Fortescue Ltd (ASX: FMG) shares are down 2% today after the company announced that it expects to save US$100 million in fossil fuel costs by 2027 by accelerating the delivery of its heavy industry green grid.
Fortescue is one of the world’s largest iron ore miners. It also has big green energy plans, by developing green hydrogen and green technology at scale. The company describes itself as a “unified global metals and green energy company” and has a goal to run its Australian iron ore operations on green energy.
Green energy grid coming sooner
Today, Fortescue announced that it is accelerating the delivery of “the world’s first industrial and fully integrated green energy grid” which is dedicated to eliminating fossil fuels from large-scale industry, at a scale comparable to a city. The green grid will target diesel elimination in particular, with the company planning to replicate and commercialise the technology “wherever it is invited”.
By early 2027, Fortescue expects to complete 290MW of installed renewable capacity to meet the fixed energy requirements of its ore processing facilities. This will enable daytime “green processing” across Fortescue’s Pilbara operations.
In late 2027, the plan is for the system to power all of Fortescue’s operations for 24-hour periods without fossil fuels.
The company said that this is well ahead of previously announced “Real Zero” plans which are targeting a completion date of December 2030.
Fortescue said that it expects full completion of its Pilbara green grid by the end of 2028, which is its goal of ‘Real Zero’. This includes 1.2GW of solar capacity, more than 600MW of wind generation and between 4GWh to 5GWh of battery energy storage.
The business said it expects implementation to ramp-up within two years, subject to delivery schedules and commissioning.
Why do this now?
The company said that as global energy supply chains become increasingly unstable and the “massive risks of fossil fuel dependence are exposed”, it’s moving faster to decarbonise, control its costs and reduce energy risks.
It’s targeting diesel elimination in particular, a fuel that is 100% “imported and subject to extreme price volatility, unreliability and hardship”.
It expects to save US$100 million in fossil fuel costs by next year. At the end of the completion of its decarbonisation program, it expects to see a further reduction in C1 (production) unit costs of at least US$2 per wet metric tonne (wmt) t0 US$4 per wmt.
Fortescue said that it’s demonstrating that going green can be economically superior. It’s expected to be delivered for less than US$2.5 billion.
Final thoughts on the Fortescue share price
The business is doing the right thing to try to reduce its costs and reduce its impact on the planet.
But, it’s not at a cheap price, so I don’t think this is a great time to invest. I like to buy cyclical shares when they’re at a weak point in the commodity cycle rather than a relatively strong point like now. If the iron ore price falls, it could become more interesting.
Plus, I think it’s good that Fortescue is seemingly look to expand its exposure to copper.
