The Fortescue Metals Group Ltd (ASX: FMG) share price is under the spotlight today after an announced $2 billion for hydrogen in the budget.
Fortescue is one of the largest iron ore miners in the world, but it also wants to be one of the largest green hydrogen producers in the world as well.
$2 billion for hydrogen
The Australian federal budget was announced yesterday, which included a forecast of a budget surplus this year. The surplus would be the first time in 15 years. It was driven by resource prices, low unemployment and an increase in net migration.
As noted by the Australian Renewable Energy Agency (ARENA), the Australian government noted the establishment of a $2 billion ‘hydrogen headstart’ initiative to “underwrite the biggest green hydrogen projects to be built in Australia.”
The idea is that funding will provide “support for investment in renewable hydrogen production through competitive production contracts”. This funding will “cover the commercial gap between the cost of hydrogen production from renewables and its current market price.”
ARENA said that the idea aims to support two to three ‘flagship projects’ which could provide up to 1GW of hydrogen electrolyser capacity. This could be helpful for the Fortescue share price.
The ARENA CEO Darren Miller said:
Australia has an unparalleled opportunity to become a global green hydrogen leader, but we can’t afford to lose our momentum as other competing countries step up their ambitions and support.
With this funding, we are looking to incentivise green hydrogen production in Australia by backing early projects that will be among the largest in the world.
This funding will reduce the cost of green hydrogen produced via renewable electricity and will scale up our hydrogen sector. These projects will create thousands of regional jobs and will help reduce emissions in industry in line with our climate targets.
Response and thoughts on the Fortescue share price
Fortescue Future Industries (FFI) said in response to this that it “has the green hydrogen projects in the pipeline ready to go”.
It also pointed out that it has paid billions of dollars to the government in the form of tax, including A$4.2 billion in corporate tax in FY22.
FFI said that green energy will “create significant economic growth and prosperity for Australia, the years ahead.”
If Fortescue can capture some of that funding, the green energy business will benefit significantly and this could help the Fortescue share price. But, I’d
