Fortescue running out of time to find cheap power or government subsidies for second Australian green hydrogen project




The energy and mining company has until the end of next month to take a final investment decision on the 550MW Gibson Island facility


Australia’s Fortescue has until 28 February to take a final investment decision (FID) on its Gibson Island green hydrogen project in Queensland, which it had delayed from the end of last year due to “structurally high green electricity costs”.


The mining and energy company has signed a 25-year power purchase agreement (PPA) with Genex for electricity from a yet-to-be-built solar farm, but this 337.5MW deal is not enough to cover the plant’s 550MW electrolysis capacity.


Fortescue must secure additional green sources of power, both in order to claim the H2 is renewable and to avoid buying power from the grid, which in Queensland is among the most expensive in Australia. 


Genex has extended the deadline for FID on Gibson Island from 31 December to 28 February, but after that date the PPA will fall through, leaving Fortescue with no renewable power at all for the facility.


“On Gibson Island, we’re working harder to get this project across the line,” Mark Hutchinson, energy CEO at Fortescue, told an analyst call today (Thursday). “We have the Board coming up later on in February, and I would imagine there will be a go, no-go decision made at that Board.”


Fortescue is also seeking government support additional to the A$13.66m (US$9m) the project already secured from the Australian Renewable Energy Agency for Gibson Island’s front-end engineering and design.


“We have been working very closely with the State and Federal Governments, and if the project goes ahead there will be support from both Federal and State,” Hutchinson said. “We are having some great discussions with Government entities, so we’re progressing on that.”


However, Gibson Island was not included in the shortlist of six projects seeking a combined A$2bn in production credits through the federal government’s Hydrogen Headstart programme.


Hutchinson hinted that Fortescue could end up shelving Gibson Island in pursuit of locations with cheap renewable electricity.


“Look, in the green hydrogen space, the power is actually the most important part of the costing equation, actually,” he said. “So, really, what we do is we look around the world, we’re looking for the best possible sources of cheap power.


“That’s why we’re in places like Brazil and looking at places like Namibia, Morocco, to do that. So, it’s a big part of the equation. As the market develops, I think those thresholds, costs on power will become more obvious, but it’s a big part of the cost. As we weigh up the economics, we want to make sure we have the right financial rigour and security around all the things we’re doing, including to the power supply.”


If Gibson Island is cancelled, this could leave the proposed offtaker Incitec Pivot Limited with no volumes of renewable H2 for its green ammonia plant co-located with the electrolyser project.



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