Key Points
- Green hydrogen adoption depends on reducing costs to drive demand.
- Buyers won’t pay more for green hydrogen without economic incentives.
- Steel production’s carbon footprint can drop with green hydrogen solutions.
Making green hydrogen affordable is essential to replacing fossil fuels since consumers are still hesitant to pay “green premiums,” according to Fortescue Energy CEO Mark Hutchinson on Thursday.
Green hydrogen faces cost challenges in gaining widespread adoption
Green hydrogen is created by using renewable electricity to split water into hydrogen and oxygen. It can be utilized to generate carbon-free ammonia, a crucial component of fertilizers, or as a power source. However, Hutchinson stated at the Reuters Global Markets Forum at the World Economic Forum’s annual meeting in Davos that the development of green hydrogen has been hampered by the high cost of the electrolyzers used to manufacture it and a lack of government subsidies.
“The green hydrogen and ammonia sector is not where we thought it would be,” Hutchinson stated. “We’re hoping demand will rise over the next few years as prices come down.”
Making green hydrogen economically feasible is essential, Hutchinson underlined. “Forget about expecting someone to pay more just because it’s green. Ultimately, the economics must be sound,” he stated.
The Australian mining corporation Fortescue Metals Group’s renewable energy subsidiary, Fortescue Energy, declared in July that it is unlikely to reach its 2030 goal of producing 15 million metric tons of green hydrogen.
The company has encountered challenges, such as criticism of environmentally conscious business practices, which have been made worse by the return of former US President Donald Trump. Shortly after taking office, Trump ripped back green policies and proclaimed an energy emergency.
Steel production and green iron key to reducing emissions
According to Mining weekly, instead of concentrating only on the environmental advantages of green energy, the industry should present it as an economic need.
Fortescue’s emphasis on “green iron” has grown considerably in spite of demand worries. Iron ore is reduced with hydrogen gas to create green iron, which is subsequently transformed into steel in an electric arc furnace.
A major component of infrastructure and the global energy transition, steel production contributes roughly 8% of global carbon emissions.
Fortescue is looking for more investors to move the green hydrogen projects forward as it awaits final investment permits for projects in Brazil and Norway, which are initially anticipated in 2023, according to Hutchinson. Â
