Andrew Forrest’s Fortescue axes US green hydrogen partnership

A hyped pact between Andrew Forrest’s Fortescue and a major US green hydrogen developer has been quietly dissolved, as developers pull back from projects following the election of Donald Trump.

Former Queensland premier Annastacia Palaszczuk and Andrew Forrest, centre, at a hydrogen announcement at Incitec Pivot on Gibson Island in 2021. The facility has since been paused due to tough market conditions

Australia’s biggest promoter of green hydrogen, Andrew Forrest, has axed an investment pact with US hydrogen giant Plug Power in the latest blow for the hyped clean energy power source, as developers pull back from projects following the election of Donald Trump.

The billionaire’s Fortescue has been a major cheerleader for the nascent technology, signing a multipronged deal in 2022 to partner with Plug Power both as a potential supplier of electrolysers for the company’s projects, and as a joint venture partner with Fortescue in the US hydrogen market.

The pair inked a deal for the Australian resources major to take up to a 40 per cent stake in Plug’s Texas hydrogen plant and for Plug to take up to a 25 per cent stake in a plant Fortescue wants to build in ­Arizona.

However, Fortescue told The Australian the partnership has now been dissolved as it more broadly reconsiders its own development timelines for pushing ahead with projects.

It signals an ongoing retreat by the nation’s most prominent cheerleader for green hydrogen, with Dr Forrest only a few years ago boasting that the company’s green-energy ambitions would one day make it ­bigger than the world’s biggest oil producer, Saudi Aramco.

Andrew Forrest and Jo Bamford, owner of Wrightbus, after sealing a trade deal in green hydrogen at COP26 Glasgow. Picture: Annabel Moeller

The Australian revealed this week that more than 60 projects have been paused or shut down due to high production costs, infrastructure bottlenecks and soft ­demand from would-be inter­national buyers.

When Fortescue and Plug signed the investment accord in 2023, a joint statement spoke of a common mission to build out and scale up a global green hydrogen ecosystem.

“We believe there is strong demand globally for the green hydrogen we will produce, and we must move quickly to meet that demand,” Fortescue said in October 2023.

However, last year, Dr Forrest launched a sweeping restructure at For­tescue in the face of the ­company’s failure to deliver on its green-energy ­promises.

Fortescue said in February this year it was reconsidering the development time frames for its green hydrogen project in Arizona and for a green hydrogen project in Gladstone in Queensland linked to its electrolyser manufacturing facility.

Plug Power said on Wednesday its Texas plant had now been delayed due to Mr Trump’s anti-green energy focus, a fresh setback after it had already announced $US971m in writedowns earlier this week and looming job cuts.

Fortescue and Plug in Australia had previously teamed up for the Gibson Island ammonia plant in Queensland, but the project has ­effectively been shelved amid concerns over high power prices.

One of Australia’s biggest renewable energy investors, the AustralianSuper-backed Quinbrook Infrastructure Partners, said green hydrogen had been hit by a reality check.

“The hope around green hydrogen is getting a dose of the fundamental cost challenges that appear unlikely to be overcome by any of the production tax credits that might be on offer,” Quinbrook co-founder David Scaysbrook said.

“Some of the projects were overly ambitious in expecting a market to develop, and I think ultimately there’s been a lack of customer demand at the price points. Everyone’s hopes around market development and customers committing just haven’t materialised.”

As part of its flagship Future Made in Australia plan, the ­Albanese government in 2024 provided a budget allocation of $6.7bn to provide a $2 incentive for every kilogram of green hydrogen produced from 2027-28. It also committed $2bn for new projects under the Hydrogen Headstart program.

“That $2 per kilogram hasn’t been enough to make a difference,” Mr Scaysbrook said. “It certainly doesn’t appear to be making enough difference for the projects that are now falling over.”

Quinbrook co-founder David Scaysbrook.

In the US, green hydrogen producers were expecting to tap into a $US3/kg tax incentive. But Mr Trump has indicated the Inflation Reduction Act which contained the subsidy is likely to be wound back.

“Probably under this administration no one will be developing green hydrogen projects in the US even with the $US3/kg leg-up – even if it remained,” Mr Scaysbrook said.

Green hydrogen – produced by splitting water into hydrogen and oxygen through zero-emissions technologies – has so far proven to be more hype than a major new energy source, its critics maintain.

The battle to build a hydrogen export industry from scratch also looms as a major political divide ahead of the federal election. Labor has included green hydrogen as a central plank in its plan for Australia to become a renewable energy superpower.

Energy Minister Chris Bowen said in September it was “no exaggeration” to say green hydrogen would be on the ballot paper.

Originally published as Andrew Forrest’s Fortescue axes US green hydrogen partnership