By Sonali Paul and Melanie Burton
MELBOURNE, Oct 27 (Reuters) - Australian iron ore magnateAndrew Forrest wants to turn his company, Fortescue Metals GroupLtd , into the world's biggest green energy group, butcritics say his targets are a stretch even for a man who builtthe world's fourth-largest iron ore producer from scratch injust over a decade.
Forrest has spent the global pandemic crisscrossing theglobe, announcing a string of green energy projects from PapuaNew Guinea to Brazil in plans that have both intrigued and irkedinvestors because of their grand ambition and lack of detail.
But this month, Forrest tantalisingly laid out his mostspecific target yet: to produce 15 million tonnes a year ofgreen hydrogen by 2030, which could be sold to customers in Asiaas either green hydrogen or green ammonia, used for fertiliser.
Unsurprisingly for an entrepreneur who bounced back from afailed attempt to shake up global nickel production in the 1990sto build a personal fortune of over $13 billion with Fortescue,Forrest's target is 50% more ambitious than the European Union'starget of 10 million tonnes a year by the same date.
Sceptics say he will face technical hurdles with highproduction costs, demand years away and no global carbon price,although his drive is unquestioned.
"If Fortescue says it's going to do something it will doit," Forrest told Reuters in an interview.
"People say, 'Well where do you get the markets from?' Idon't have to look far, I just have to get up in the morning andlook in the mirror."
Fortescue is already readying its operations to run onhydrogen, developing fuel cell vehicles like trucks, trains andbuses, and eventually aims to fuel ships and even produce "greeniron", which could be used to make steel without burning dirtycoking coal.
The key factors needed to make hydrogen competitive withfossil fuels today are a sharp drop in the costs of equipmentused to split water into hydrogen and oxygen, calledelectrolysers. For green hydrogen, the electrolysers must bepowered with renewable power.
Fortescue has given no cost estimate for achieving itstarget. So far it has committed to spend up to 10% of its annualprofit after tax on the green push and is counting on securingfunding from other investors to advance its projects.
Net profit last year was $10.3 billion with iron ore atrecord prices, but these have since dropped by half.
"There is a lot of fanfare around (hydrogen) as a prospectfor a new source of energy but the reality is that when youdelve into it technically, it's very hard and expensive to doand, it's not clear that the economics work," said BrentonSaunders of fund manager Pendal Group in Sydney.
The EU estimated that to reach its 2030 target, it wouldneed investment of up to $445 billion in electrolysers and solarand wind power.Forrest says he can achieve his target by driving down coststhrough automation, massive scale in manufacturing electrolysersand innovations in solar photovoltaic (PV) technology."If you automate, you deeply increase efficiency, you lowercosts and you can employ more people to expand your operations.That has been the key to Fortescue's success," he said.
RAPID SCALE-UP
Two deals Fortescue announced this month aim to achieve justthat - a joint venture with U.S. hydrogen technology companyPlug Power and investments in private Netherlands-basedfirms HyET Hydrogen and HyET solar.
Fortescue Future Industries, the company's green power arm,and Plug Power plan to build the world's biggest factory tomanufacture electrolysers in Queensland, aiming to startconstruction by March 2022 and complete it in 2023. Plug Power CEO Andrew Marsh is undaunted by the size of theproject and is banking on cost savings.
"What we found with scale is that every time we double thenumber of units in the field, our cost goes down by about 25%,"
Marsh told Reuters.
The bigger challenge for Forrest would be to acquire theland, water supply and renewable electricity for the plant invery tight timeframes, Marsh said.
On the solar front, Forrest is betting on HyET's Powerfoiltechnology, which the company's chief executive Rombout Swanbornsays is light-weight, flexible and simpler to manufacture thanconventional glass solar panels. HyET and Fortescue plan to build a 1 GW solar Powerfoil PVfactory in Australia at a cost of about $350 million, half thecost of a conventional plant.
While the factory is 1,000 times bigger than HyET's largestso far, Swanborn said the "massive scale up" was what attractedhim to working with Forrest.
They aim to drive costs down for HyET's solar PV modules toless than 10 cents per watt - or about half the cost ofconventional solar panels - which Swanborn said could make themviable for large-scale green hydrogen production.
"I've seen Andrew's track record. He leads from the front,grabs a concept and runs hard with it," said Ric Ronge, head ofinvestments at Adansonia Capital.
"I have absolutely no doubt he'll get a hydrogen project upand running. I don't know if it'll be a commercial success, buthe'll get the support to build it."
(Reporting by Melanie Burton and Sonali Paul; editing byRichard Pullin)