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Date : 28/09/2023

Green Hydrogen in Australia: Fortescue vs Orica

Australia, a country widely recognised for its natural resource wealth, is experiencing a significant revolution in its energy sector. As the global community intensifies its focus on adopting sustainable energy solutions, green hydrogen has emerged as a promising new player. In this regard, two major Australian players, Fortescue Metals Group Ltd and Orica Ltd, have taken the lead in transforming the country’s energy landscape. This article explores their respective ambitious plans, innovative strategies, and the crucial role of government support in shaping Australia’s journey towards a greener hydrogen future.

Understanding Green Hydrogen

Green hydrogen, which is a sustainable and eco-friendly energy source, is produced through a process called electrolysis. This process involves splitting water molecules into hydrogen and oxygen by passing electricity through it. The electricity used to create green hydrogen comes from renewable sources like solar and wind, which makes it a clean energy source. In comparison, grey hydrogen is produced using natural gas, which is less environmentally friendly than its green counterpart. Therefore, producing green hydrogen is a significant step towards preserving our planet and mitigating climate change.

Fortescue Metals Group Ltd (ASX: FMG): Stepping Beyond Traditional Mining

Fortescue Metals Group Ltd (ASX: FMG), under the leadership of its founder, Andrew ‘Twiggy’ Forrest, is showcasing an innovative pivot from traditional mining paradigms. This S&P/ASX 200 Index-listed company has signalled its intent to lead the green hydrogen revolution in Australia, evidenced by:

  1. Innovative Research & Development: Instead of following the conventional mining trajectory, Fortescue has pumped resources into green hydrogen technology research to make this sustainable energy source both profitable and commercially viable.
  2. Fortescue Future Industries (FFI): Fortescue’s specialised green arm, FFI, plays a pivotal role. It’s spearheading projects to decarbonise the company’s extensive operations, from massive mining trucks and equipment to shipping fleets. Additionally, Fortescue aims to produce environmentally friendly “green iron.”

While Fortescue’s vision is expansive and its investments substantial, commercialising these projects is still nascent. One potentially groundbreaking project to watch is collaborating with Incitec Pivot Ltd. at the Gibson Island ammonia plant.

Fortescue Metals Group share analysis

Orica Ltd (ASX: ORI): Crafting a Green Blueprint with Robust Strategies

Orica Ltd (ASX: ORI), another behemoth with a commanding market capitalisation, has also marked its territory in the green hydrogen arena. Several strategic moves underline Orica’s commitment:

  1. Emphasis on Hydrogen: Their recent sustainability investor presentation highlighted hydrogen, iterating the company’s strategic focus on this sector.
  2. Economic Pragmatism: While fully aware of green hydrogen’s ecological benefits, Orica remains grounded about its economic challenges. Green ammonia, a derivative of green hydrogen, is currently a costlier endeavour than its grey counterpart.
  3. Partnerships and Projects: To expedite its green hydrogen projects, Orica is collaborating with Origin Energy Ltd. Together, they plan to launch a 50 megawatt-hour electrolyser at Kooragang Island by 2026, a move that could potentially position Orica as an industry frontrunner.

The Australian Government’s Role in Accelerating the Green Energy Transition

Australia’s federal initiatives underscore its commitment to renewable energy. The Hydrogen Headstart program, backed by a $2 billion investment, aims to support and subsidise the pioneering efforts of companies like Fortescue and Orica in the green hydrogen sector. However, challenges abound. Production costs for green hydrogen remain a significant concern, substantially higher than traditional methods.

Conclusion

Australia’s journey into the green hydrogen frontier is emblematic of the larger global shift towards sustainable energy. As companies like Fortescue and Orica innovate and experiment, supported by strategic alliances and bolstered by governmental initiatives, they’re not just charting a course for a cleaner industry but envisioning a greener planet. The coming years will be pivotal. The investments made today in terms of capital and belief in sustainable technologies will determine if green hydrogen is indeed the golden ticket to a sustainable future.

 

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