Production

'Renewable power prices must be $30/MWh or less for green hydrogen projects to compete': Fortescue

Current power prices in Queensland could nix Andrew Forrest-led company's second H2 project in Australia

The Gibson Island site, where Fortescue and Incitec Pivot Limited plan to develop an electrolyser and green ammonia project.
The Gibson Island site, where Fortescue and Incitec Pivot Limited plan to develop an electrolyser and green ammonia project.Photo: Fortescue
Senior Reporter
Renewable power for green hydrogen and ammonia production will have to cost less than US$30/MWh for projects to compete on a global market, Fortescue CEO Mark Hutchinson reportedly told the Australia Financial Review’s Business Summit today — implying that the company's Gibson Island project is in danger of being shelved.

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“If you look around the world where you can get cheap renewable power, competitive renewable power is below $30 a megawatt hour,” he said.

“That should really be the target and particularly when you’re looking at really what will be a global market to supply green ammonia, green hydrogen. So that’s kind of the goal.”

This suggests that Fortescue’s 550MW Gibson Island facility in Queensland — which the company has said would be its next green H2 project in Australia scheduled for a final investment decision (FID) — could be shelved unless it can secure power at nearly half the average price in the state or subsidies to cover the extra cost.

“We’ve been working very, very hard on it,” Hutchinson said. “But it’s tough based on the current power prices when we’re looking at competing globally. It’s a tough decision.”

Queensland’s average power price in the last quarter of 2023 was A$79/MWh (US$52.25/MWh), according to the Australian Energy Regulator.

While the Gibson Island facility has secured a 337.5MW power purchase agreement (PPA) with a yet-to-be-built solar park in the state, which could lock in cheaper renewable electricity for a portion of the electrolysers’ energy demand, this provisional contract will expire at the end of this month unless Fortescue takes FID.

Meanwhile, in Norway, where Fortescue is developing a 300MW green hydrogen project drawing on hydropower, average electricity prices for energy-intensive manufacturing were $45/MWh in the same quarter.

However, the Australian firm has already signed a provisional PPA with power producer Statkraft, as well as securing a €200m grant from the EU’s Innovation fund, although both are conditional on FID being taken on the project, which is scheduled to begin construction next year.

Fortescue is also developing projects in Brazil and Kenya, although no power purchase agreements in either location have yet been announced.

Hutchinson confirmed at the conference that the company is still in discussions with the Queensland and federal Australian governments for support that would make the Gibson Island project financially viable.

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FortescueAustraliasolarQueenslandNorway
Published 11 March 2024, 12:40Updated 11 March 2024, 13:26