Paul Rodden • Season: 2024 • Episode: 344
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In episode 344, Fortescue hydrogen pullback leaves the door open for other operators to step up. Stockhead discusses two of those operators, and I have some thoughts. I’ll go over those thoughts and go through the article on today’s hydrogen podcast.
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Transcript:
Fortescue hydrogen pullback leaves the door open for other operators to step up. Stockhead discusses two of those operators, and I have some thoughts. I’ll go over those thoughts and go through the article on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy. Where is capital being deployed for hydrogen projects globally, and where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
In an article in stockhead, Beavis Yeo writes Fortescue’s Green hydrogen pullback creates plenty of opportunities, with the company pointing the finger towards the high cost of electricity, its move has led to questions about the broader green hydrogen sector, which is reliant on a renewable electricity to power electrolyzers to split water molecules into hydrogen and oxygen. However, while the company’s plans have been put on hold, its founder Andrew Forrest, remains confident that green hydrogen still has the power to decarbonize, hard to abate industries.
This includes the use of green hydrogen to produce green iron, a key plank of Fortescue’s plans to eliminate about 90% of its CO two equivalent emissions associated with its Australian iron operations and hit Net Zero scope Three emissions by 2040, those which include those generated by its steel making customers. FMG also recently introduced a prototype hydrogen haul truck Europa for testing at its operations. And while Fortescue step back is indeed a blow for perceptions of green hydrogen, it doesn’t mean the sector is all doom and gloom. Speaking to stockhead pure hydrogen Corporation sales manager Clint Butler, said that in recent times, there has been increased engagement from governments at the federal and state levels to support the growth of Australia’s hydrogen industry.
Saying in the 2024 budget, the federal government announced it will establish a temporary hydrogen production tax incentive to incentivize renewable hydrogen production for eligible Australian resident corporations with a time limited and uncapped, refundable tax offset. He also said this will provide a $2 incentive per kilogram of renewable hydrogen produced for up to 10 years between the first of july 2027 and the 30th of June, 2040 for projects that reach fid by 2030 and he continues to say that at the state level, we have negotiated ongoing efforts by Queensland policymakers to support the growth of hydrogen which the government promoted in a recent advertising campaign featuring PURE hydrogens Taurus truck.
owever, Butler criticized the lack of targeted support in the short term for smaller hydrogen production strategies. This includes the company’s planned domestic Hydrogen Highway, which would help the heavy vehicle industry wean itself away from dirty imported diesel. And he added that while producing green hydrogen should be the end goal, there were several factors that needed to be considered before it could reach the point of being produced and sold at a competitive rate.
Saying, when making hydrogen using renewable energy, the cost of electricity is still a big factor that will need to be generated at a very low price point to reduce the end price of green hydrogen produced. There is no point producing hydrogen in the middle of nowhere, away from population centers and away from where it will be used as the transport cost, which then exacerbates the end cost of hydrogen pH two itself believes hydrogen demand needs to be built from the ground up.
The starting point is constructing hydrogen microhubs capable of producing up to 400 kilograms a day, that’s enough to fuel 20 trucks or busses a day close to or at where the customer has its base. It also plans to build its previously mentioned Hydrogen Highway along the way, which will feature micro hubs along the route that can be scaled up as demand grows. According to Butler, such a strategy requires smaller capex, and it can be flexibly scaled based on demand. Butler continues, saying, there’s no point building the hydrogen Taj Mahal if there’s not enough demand to support it, which at this point in time, there isn’t.
Strategically. PH2 is concentrating building out demand via their zero emission vehicle business, H drive International and scaling up production in a targeted way to meet demand. In that context, their demonstration plan at Archer field airport in Queensland is a great example that their hydrogen microhub strategy will work saying we are focused on getting that right, because it will be our sowcase to other locations, across Australia and into the international markets.
He continues by saying there has already been interest from Vietnam, the US South America and the Middle East to adopt the same microhub model that pH2 has introduced. He also added that over the next six to 12 months, the company’s focus was on marketing sales of its zero emission vehicles, as well as developing the Archerfield micro hub. While green hydrogen has been in the limelight, there are alternatives, colloquially known as clean hydrogen, seeking to produce emissions free hydrogen using fossil fuel feedstock. Leading this charge is Hazer group, which has made great strides towards commercializing its self named process.
Managing Director Glenn Corrie told stockhead that while hazer was caught up in the downdraft from the Fortescue decision, it believed that the pullback was inevitable due to the high cost of producing green hydrogen. This has created an opportunity for the company. He pointed out that splitting water molecules into hydrogen and oxygen using renewable electricity is an energy intensive process due to the strong molecular bond of water. Saying, to put that into numbers, it requires about 55 kilowatt hours to produce a kilogram of hydrogen, and that’s a lot of energy. He also said, by contrast, what we do is we effectively move carbon from natural gas or methane to produce hydrogen and graphite, and that requires just eight kilowatt hours to achieve. He says, When you translate that into cost, you see immediately that green hydrogen is going to be seven times the cost of what we do, given the big disparity in costs. Corrie believes there is an opportunity for an advanced manufacturing process like hazer to capture a large share of the market the way I see it.
Corrie adds it is an opportunity for hazer because we can provide clean hydrogen today for a fifth to a seventh of the cost to accelerate the pathway to hydrogen much faster and more affordably than what green hydrogen can do. And he also pointed out that the company’s commercial demonstration plant, which represents the fifth successful scale up of its technology, has passed through 240 hours of continuous operation. This is an achievement that proves de risks and demonstrates that hzr technology works continuously on a commercial scale. He also said it kicks off a number of really important critical success factors for our technology. So really excited about it now. He also added that it is also in the final stage before Hazer moves towards overall commercialization, saying it is 15 years of development, $100 million of capital deployed to develop the technology to where it is today, and to prove it and de risk it at this level, is transformational for their company, proving just how mature the technology is.
HCR is already secured four commercial customers that will license the technology, with South Korean steelmaker POSCO being a notable example. Corrie also added that we had had so much demand for the tech, and with the CDP and demonstration plant going to the plan, the interest in the technology has accelerated. What a lot of people don’t appreciate is that all of the hydrogen produced today in the world is derived from natural gas. Our process uses the same feedstock, but instead of producing carbon dioxide, we produce graphite instead.
So we have a built in carbon capture and storage technology. We have some more milestones coming out of the demonstration plant, which again shows the progress of our technology and preparing it for commercial readiness by the end of this year. Concurrently, we have four commercial projects that are under early stage license arrangements. Corrie also said that all four are being progressed, saying the first cab off the rank is our project in Canada, which we’ll be taking to fid next year. There are a lot of milestones between now and then in terms of the final license terms this year in early revenue from our engineering services agreement coming just around the corner, and Corrie ended by saying, corporately, we are in a pretty strong position.
We are well funded today. We have R &D rebate further arena grant funding on the way, and other applications for grant funding. So there’s more non dilutive funding coming through at that level as well. Okay, so Fortescue, so called withdrawal, is opening doors for other hydrogen operators, not just in Australia, but globally. Now, I recently covered Fortescue, greenmetal plant in Australia, but it’s no secret that they have been pulling back on their hydrogen expansion, but I don’t believe that pullback is fully due to the global hydrogen market. As it was more of a realization that the influx of capital being invested in hydrogen development was becoming much more risk averse in its deployment. As a result, they pulled back from their shotgun approach to focus more intensely on the more near term profitable projects, and that does indeed open the doors to other operators looking to push their technology or operational knowledge to the market. The most notable in the list from this article to me would be the Hazer group.
Now, while they are an Australian company, their projects are global, and yes, I realize I have mentioned other technologies similar to Hazer, the fact that they are moving forward at this project is worth noting, and it’s also important to remember that the methane that Hazer and other companies producing graphene, graphite and other solid carbon derivatives will be a part of our lives indefinitely, whether it’s traditional natural gas, coal bed methane or renewable natural gas. Methane is a very common molecule. So to me, anyone that can take what is a very harmful greenhouse gas and produce two commodity products should be a focal point. I also appreciate Pure hydrogens focus on micro hubs. I’ve said it before, and I’ll say it again. The Hub developments here in the US, they’re great, but it will be the development of the micro hubs around this nation, Canada, Europe, and other major global economies that will unify production and distribution and ultimately solidify the hydrogen supply chain.
All right, that’s it for me, everyone. If you have a second, I would really appreciate it. If you could leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, YouTube, whatever it is, that would be a tremendous help to the show. And as always, if you ever have any feedback, you’re welcome to email me directly at info@thehydrogenpodcast.com. So until next time, keep your eyes up and honor one another.
Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more. I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.
