Forrest punctures Taylor’s “gas-led recovery” grant with quick switch to green hydrogen

The Morrison government will provide a $30 million grant to a proposed gas power station backed by resources billionaire Andrew Forrest, but it turns out that the project will aim to rapidly avoid the use of fossil gas.

Federal energy minister Angus Taylor announced on Tuesday that the federal government will be providing a $30 million grant to Australian Industrial Power, a subsidiary of the Andrew Forrest backed Squadron Energy, to progress the development of a 660MW gas-fired power station at Port Kembla.

Taylor released a statement to multiple media outlets on Monday (RenewEconomy was excluded as usual) and pitched the grant as part of the Morrison government’s “gas led recovery”, saying it was essential for the economy to bounce back from the Covid recession, and for grid reliability in the face of rising renewables.

“New gas supply and generation will help re-establish a strong economy and make energy more affordable for families and businesses, while complementing the world-leading levels of renewables in Australia,” Taylor said.

But Squadron Energy was quick to point out on Tuesday that the new generator will limit the amount of fossil gas ever used at the plant, and it will run entirely on green hydrogen by the end of the decade.

Squadron had originally flagged around one third of the fuel supply would come from green hydrogen from the first commissioning, but Forrest now says it will use 50 per cent green hydrogen from day one, and will transition to operating entirely on green hydrogen by 2030.

Squadron aims to have the power station up and running by the 2024/25 summer, it means the plant may only ever partially run on fossil gas for a few years – effectively eliminating any prospect that such a power station could be a boon for Australian gas producers.

Forrest said that the Port Kembla project would become Australia’s “most significant and largest green hydrogen power station”.

“As soon as that green hydrogen is available, which we are on schedule to achieve by 2024-2025, the power station, currently licensed for dual fuel, will commence use of green hydrogen,” Forrest said.

“Green hydrogen is the only form of zero carbon energy. Every other type of hydrogen is made from carbon emitting fossil fuels.”

It is an intriguing decision by the Morrison government to provide taxpayer funding to a project being financially backed by a resources billionaire, and one of the country’s richest people.

As RenewEconomy reported in August, Andrew Forrest pocketed around $11 million a day in shareholder dividends from Fortescue Metals Group in the last financial year.

The funding announcement comes on the same day as Fortescue announced that it would aim to decarbonise its entire operations by 2040, including a target to produce coal-free steel.

Forrest has been outspoken about the need to avoid the development of fossil fuel based hydrogen, or ‘blue’ hydrogen, to the point of forming a dedicated Green Hydrogen Organisation with former prime minister Malcolm Turnbull to advocate for the production of only renewable hydrogen.

Forrest has called fossil hydrogen as a ‘distraction’, attributing a push to establish such an industry in Australia as coming from a fossil fuel industry with vested interests, and labelled carbon capture and storage technologies as an expensive failure.

The construction of the Port Kembla power station will be a key test of Forrest’s rhetoric, requiring investment in both the construction of the new plant and establishing sufficient supplies of renewable hydrogen to fuel it.

Once the project clears a final investment decision, it could receive some form of underwriting support under the Morrison government’s Underwriting New Generation Investments (UNGI) program.

The power station was one of a dozen proposed projects that were shortlisted for federal government support through the UNGI scheme.

The UNGI program has effectively been in limbo since it was first announced in late 2018. The shortlist of a dozen projects earmarked for support was announced in March 2019, but how this funding support will be provided remains unclear, more than 30 months later, with the Morrison government failing to pass legislative amendments needed to allocate funding to the scheme.

The Morrison government has separately agreed to fund a $600 million gas-fired power station, using the government owned Snowy Hydro, to be built in Kurri Kurri in the New South Wales Hunter region.

The Kurri Kurri power station also faces questions about its contribution to a ‘gas led recovery’ and is expected to be fuelled by diesel for the first six months of its operational life.