Publisher’s note: Due to the National Day of Mourning for the late Her Majesty the Queen, Money Morning will not have a Thursday edition this week. We will resume our regular publishing schedule on Friday, 23 September.
In today’s Money Morning, Fortescue Metals reveals details of their new decarbonisation plan, where green hydrogen is front and centre. It seems hydrogen is getting more and more attention as of late. Is this the beginning of a new investment trend? Read on for more…
In 2020, while most of the world was in lockdown, Andrew ‘Twiggy’ Forrest put together a team of 50 staff and travelled the world.
They visited more than 40 countries to talk with politicians, businesspeople, and investors.
All this led Forrest to one conclusion: that there’s a ‘genuine thirst for our green energy.’
As he said back in March last year:
‘I felt a change in the global mood, a shift in belief, that the impossible could be possible.’
As you probably know, this led to Fortescue Metals Group creating a new subsidiary, Fortescue Future Industries (FFI), and setting a 2030 net-zero emissions target.
Yesterday, the company revealed how much they’d be spending on their decarbonisation plan: US$6.2 billion, or around AU$9.2 billion, to switch to renewables.
It’s not just about being ‘green’.
As FMG said, they expect to save US$818 million a year on net operating costs from 2030.
Green hydrogen will play a big role in Fortescue’s ambitious plan.
Along with decarbonising their operations, Fortescue — through FFI — is also planning to produce 15 million tonnes of green hydrogen by 2030, for which they expect to start receiving money as soon as 2024.
It’s interesting, especially as things have been moving for green hydrogen…
High gas prices are making green hydrogen more competitive
Hydrogen isn’t created all the same. What I mean is that hydrogen is classified in different colours depending on how it’s created.
There’s grey — the most common one — created from fossil fuels.
Then there is blue, which includes some form of fossil fuel and carbon capture to prevent emissions from going into the air.
And there is green hydrogen, which is produced through electrolysis using renewable energy. There is even pink hydrogen, which is made with nuclear energy.
Hydrogen produced via green energy has huge potential to help phase out fossil fuels and could be key in hard-to-decarbonise industries such as steel, aviation, and shipping.
Renewable hydrogen, or green hydrogen, is, in general, more expensive to produce when compared to hydrogen made from fossil fuels.
The Australian government aims to produce green hydrogen for less than $2 a kilogram, much lower than the $4–6 a kg it costs today.
But there’s been plenty of effort to make it cost competitive. And when it comes to green hydrogen, two factors are driving its costs.
One is electricity. But renewable energy prices have been falling, narrowing the gap between the costs of green hydrogen and hydrogen produced with fossil fuels.
The second is electrolysers: the system that uses electricity to split water into hydrogen and oxygen. Regarding this, there’s been an effort to bring costs of electrolysers down and increase efficiency.
There’s been a lot of exciting innovation made in this last area to look to reduce the cost of electrolysers.
For example, in this area, capillary-fed electrolysis is looking very promising.
But the other thing that’s been making green hydrogen more competitive when compared to grey and blue hydrogen is high gas prices, particularly in Europe.
Hydrogen is getting plenty of attention
There’s been some great news for green hydrogen lately, too.
The newly passed Inflation Reduction Act in the US, for example, includes tax credits for green hydrogen.
As Andrew March from Plug Power put it:
‘With the passage of the Act, we expect a boom for our electrolyzer and green hydrogen business. All applications that use grey hydrogen today, such as fertilizer manufacturing, will now be able to buy green hydrogen at a competitive price.’
And hydrogen has also been gathering momentum in Europe as they rush for alternatives to Russian gas.
Last week, the European Union announced it would be investing 3 billion euros into creating a European Hydrogen Bank to build up their supplies.
One place this excitement has been feeding into already has been in platinum prices, which is one of the components needed for electrolysers. Platinum prices have risen from US$831 an ounce in early September to US$922 today.
But global demand for green hydrogen could be huge in the coming years, and much of the investment needed is already flowing in.
Until next week,
For Money Morning
Selva is also the Editor of New Energy Investor, a newsletter that looks for opportunities in the energy transition. For information on how to subscribe, click here.