Cost is key to green hydrogen deployment – Fortescue Energy

Replacing fossil fuels with green hydrogen depends on creating demand for it, as buyers are unwilling to pay green premiums. Fortescue Energy CEO Mark Hutchinson told Reuters in Davos.

According to Hutchinson, electrolyzers are expensive, and government subsidies to reduce these costs for companies have not been as expected. He noted that the demand for hydrogen is not what it should be. However, the Fortescue Energy CEO hopes that it will grow over the next few years as prices decline.

Fortescue Energy, the green energy division of the Australian mining company Fortescue, the agency notes, announced last July that it was unlikely to meet its goal of producing 15 million tons of green hydrogen by 2030.

Hutchinson noted that the promotion of green energy may take a back seat during Trump’s presidency. Shortly after taking office, the US president declared an energy emergency and curtailed green policies. However, it is up to the industry, according to Fortescue Energy CEO, to make sure that this discussion moves to the economic plane, not just the environmental one.

However, over the past year, the Australian company’s attention to green iron has increased significantly, despite concerns about demand. These products are made by reducing iron ore with hydrogen gas and are used in electric arc furnaces.

Hutchinson noted that final approval for investments in green hydrogen projects in Norway and Brazil, which were originally due in 2023, are still pending, and Fortescue Energy expects to attract new investors.

At the same time, according to a study by the Institute for Energy Economics and Financial Analysis (IEEFA), due to the cost of green hydrogen, European steelmakers should reconsider importing cheaper green iron from places with cheap, clean energy and suitable iron ore. In the long run, this could save jobs in the region’s steel industry.

“The production of green hydrogen and its supply may be too expensive to enable the steel sector to operate in a decarbonized environment and save jobs,” said Simon Nicholas, a leading analyst at IEEFA.

In particular, the mining giant Vale continues to plan mega-hubs, and the South Australian government is actively supporting green iron for its renewable energy network.

Nicholas notes that hydrogen-based green iron will be needed for decarbonization in Europe. Other technologies, such as carbon capture and storage (CCS), “continue to flounder,” and IEEFA still doubts its viability for the steel industry.

The analysis points to a recent slowdown in the planned transition to low-emission technologies, partly because the cost of producing green hydrogen has not fallen as fast as expected.

The expert notes that in the medium and long term, DRI based on green hydrogen is much more likely to reduce emissions from steel than CCS and surpass it in terms of efficiency and cost.

Earlier, EuRIC, the EU Confederation of Recycling Industries, warned that European steelmakers should reconsider their approaches to switching to hydrogen-based steel production and direct reduction of iron. The recommendations were made in view of rising energy prices and the lack of readiness of the hydrogen infrastructure.