A billionaire hydrogen evangelist should add details to his dream

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When faced with a formidable challenge like climate change, the industry tends to be long on details and short on vision. In theory, everyone agrees to reduce carbon emissions to zero – but if the yields of old and polluting equipment are slightly better than those of the clean alternative, who would be making the mistake of be the first to act?

And yet, the disruptors that will make the biggest difference in the energy transition are often the opposite: short in details, long in aspirations. In the mid-2000s, Elon Musk’s dream of an electric car maker that could take on Detroit sounded fantastic. Then it happened, making Musk the richest man in the world and giving Tesla Inc. nearly half of the global auto industry’s market capitalization.

The second richest Australian, Andrew Forrest, is cut from a similar cloth. While Musk worked on Tesla’s first Roadster, Forrest was busy securing low-grade iron ore claims ignored by the biggest mining companies, BHP Group and Rio Tinto Group, convinced that China’s growth would increase the demand for steel beyond what everyone expected then.

Two decades later, that lavish forecast – despised at the time – has proven to be spectacularly correct. Forrest now has a net worth of $19.2 billion. Iron ore, which changed hands for $25 per metric ton in the early 2000s, hit $227 per ton in 2021 and averaged $140 per ton over the past year. Forrest’s company, Fortescue Metals Group Ltd., supplies nearly one-fifth of the metal to the marine market. If it wasn’t there, those prices could be even higher.

His latest vision is even more dramatic: to revolutionize not only the steel from which modern society is built, but also the energy that powers it. Like fellow billionaires Mukesh Ambani, Gautam Adani and Jim Ratcliffe, he is a green hydrogen evangelist. Produced using wind and solar power to separate water molecules, it could in theory be a miracle fuel for displacing oil, gas and coal from the hardest-to-decarbonize sectors: aviation, trucking, shipping, steel industry, chemicals, fertilizers, cement, etc. -up power.

Fortescue last week announced an agreement with German manufacturer Liebherr Group to replace nearly half of its mines’ diesel haul trucks with electric and hydrogen-powered trucks, using technology developed by the subsidiary. Fortescue Future Industries. By 2030, it plans to have reduced its own emissions to net zero, much sooner than any of its competitors. FFI wants to produce 15 million tonnes per year of green hydrogen on the same date, the equivalent of some 5.7 billion cubic meters of fossil gas, enough to replace all the natural gas consumed by Chile, Ireland or Greece. It has already signed an agreement with German utility E.ON to work together to deliver 5 million tonnes per year to Europe by 2030.

Forrest is in an unparalleled position to achieve this. Fortescue posted more profits in its last fiscal year than Tesla, McDonalds Corp. or Alibaba Group Holding Ltd. As founder, executive chairman and (via his philanthropic foundation) 30% shareholder in the company, he has more latitude to direct its vast cash flow than the bosses of most other companies. His high profile in Australia also makes him an extremely effective lobbyist for a decarbonization policy that the newly elected government would be wise to adopt.

There is only one problem. A plan that has a lot of vision but few details can be as risky as the opposite. Right now, Forrest is making so many bets on the energy transition, it’s hard to know which one will pay off. Besides the own transport trucks, there is a gravity iron ore train; an undersea cable providing renewable energy from Australia to Singapore; a partnership with Airbus SE on hydrogen aviation; and plans to turn coal assets in Australia and Washington state into green hydrogen hubs. These plans are necessarily at an early stage. But it is only when they move from proposals, studies and memorandums of understanding to operational projects that we will know which are the most interesting.

This is all the more the case as cracks in the carbon economy drive up fossil fuel prices and inflation, translating into higher interest rates and increasing the cost of getting off the board. drawing of new zero carbon industrial enterprises.

Faced with upstarts, incumbents have advantages but also weaknesses. Tesla’s lead in the battery-powered vehicle market is likely to fade over the next few years as Big Auto’s electric supply chain finally comes to life, allowing Detroit to reap the accumulated benefits of a century of manufacturing . Forrest has a similar problem. Legacy energy industry competitors such as BP Plc, Shell Plc and TotalEnergies SE may be tied to the fossil economy – but they are also hiring the bean counters needed to turn the broadest visions of decarbonization into reality. Major oil companies will spend more than 8% of their upstream investment in clean energy this year, up from 1% or less in 2019, the International Energy Agency said this week.

The winners of the energy transition will not be those who make the boldest proposals. They will be the ones with the deep institutional expertise in the operation of supply chains, permits, regulations and capital markets, so that clean energy becomes the most competitive choice in the world.

This kind of knowledge won’t dazzle a TED audience, but it’s exactly what investors will want to see before they provide the trillions that the path to net zero sorely needs. Fortescue’s Liebherr tuning is a good start. Much more must follow.

More from Bloomberg Opinion:

• The West’s energy war against Russia demands sacrifices: Liam Denning

• Forget the words of this COP26 agreement. Follow the Money: David Fickling

• The missing piece of the hydrogen puzzle: Clara Ferreira Marques

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

David Fickling is a Bloomberg Opinion columnist covering energy and commodities. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.

Clara Ferreira Marques is a Bloomberg Opinion columnist and editorial board member covering foreign affairs and climate. Previously, she worked for Reuters in Hong Kong, Singapore, India, UK, Italy and Russia.

More stories like this are available at bloomberg.com/opinion

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