German industry discovered the country two years ago as a potential major supplier of green hydrogen. In December 2020, the German industry association BDI and scientists from the German Academy of Science and Engineering (Acatech) founded the HySupply project together with Australian partners to advance a hydrogen bridge between the two countries. In May, German Education and Research Minister Bettina Stark-Watzinger accompanied the project group around the country for a week. The Germans have realized that they have to hurry up, lest Asian countries, above all Japan and South Korea, snatch up the precious eco-hydrogen. It works to the Germans’ advantage that they are among the world’s leading suppliers of electrolyzers. Without technology from Thyssenkrupp, Linde and Siemens Energy, not much would work in Australia, either.
In the Pilbara region, on the coast of Western Australia, one of the world’s largest hydrogen projects, the Asian Renewable Energy Hub, is currently under construction. Some 26 gigawatts of electricity generated from the wind and the sun are to be used to produce 1.6 million metric tons of green hydrogen there annually, with the help of 14 gigawatts of electrolyzer capacity. By comparison: The new German government has set a target of installing 10 gigawatts of capacity by 2030 throughout Germany.
The face of the hydrogen euphoria is Andrew Forrest, with his company Fortescue Future Industries (FFI). Over the past 19 years, environmentally unfriendly mining made Forrest, a former stockbroker and amateur boxer, one of Australia’s richest men. The iron-ore magnate has earned a reputation as the Elon Musk of the energy world: loud promises and a drive that accepts no reservations or obstacles.
Forrest now wants to turn his company into a major driver and profiteer of the transition to green energies at a similar pace. He founded FFI, now one of the major players in the global hydrogen business, in 2020. Fortescue wants to radically drive down production costs for green H2 as he did with iron ore. To do that, scale, above all else, is needed. The company’s advertisements state that Europe could completely replace fossil natural gas from Russia with green hydrogen. By 2030, he has said, FFI alone could supply around 15 million tons of green hydrogen a year.
To deliver the volumes announced on paper, however, the company would need about 150 gigawatts of electrolyzer capacity and 450 gigawatts of electricity from wind and solar by 2030. Many in the industry don’t think that’s feasible, even in Australia. Even at FFI, some don’t know how to meet the tempo requirements and promises of their boss. In this sense, too, the company is similar to Tesla.
At the end of March, FFI signed a memorandum of understanding with the German energy utility company E.on to supply 5 million tons of green hydrogen per year to Europe, according to which the first 200,000 tons would be shipped in the form of green ammonia as early as 2024. Forrest personally traveled to Berlin for the public announcement. So far, though, there is no firm contract.
The reasons are typical and underscore what ails the market, despite all the euphoria. E.on has to first find customers in German industry. And that isn’t easy, especially given that it is unclear how expensive a kilogram of eco-H2 will be in the future. Currently, green ammonia is cheaper than conventional ammonia produced using natural gas. This is due to the record high prices for gas and LNG. However, the usual supply contracts generally run for 10 years, by which time the price gap could open up again. It is also still uncertain what the European Commission will accept as its definition of green hydrogen.
And without set customers, many projects in Australia that currently exist only on paper may not come to fruition. Without sufficient supply, demand could also falter. It’s a classic chicken-and-egg problem. The German government wants to solve this with a funding instrument that uses an auction mechanism to bring together green H2 producers from around the world and customers from Germany. The government has made 3.6 billion euros ($3.6 billion) available as compensation for the price difference between green hydrogen and its fossil counterpart. The program, called H2Global, is scheduled to launch later this year.
But Germany isn’t yet ready for the hydrogen revolution either. It lacks infrastructure, such as port terminals for liquid ammonia and plants that could convert it into hydrogen, and pipelines. Instead of investing in hydrogen networks, German Economics Minister Habeck must now first invest billions in LNG terminals, ships and pipelines. Indeed, the Port of Rotterdam is currently Germany’s hope.
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