The founder of Fortescue Metals Group Limited (ASX: FMG), Andrew 'Twiggy' Forrest, has suggested the best industry to be growing in is hydrogen.
But why is Twiggy talking about hydrogen? Fortescue may be best known as an iron ore miner, but it's in the process of becoming a major player in green hydrogen. The company is planning to take a global leadership position in green energy and technology.
What's green hydrogen?
Hydrogen is seen as a future-focused resource in a decarbonising world.
Fortescue is looking to produce hydrogen with as little impact on the environment as possible.
Green hydrogen is produced by using renewable energy such as solar.
Fortescue is investing to create a global portfolio of green energy projects to supply 15 million tonnes per year of renewable green hydrogen by 2030.
Why is green hydrogen so attractive?
Fortescue wants to make green hydrogen the most globally-traded seaborne commodity as the world looks to different resources for energy, away from fossil fuels.
However, Forrest also thinks that green hydrogen can help with current soaring energy prices triggered by various events, including the Russian invasion of Ukraine.
Forrest said (as quoted by the Australian Financial Review):
I don't know of a better industry to be pivoting towards when fuel prices are going through the roof than an industry where you can make all your own fuel. We smoke $3.5 billion worth of fossil fuel into the atmosphere every year. That is one hell of a pool of capital annually to invest into your own fuel production and green iron systems.
Is there any demand for green hydrogen?
Fortescue Future Industries (FFI) – the green division of Fortescue – and German-based international energy company E.ON have signed a deal to supply up to five million tonnes of green hydrogen per year by 2030. That will equate to a third of Fortescue's production.
E.ON and FFI's broader ambition is to "lead the decarbonisation of Europe and to strengthen security of green energy supply at a time when Europe needs to reduce its energy dependence on fossil fuels from Russia as quickly as possible".
At the time of that announcement, Forrest said:
The announcement of this historic partnership today aims to diversify the future energy security in Europe. Green energy will reduce fossil fuel consumption dramatically in Germany and quickly help substitute Russian energy supply, while creating a massive new employment intensive industry in Australia. This is a cohesive and urgently needed part of the green industrial revolution underway here in Europe.
FFI also signed a "multi-billion-pound-deal" with construction giant J C Bamford Excavators (JCB) and Ryze Hydrogen for 10% of FFI's global green hydrogen projection.
FFI is expecting green hydrogen production to grow to 50 million tonnes per year in the 2030s.
Fortescue share price snapshot
Over the last month, the Fortescue share price has fallen by 13%.
