Fortescue’s green shovels break ground at first US hydrogen project, but Twiggy has policy blues

Australian iron ore billionaire Andrew Forrest was in Buckeye, Arizona late last week to attend the official launch of Fortescue’s first green hydrogen production facility in the US – a project that aims to produce up to 11,000 tons of liquid renewable hydrogen a year from large-scale solar and wind.

Wielding a symbolic green shovel, Forrest said the soil turning ceremony marked a new phase in the development of Fortescue’s $550 million Arizona Hydrogen project, the first of the company’s planned green energy investments in North America.

As its website notes, Fortescue has dozens of green energy and green hydrogen projects under development globally, but few in the company’s green hydrogen pipeline would be as well advanced as the Buckeye facility.

Just a couple of weeks ago the company assured investors and analysts that it is still on track to deliver its ambitious target of producing 15 million tonnes of green hydrogen a year by 2030, but noted that Australian project plans are being hamstrung by high power prices.

“We totally believe we’re gonna get there on the decarb targets, we’re working very hard,” Mark Hutchinson, the head of Fortescue Energy, told analysts and media in its first quarter earnings call.

In the past, Hutchinson has also warned that Australia risked being left behind in the race to green hydrogen if the federal government did not match the Inflation Reduction Act incentives rolled out in the United States.

But in comments at the soil turning ceremony in Buckeye, Forrest had a few criticisms to level at the Biden Administration for policies he says threaten to “punish” green hydrogen pioneers like Fortescue.

“Fortescue is unashamedly a first-mover in this space, the world needs us to move quickly,” Forrest said in a statement last week. “But, we need to be encouraged to that, not punished.

“There are rules right now under consideration with the Biden Administration that would make already announced projects like this one dramatically more expensive and smaller, resulting in fewer economic opportunities and slower progress on decarbonisation,” he said.

“I support the Biden Administration’s goal to produce hydrogen in a way that prioritizes sustainability, however 45V, in its current form, is a straitjacket on the industry and works against the Biden Administration’s own climate goals.”

Forrest refers to a draft regulation, issued in December, that governs implementation of expanded tax credits in Section 45V of the IRA and, in terms of renewable hydrogen, means producers would have to source all their energy directly from renewables projects to ensure they get the full $US3 per kg credit.

According to Forbes, it means projects sourcing power from a public grid would be unlikely to qualify for the full credit and would have to certify the power used had come from renewable facilities to claim even a lower level of the rebate.

And of course it means projects proposing to use gas to produce so-called “blue hydrogen” – which currently accounts for about 95% of US-produced hydrogen today, Forbes says – would not get access to the tax credit at all.

Why this should bother Forrest, who says the Arizona Hydrogen facility will be solar and wind-powered, is unclear. But as Forbes notes, the draft regulation has pleased few in the industry, who will be counting on the full level of the 45V credit to make their hugely costly projects economically feasible in the planning stages.

Forrest, who once said that using gas to make hydrogen was “mangling the process” and dishonest has changed his tune a bit on the fossil fuel lately, giving his endorsement to the development of a new gas facility to help Australia transition from fossil fuels.

“If you think you can go from a filthy to a totally clean operating environment for energy through flicking a switch, clearly you’re not an industrialist,” he said in January.

But as Fortescue’s Hutchinson reaffirmed in October last year, the “holy grail” of green hydrogen production remains to replace the global LNG market.

“We’re a mining company, but we are driven by a very driven founder who is really going to bet his entire worth and the company he created on stepping into [the green hydrogen] market,” Hutchinson said in October.

“What we’re trying to do is look for where around the world can we get very cheap power abundantly that really isn’t needed in the domestic market, and where can really start to phase projects.

“So some of these project the first phase will be a million tonnes, but then we hope to continue to build these out as the demand grows” he said.

“We’re in climate change now. The world needs to get off fossil fuels and so we believe, like yourselves, that green hydrogen is a great alternative.”

Fortescue says the Arizona Hydrogen project has the potential to create up to 2,244 direct, indirect, and induced jobs during its two-year construction phase and could add $US187.8 million to Arizona’s GDP.

During the operation phase, Arizona Hydrogen is expected to employ 40 people.