BIG PIVOTS: A Hydrogen Economy?

This story by Allen Best first appeared on Big Pivots, on September 29, 2022.

Colorado has become a focal point for investment by an Australian firm called Fortescue Future Industries. During September the company announced two new and overlapping partnerships in Colorado.

Passage of the Inflation Reduction Act, including its provisions to encourage hydrogen, was described as a motivation.

The first announcement, on September 16, was the launch of the company’s own US Technology Hub in Jefferson County, which is already home to the National Renewable Energy Laboratory and the Colorado School of Mines. This new partnership also includes potential collaborations with University of Colorado-Boulder and Colorado State University.

What this partnership and technology hub looks like is not yet clear. Colorado awarded almost $2 million in incentives to support establishment of the Technology Hub and creation of jobs, according to the press release from Fortescue.

The US Technology Hub is to develop green hydrogen and other innovations and technologies, with a focus on decarbonizing hard-to-abate industries.

The second and perhaps more tangible announcement was of $80 million in investment in research programs in partnerships with NREL during the next 10 years. Getting “green” hydrogen to a place it can be commercialized seems to be part of the deal.

“NREL’s dream is to have its green technology commercialized. Our dream is to commercialize their green technology,” said Andrew “Twiggy” Forrest, the executive chairman of Fortescue Metals Group. He called out the Inflation Reduction Act, or IRA, that was passed by Congress in August.

“I thank Sen. Joe Manchin and the U.S. representatives for making the IRA a reality and catapulting the U.S. from laggard to leader in what will be the largest energy source in the world,” he said in a press release.

Martin Keller, director of NREL, expressed similar sentiments, but in reverse. “NREL is committed to making sure our research gets to market—where it can improve everyday life and strengthen our global economy,” he said. “The NREL team is eager to get to work with (Fortescue) and our collaborators and partners across the Colorado hydrogen ecosystem.”

The current agreement with NREL covers three years, but “the exact nature of the specific work that will be done in this partnership is still to be determined,” said an NREL spokesman in an e-mail on Tuesday. More details were expected to be released late this week.

The Australian company said the collaboration with NREL has the potential to create more than 350 high quality research, engineering, and management jobs.

The Colorado Energy Office, asked for response, issued a statement that said the Fortescue announcements “further cements Colorado as a frontrunner in clean energy technology. This will bring jobs and investment into Colorado and helps build further momentum toward our existing work on hydrogen. With all the work we’re doing on hydrogen, it’s really valuable to have companies with technical knowledge and research capacity in the state. Development of clean hydrogen is important to Colorado in meeting its ambitious greenhouse gas reduction goals, particularly in hard to decarbonize sectors such as industrial and transportation.”

Forrest has gained international attention because of both his wealth and his ambitions. Forbes estimates his wealth as $14.8 billion. The Bloomberg Billionaires Index put it at $16.4 billion.

He started his first company, then called Anaconda Nickel, in 1994 and nine years later founded Fortescue Metals Group, which mines and ships iron ore to China.

He has now focused on repositioning the company through a subsidiary — the one investing in Colorado — to create a green energy powerhouse. It aspires to deliver 15 million tons of green hydrogen to the world by 2030, according to a profile of Forrest published in March by the Guardian under the title of “Can Andrew Forrest become Australia’s clean, green hero?”

That story tells of his great success but also skepticism:

“The American novelist John Barth wrote that “everyone is necessarily the hero of his own life story”. Forrest is certainly that. But his story – including, but not limited to, the staggering success of his iron ore business and the even more staggering ambition of his clean energy plans – is writ large enough for others to read. And they don’t all see him as a white knight…”

A key passage in the Guardian article as it relates to Colorado:

“Forrest is promising all-green hydrogen, but Richie Merzian, the Australia Institute’s climate and energy program director, says the technological transition will not be easy.

“But what Twiggy has done … is fast-tracked the debate,” he says. “It’s helped. What you have is a massive mining baron who’s benefited from the status quo actually positioning himself and making a clear pivot into an industry that is aligned with a decarbonised future.

“It’s not all good … but the overall objective, the big picture, the commitment is good.”

Standing out in the Fortescue press release was a statement by Andy Vesey, who heads Fortescue’s operations of North America. “America is now the best place for green hydrogen investment,” he said.

That’s a tall statement, and when asked for elaboration, the Fortescue media department pointed to the other statements about the IRA.

Hydrogen can be produced from several sources. Most hydrogen today comes from a base of natural gas. It’s called gray hydrogen because there are emissions. Green hydrogen comes from using renewable sources to power electrolyzers that are fed water.

The IRA provides incentives for green hydrogen or, in the case of hydrogen produced from natural gas but with the emissions sequestered, “blue” hydrogen.

Fred Porter, a retired building energy modeler based in Carbondale, who closely follows developments in the energy transition around the world, expects the Australian company’s investment to “seed” the growth of businesses able to harness renewable electricity that might otherwise be curtailed. It could also accelerate development of improved electrolyzers.

Electrolyzers allow hydrogen to be made from water, and if the electrolyzers are powered by renewable generation, that makes the hydrogen “green.”

Porter explains that the IRA offers a maximum of $3/kg tax credit for “qualified clean hydrogen.” That credit is roughly equivalent to $2.50/therm of gas, he says.

“By way of comparison, the ‘wholesale’ price of U.S. natural gas over the last decade, exclusive of some extremes, has varied from under $0.30/therm to $1/therm.

“Given inexpensive renewable power and electrolyzers, some analysts claim that hydrogen could be made for less than $3/kg, so with the incentive it would be ‘free.’ However, that ‘free’ hydrogen would still need to be stored or transported. Those challenges have led clean hydrogen to be called ‘hopium,’ by some observers.”

The most significant current “green” hydrogen project is underway in south-central Utah near the town of Delta. There, the Los Angeles Department of Water & Power is replacing its coal plant with a facility to generate hydrogen.

The renewable power will come from various places, including wind power from Wyoming through new transmission lines that will cross Moffat County. It will be stored in underground salt caverns, some of which are already used for gas storage. The plant is to provide power to California when their renewable energy and storage are inadequate—as was the case this summer.

“It will be designed to take increasing hydrogen blends from these caverns,” says Porter. “However, the salt domes forming the caverns are geologically rare in the Western United States, so other projects using hydrogen to generate peak or backup power will need other hydrogen storage methods.”