Fortescue Metals Group Ltd (ASX: FMG) founder Andrew ‘Twiggy’ Forrest has a lot at stake in the race to produce green hydrogen.
The S&P/ASX 200 Index (ASX: XJO) mining stock has differentiated itself from its peers by investing heavily in the research and development of the technologies needed to produce green hydrogen commercially and profitably.
That task has primarily fallen to the company’s green arm, Fortescue Future Industries (FFI).
But there’s another big-name horse in this race.
Namely Orica Ltd (ASX: ORI), which commands a market cap north of $7 billion.
We’ll get to Orica’s hydrogen ambitions in a tick.
But first…
What are Fortescue’s green hydrogen plans?
When you run electricity through water (don’t try this at home!), it’s possible to separate out the hydrogen from the oxygen.
Grey hydrogen uses natural gas to power this process.
Green hydrogen makes use of renewables, like solar, hydropower, wind or geothermal energy.
According to Fortescue, “Through FFI, Fortscue will use green hydrogen to decarbonise the company’s mining and shipping fleet including trucks, drill rigs and trains.”
In a bid to tackle global warming and achieve its own ambitious net zero targets, Fortescue also hopes to use that clean energy source to produce green iron.
But while a lot of money has been spent and the projects have garnered plenty of media attention, the results have so far been slow in coming.
The best near-term hope looks to be Incitec Pivot Ltd’s (ASX: IPL) Gibson Island ammonia plant, located in Queensland. A final investment decision (FID) is expected on that project before the end of the year.
Which brings us back to…
Is Orica leading this race?
In Orica’s sustainability day investor presentation report, released yesterday, hydrogen was mentioned no less than 19 times. The company noted the positives and negatives of both grey and green hydrogen to produce ammonia.
Orica managing director Sanjeev Gandhi, however, stressed that green ammonia woul be more expensive to produce than grey ammonia for some years yet.
Hence, any projects by Fortescue, Orica or others will need to tap into some of the $2 billion green hydrogen support program unveiled by Jim Chalmers in the government’s budget back in May to be profitable.
The so-called Hydrogen Headstart program is part of an additional $4 billion the government plans to invest in Australia’s renewable energy sector.
As for the costs, Gandhi said (courtesy of The Australian):
These costs can be anywhere between 50% to 100% more expensive in Australia, compared to grey hydrogen – assuming a $12 gas price, and based on the current renewable price, and the cost of electricity and the cost of the investment.
That’s not stopping Orica from moving forward with its plans to construct a 50 megawatt-hour electrolyser at its Kooragang Island ammonia plant, located in New South Wales. A project it’s collaborating on with Origin Energy Ltd (ASX: ORG).
And with the opening scheduled for 206, Orica might just beat Fortescue to the punch in the green hydrogen race.
Gandhi said:
So, we are happy to produce green hydrogen by the way of a 50 megawatt-hour electrolyser that would be the largest commercial electrolyser in the world, if I can get that up and running in 2026.
So it feels small, it is small, but it is still today the biggest one that will operate commercially.
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