E.ON, Fortescue in deal to supply green hydrogen to Europe

Source: iStock

German energy giant E.ON SE and a unit of Australia-based Fortescue Metals Group Ltd. plan to supply green hydrogen to Europe as the continent seeks to reduce its dependency on Russian energy.

The companies will work together to deliver 5 million metric tonnes of hydrogen a year by 2030, they said in an emailed statement on Tuesday, after signing a memorandum of understanding in Berlin. The fuel will be produced using renewable power in Australia and will be distributed by E.ON.

The agreement comes as Europe tries to wean itself off Russian gas in response to the invasion of Ukraine. While 5 million tonnes of hydrogen would be equal to about a third of the energy Germany imports from Russia, there are still multiple logistical, infrastructure and financing hurdles to be overcome.

Fortescue’s billionaire founder Andrew Forrest estimates the project would require $50 billion of expenditure and the company is talking to banks, institutional investors, export credit agencies and other global institutions over project funding, the producer said in a Wednesday statement. 

Perth-based Fortescue, the world’s No. 4 iron ore exporter, has committed to provide 10 per cent of earnings to the hydrogen unit, equivalent to about $1 billion in the most recent full year. Fuel would initially be shipped as liquid ammonia, which is much easier to store and transport, before being converted to hydrogen once it reaches European industrial zones, according to Forrest.

“Green energy will reduce fossil fuel consumption dramatically in Germany and quickly help substitute Russian energy supply, while creating a massive new employment intensity industry in Australia,” he said in a separate statement. “This is a cohesive and urgently needed part of the green industrial revolution underway here in Europe.”

Europe is betting on hydrogen to transition to cleaner forms of energy, a move that’s gained even more traction as the war in Ukraine sends prices shocks through commodities markets. High energy prices have improved the economics of hydrogen when compared to fossil fuels, with a wave of projects starting to take shape in Europe.

“The race for large scale production and transportation of green hydrogen has taken off,” German Economic Minister Robert Habeck said. “The agreement between E.ON and FFI is a major step forward and puts them in a pole position for the delivery of green hydrogen to German industry.”

E.ON and Fortescue Future Industries said they will work together to analyze possible solutions to “solve infrastructure issues and to build a secure value chain,” according to the statement.

Fortescue Future Industries is targeting first sales of green hydrogen by 2024 and aims to produce 15 million tons by 2030. 

© 2022 Bloomberg L.P.

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