Could this put a dent in Fortescue’s green hydrogen dreams?

a man dressed in a green superhero lycra outfit stands in a crouched pose with arms outstretched as if ready to spring into action with a blue sky and oil barrels lying in the background.a man dressed in a green superhero lycra outfit stands in a crouched pose with arms outstretched as if ready to spring into action with a blue sky and oil barrels lying in the background.

The Fortescue Metals Group Limited (ASX: FMG) share price is slightly in the red at lunchtime on Wednesday, trading down 0.18% at $19.17 per share.

Fortescue founder and executive chair Andrew ‘Twiggy’ Forrest AO is at the forefront of Australian business when it comes to climate change adaption and the renewable energy pivot that the whole world has to make.

The establishment of Fortescue Future Industries (FFI) allowed Forrest to capture a first-mover advantage in the mining sector in this regard.

During the height of COVID-19, Forrest was travelling the world seeking business and government partnerships to develop renewable energy, green hydrogen, and green ammonia projects through FFI.

As we reported in September, Forrest says: “We must become the Saudi Arabia, not of oil, but of green hydrogen…”

But could United States subsidies undercut Fortescue’s plans?

Fundie says US subsidies are ‘devastating’ for Australia

According to The Australian, a private investment fund specialising in renewable energy infrastructure, Quinbrook Infrastructure Partners, reckons so.

At a briefing, Quinbrook co-founder David Scaysbrook pointed out that the US Inflation Reduction Act (IRA) includes $US437 billion of subsidies to be spent over 10 years supporting energy and climate change investments.

Scaysbrook said:

The degree of subsidy … will be devastating from a competitive perspective (for Australia).

Scaysbrook elaborated:

… the degree to which the hydrogen supply chain will be subsidised in the United States … will make it very, very difficult for Australia to compete with US exports of green ammonia.

What does Fortescue think of this proposed threat?

Well, they don’t see it as a threat. Pure and simple.

Fortescue Future Industries was actually a key supporter of the IRA, and the CEO Mark Hutchinson describes it as “a brilliant outcome for FFI”.

At yesterday’s annual general meeting (AGM), FFI CEO Mark Hutchinson said:

The recent passage of the Inflation Reduction Act sees the US position itself as a potential green hydrogen superpower.

We worked hard with the US Government, the Whitehouse and Senator Joe Manchin to see the Bill pass. It is game changing for the green hydrogen market globally and a brilliant outcome for FFI.

America is now the greatest place in the world to invest in green energy and we are poised to take advantage of this for our shareholders.

Australia and Europe must now look very closely at what America has done to supercharge green energy or they will be left behind.

Hutchinson said it was “acknowledged internationally already” that FFI is one of the world’s leading developers of green hydrogen.

He added:

Various estimates suggest that green hydrogen will become a multi-trillion-dollar market. The geopolitical environment has only served to speed this up.

Our role is to ensure FFI remains at the forefront of this global movement, to move at a rapid pace to capture this new market, which present a significant opportunity for our business and create significant value for you – our shareholders.

In his own AGM address, Dr Forrest described Fortescue as “the only industrial company to stop the greenwashing and just step beyond fossil fuels to save our kids”.

He actively encouraged other businesses to get cracking on their own plans to combat climate change. That doesn’t sound like a man worried about subsidies to help US companies do so.

Forrest said:

All industrial companies now must act because it is not you the consumer, us, who is at fault here. It is the producers of your energy, your plastic, your goods made with fossil fuel, when they now have a choice to not force you to consume these products which are essential, to destroy your own planet because they won’t accept the solutions that are there. It is they who must change.

The post Could this put a dent in Fortescue’s green hydrogen dreams? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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