Andrew Forrest's Hydrogen Gamble Faces Setbacks
Andrew Forrest, the mining magnate known for his boundless energy and unwavering optimism, is facing challenges with his ambitious hydrogen venture. His initial plans to produce 15 million tonnes of hydrogen fuel by the end of the decade have been scaled back significantly, with plans to lay off up to 700 workers. This shift has raised concerns within the Australian government, which has been actively promoting the development of a hydrogen hub in Western Australia.
The change in plans comes amidst rising energy costs, particularly due to the war in Ukraine. Forrest argues that lower electricity prices are crucial for the economic production of hydrogen fuel. However, green hydrogen, produced using renewable energy sources, should theoretically be less affected by fossil fuel price fluctuations in the long run.
Despite Forrest's claims, the high cost of hydrogen production remains a significant obstacle, making it difficult to compete with fossil fuels. Additionally, Fortescue's expansion into renewables has been largely funded by its iron ore operations, which have been impacted by the slowdown in China's economy. This has led to increased pressure on the company, as its debt burden and spending commitments on the energy division continue to grow.
Furthermore, hydrogen faces inherent disadvantages compared to battery-powered vehicles. While hydrogen may be more efficient than petrol, it falls short of battery-powered vehicles in terms of energy efficiency. This means that renewable energy sources need to produce significantly more energy to achieve the same results with a hydrogen car.
Given these challenges, Forrest's decision to focus on producing renewable energy for the grid and potentially for green steel production appears to be a more viable strategy, at least for the time being.