The Fortescue Metals Group Limited (ASX: FMG) share price is up 4%. Could it be due to a new hydrogen project?
Whilst Fortescue is a major miner, it is also looking to decarbonise heavy industry through areas like green hydrogen and renewable energy through its Fortescue Future Industries (FFI) business.
Fortescue’s latest hydrogen play
Fortescue is acquiring an interest in Sparc Hydrogen, a company which has an exclusive licence to develop and commercialise next-generation green hydrogen technology, created by the University of Adelaide and Flinders University.
This new technology which is being researched could see green hydrogen produced by only sunlight and water, instead of renewable energy and electrolysis. The technical process is called photocatalytic water splitting coupled with solar radiation.
Why is Fortescue Future Industries focused on this technology?
FFI has done a lot of work on being able to produce green hydrogen from electrolysis (using electrolysers) with this powered by renewable energy.
However, Fortescue said Sparc Hydrogen’s promising early-stage technology has the potential to create significant energy efficiencies and a cost competitive advantage with low capital and operating expenditure required compared to renewable energy and electrolysis.
If this early-stage technology is successful, it could ultimately be used to help produce green hydrogen at a larger and more affordable scale.
FFI reminded investors that it’s also building one of the largest electrolyser factories in the world in Gladstone, Queensland with the first ‘sod’ due to be turned this month. It looks like Fortescue Future Industries is trying to cover all the bases.
If this technology is successful, it is still years away from being able to produce the first commercial-scale project.
FFI’s investment
FFI’s initial stage 1 investment of $1.8 million will result in FFI acquiring a 20% interest in Sparc Hydrogen, a joint venture with Sparc Technologies Ltd (ASX: SPN) and the University of Adelaide. At stage 2, FFI could invest a further $1.475 million into Sparc Hydrogen for a total investment of $3.275 million over 4.5 years to earn a 36% interest in Sparc Hydrogen.
Comments
University of Adelaide’s Executive Director, Innovation & Commercial, Dr Stephen Rodda said:
“Central to this is working with partners that are aligned in the strategic objectives and goals to be achieved. Bringing FFI into the Sparc Hydrogen joint venture is a tremendous outcome and one that the University of Adelaide is proud to be a party to.”
“Not only is FFI’s hydrogen energy strategy strongly aligned to that of Sparc Hydrogen, but FFI will also bring a high level of capability and expertise to support the successful development of this innovative technology.”
Final thoughts on the Fortescue share price and this deal
I’m no expert on Thermo-Photocatalysis. But it sounds very compelling if it’s cheaper and easier to produce. I don’t know what that would mean for its other plans with electrolyser plants and so on, but as long as FFI is involved and decarbonisation occurs then it will be a positive for the company.
Fortescue has rallied in recent months, so I wouldn’t call it an obvious buy today, particularly with the current strength of the iron ore price.
