Why hydrogen – and Andrew Forrest – are stealing the limelight

If there was a prize for timing the announcement of a ‘green hydrogen’ project, Andrew Forrest’s Fortescue group would have it in the bag.

Andrew Forrest from Fortescue during a press conference at Incitec Pivot in Brisbane on Monday. Picture: NCA NewsWire/Tertius Pickard

Is it a coincidence? A landmark ‘green hydrogen’ investment from billionaire Andrew Forrest came inside 24 hours of Prime Minister Scott Morrison’s equally pivotal announcement on Monday that “addressing climate change is a challenge we must all do together”.

Despite a predictable level of hype and only sketchy financial details, investors will not miss the move by the iron ore magnate – through his Fortescue Future Industries unit – to stake a claim on what might become ‘the hydrogen era’.

Investors all over the world are betting on hydrogen – particularly cleaner green hydrogen – as heavy industry seeks alternatives to fuels such as coal.

A closer look at the statement from Forrest reveals he is planning a diversified gamble on the future of alternative power where ‘green hydrogen’ just happens to the first step in a long range plan. The $US650m Queensland facility is expected to start with an $US83m investment to kickstart the manufacture of electrolyser equipment used to create hydrogen from water.

RBC Capital Markets quickly noted that under present day economics the project would fall short of providing an adequate return.” (Green hydrogen is currently much more expensive than other forms of power, including ‘brown hydrogen’ from fossil fuels).

But investors will also note the parallels with the LNG boom more than a decade ago. At that time investors were making big returns on LNG projects even though back then storage and transport questions also dogged the sector. A decade later those problems were solved and a major industry emerged.

Crucially, the Aldoga project could double the green hydrogen capacity worldwide and is touted to produce 380 jobs for Central Queensland.

Again this chimes perfectly with the PM’s suggestion that clean energy products will bring new job opportunities to regional Australia.

But can investors make money from Hydrogen? Kanish Chugh, head of distribution at ETF Securities who launched Australia’s first Hydrogen-focused Exchange Traded Fund just last week certainly thinks so.

Chugh has form in picking trends: The most successful ungeared ETF in the Australian market over 2021 was the ETF Securities battery metals-focused AC/DC ETF – it made 63 per cent in 12 months.

Now Chugh says ETF Securities is backing hydrogen, which Bank of America predicts could account for one quarter of the world’s energy needs by 2025.

The ETFS Hydrogen ETF, which has stakes in leaders such as Plug Power and Bloom Energy, will track the Solactive Global Hydrogen ESG Index which is up 40 per cent over the last 12 months.

Inside the Australian market the most advanced hydrogen project is the ambitious plan to export hydrogen made from coal in Victoria’s La Trobe Valley to Japan. However, the plan is classified as ‘brown hydrogen’, environmentally less attractive and similarly low on the agenda for many nestors.

“Green hydrogen is where the money is, this is what global investors want to enter – the other forms of hydrogen based on fossil fuels have their merits too, but the money is following the cleaner fuel,” says Jack Colreavy of Barclay Pearce Capital, which has backed a number of local pre-IPO green hydrogen companies.

Even inside the world of alternative energy hydrogen has many critics not least Elon Musk of Tesla who has regularly derided hydrogen as a potential energy source for cars, dubbing the technology ‘mind bogglingly stupid.’ Forrest has not missed these outbursts from Musk. He told an investment conference earlier this year: “He has every reason to fear them and his description is perhaps better suited, in my view, to someone who peddles a battery technology as green when it turns out it run on fossil fuel.”

Can Forrest defy them all? The fossil fuel lobby, the broking analysts and Elon Musk. Anyone who has watched the rise and rise of Fortescue would be slow to be against him – or green hydrogen just now.