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Few have been more bullish on renewable, or “green,” hydrogen remaking energy and transforming industry than Australia’s richest man, Andrew “Twiggy” Forrest. He has literally traversed the globe over the past five years singing the praises of renewable hydrogen in conferences, corporate C-suites and public appearances.

So many eyebrows, including mine, elevated recently when Forrest — whose flagship Fortescue mining empire touts some of the most ambitious decarbonization goals of any company — suddenly scaled back his hydrogen plans.

The pugnacious, ever-optimistic mining magnate dropped Fortescue’s 2030 timeline for producing 15 million tons of green hydrogen annually and said it would lay off some 700 employees, about 4.5% of its workforce, many of them working on meeting those goals.

Forrest’s move highlights how reality is starting to temper expectations for clean hydrogen, long held out as one of the better options to help replace coal, natural gas and oil in the race to reduce carbon emissions, even in countries that have been among hydrogen’s biggest proponents, such as Australia.

But producing and using hydrogen — the most abundant element in the universe — in ways that don’t create carbon emissions remains cumbersome and expensive.

Forrest and others still say prospects for renewable hydrogen, which is produced using electricity from wind, solar and other power sources that don’t emit greenhouse gases, remain bright over the long term. The company is forging ahead with projects in the United States, Norway, Brazil and Australia.

“If you give up on green hydrogen, you give up on the world,” he said in a statement released after the decision. (Forrest is an investor in Breakthrough Energy Ventures, a program of Breakthrough Energy, which also supports Cipher).

But in Australia, as elsewhere, it’s the near-term prospect for hydrogen that has become so challenging.

Hopes and reality checks

Hydrogen boosters like Forrest have long compared the ubiquitous gas to a Swiss Army Knife, touting its ability to perform many tasks traditionally done by fossil fuels. Over the past five years, governments in every industrialized country have poured hundreds of billions of dollars of subsidies and tax breaks into “clean” hydrogen. Those efforts include the 2022 Inflation Reduction Act in the U.S. and the European Union’s 2020 hydrogen roadmap.

Australia, with its plentiful wind and solar resources, has leaned into hydrogen. On a reporting trip to Forrest’s home country earlier this year, I found hopes for renewable hydrogen running very high.

In the state of South Australia, officials were contemplating producing hydrogen from the state’s abundant wind and solar power for many uses, including energy storage and exporting it in the form of ammonia. I visited a pilot project in the city of Adelaide generating hydrogen from the state’s already 75% renewable power grid to heat homes. And I stopped in Wollongong, just south of Sydney, to see a start-up company with what it says is a unique approach to making an electrolyzer, the machines that break water into oxygen and hydrogen.

But since my trip in the spring, the architect of some of Australia’s biggest hydrogen hopes has toned down his enthusiasm. Alan Finkel, the former chief government scientist who led a 2018 commission laying out future uses for hydrogen, was quoted last month in the Australian Financial Review saying his thinking on hydrogen had evolved recently. Some applications his commission laid out — heating homes, storing electricity and shipping it overseas — no longer appear feasible, he said, given the high cost of producing clean hydrogen with electricity.

Most of the hydrogen currently used by refineries and factories is manufactured in a way that creates lots of carbon dioxide emissions. Getting rid of those emissions means either producing hydrogen with electricity generated by renewable energy or capturing and storing the carbon that the traditional process emits.

Producing hydrogen cleanly costs more, especially if the hydrogen then needs to be transported to where it will be used. Japan and South Korea — both expected to import lots of hydrogen-derived ammonia to fuel electricity generation — appear to be shying away from the cleanest hydrogen made from renewable sources at least initially due to the anticipated cost.

Various studies have concluded that hydrogen from renewable electricity could initially cost between two to four times more than standard hydrogen. Even massive government subsidies might not be enough to support the market. Most planned renewable hydrogen projects around the world currently don’t have any customers signed on to purchase the fuel.

Renewable hydrogen “is quite expensive, inefficient and really should only be used for certain applications,” said Kevin Morrison, an energy finance analyst with the Institute for Energy Economics and Analysis (IEEFA).

Iron ore aspirations

One of the better applications of renewable hydrogen is, in fact, abundant in Australia: iron ore production.

Australia is among the largest exporters of unprocessed iron ore to markets like Europe and China. The importing countries then use coal to purify the ore, which generates lots of CO2. But purification — also known as “direct reduction” — using renewable hydrogen could be done close to the mine itself without emissions, allowing Australia to export ore that has already been decarbonized.

Iron ore is one of the markets Paul Barrett, CEO of electrolyzer start-up Hysata is most excited about for Australia.

“Australia has a lot of iron ore. We exported $250 billion of iron ore last year, largely to our Asian trading partners,” Barrett told me as we walked through Hysata’s beachside manufacturing plant, which the company is starting to ramp up after a recent $111 million funding round that included South Korean steel giant POSCO.

Fortescue is also pursuing a zero-emissions iron ore project in Western Australia, with production starting next year and plans to become the world’s largest producer.

Nevertheless, Forrest says the best way to support renewable hydrogen production in Australia for now is to invest heavily in wind and solar power. All that clean electricity could eventually be used to create hydrogen, he reasons. The company also plans to make electrolyzers.

“By investing in green electricity,” he said in a recent statement, “we’re directly supporting the green hydrogen supply chain.”

Editor’s note: Andrew Forrest is an investor in Breakthrough Energy Ventures, a program of Breakthrough Energy, which also supports Cipher.