortescue had ended its plans to produce hydrogen at the decommissioned Liddell coal-fired power station. “AGL remains committed to exploring options for green hydrogen production and future fuels in the Hunter,” it said. [Valley] “We plan to establish a site in the future if it is economically feasible,” a company spokesperson said.
UBS has issued a “sell” call on Fortescue shares, forecasting at least another 10% drop (based on the more than 25% drop in 2024 so far). The main reason for the drop is falling iron ore prices as demand slows in China — something that has nothing to do with Fortescue’s hydrogen hopes.
What do governments do?
The government will provide a tax credit to support green hydrogen as part of The future is made in Australia. Producers will receive an “incentive” of $2 per kilogram for up to 10 years — between mid-2027 and mid-2040 — for projects that reach final investment approval by 2030.
States also contribute to this effort. For example, South Australia has $500 Million Hydrogen Job Creation Plan This includes $100 million in state and federal support. Hydrogen Centre in Port Bonython Which aims to produce green hydrogen-related exports by 2030.
Meanwhile, New South Wales will offer up to $3 billion to attract similar projects to the state, with an “ambitious target” by 2030 of producing 111,000 tonnes per year of green hydrogen and 700 megawatts of electrolyser capacity.
But other countries are spending much more. The US Inflation Reduction Act could top $1 trillion (A$1.5 trillion) for decarbonisation programmes, including hydrogen, electric vehicles and more.
Fortescue’s cuts are likely linked to failure to be present. Shortlisted for the first $2 billion The amount is part of the federal government’s $4 billion “advance hydrogen” scheme, one of the sources added.
What does the hydrogen sector think?
Insiders say much of the climate action depends on “cost-effective” renewable energy, not just green hydrogen.
So-called blue hydrogen may be a short-term solution to make the product cheap enough to boost demand, but “it’s better for the planet to go straight green,” one source said.
Fiona Simon, CEO of the Australian Hydrogen Council, said Fortescue’s move was “less about hydrogen and more about one company and how it seeks to reassess its priorities”.
However, “we all knew that hydrogen was difficult, and in the last two or three years [experience has shown] “This is more difficult than we thought,” Simon said. “And it certainly doesn’t spell the death of hydrogen.”
She added that scaling up production of electrolyzers, which use electricity to split water into hydrogen and oxygen, would help reduce costs.
By some estimates, hydrogen costs would need to fall to around $2 per kilogram to become competitive. A recent study by the US government This puts the current cost at $12 to $16 per kilogram when delivery costs are included.
What then?
The International Energy Agency estimates that global demand for hydrogen will reach 95 million tonnes in 2022, up by about 3% that year. Low-emission fuels accounted for only 0.7% of demand.
“In the current situation, it will be very difficult, if not almost impossible, to reach $2,” Minh Le, global head of hydrogen at analyst firm Rystad Energy, told analysts. [US] “For green hydrogen”.
However, he said, “the momentum for hydrogen development remains strong,” with “several major auctions taking place in key regions” this year in Europe, Japan and elsewhere.
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“There is a lot of work to be done on demand-side policies to incentivise potential end users and reduce the green premium associated with clean hydrogen,” said Nigel Rambogon of Rystad Energy, with the next six to 12 months being “critical” for the sector in Australia.
“Without significant government support, green hydrogen will remain the most expensive color of hydrogen.”
