Podcast ABC Boyer Lecture
In this first Boyer lecture, leading philanthropist and businessman Andrew Forrest calls for an urgent move to green hydrogen "on a global scale".
Having just returned from visiting nearly 50 countries in four months, Dr Forrest says he's seen a paradigm shift in global thinking. Sovereign leaders, business people, politicians, financiers and technology developers have developed a "genuine thirst" for a rapid shift to green energy.
He argues Australia is perfectly placed to become a world leader in the production of green hydrogen energy. For Dr Forrest, the question is not whether green hydrogen will become the next global energy form, but who will be the first to mass-produce it?
More Information
Dr Andrew Forrest is a leading businessman and active philanthropist. He and wife Nicola co-founded the Minderoo Foundation in 2001, and to date they have supported over 300 initiatives across Australia and internationally with their total philanthropic donations now exceeding A$2 billion.
Andrew recently completed a PhD in Marine Ecology and is passionate about ocean conservation. He is a member of the United Nations Environment Programme Scientific Advisory Committee on the Assessment on Marine Litter and Microplastics.
Dr Forrest was appointed by the Prime Minister and Cabinet of Australia to Chair the Review of Indigenous Training and Employment Programs to end Indigenous disparity through employment.
In 2017, he was appointed an Officer of the Order of Australia for distinguished service to the mining sector, a year later he was inducted into the Australian Prospectors & Miners' Hall of Fame. He is a recipient of the Australian Sports Medal and the Australian Centenary Medal. Andrew was Western Australia's 2017 Australian of the Year for his outstanding contribution to the community.
Transcript
Geraldine Doogue: Hello there, I'm Geraldine Doogue and I'm delighted to introduce this year's Boyer lectures. This ABC flagship series of talks began in 1959, and each year a prominent Australian is invited to share their views on the challenges and the opportunities that lie ahead of us.
This year's Boyer lecturer is the leading Australian businessman Dr Andrew Forrest AO. Dr Forrest is the founder and chairman of Fortescue Metals Group. He is also a leading philanthropist, having co-founded the Minderoo Foundation with his wife Nicola in 2001. Dr Forrest will make the case for business to collaborate with philanthropy to drive positive change and to solve some of the world's most intractable problems, that scale will matter, he suggests, in some of these very big long-term challenges. Here now is Dr Andrew Forrest with the first of his Boyer lectures: Confessions of a Carbon Emitter.
Andrew Forrest: The Boyer lectures are traditionally lectures; a speaker lecturing Australia about what it should do. I've chosen a different path. This lecture is about what I'm doing to fight climate change, under the premise that actions speak louder than words.
But first, I have a confession to make. The iron ore company I founded 18 years ago, Fortescue, generates just over two million tonnes of greenhouse gas every year. Two million tonnes. That's more than the entire emissions of Bhutan and its 800,000 inhabitants. It's a huge number, yet it's also just 0.004% of the greenhouse gas that enter the atmosphere every year, of around 51 billion tonnes.
The answer isn't to stop mining iron ore, which is critical to the production of steel, to humanity. The answer is green zero-emissions energy and steel. Every day that the sun shines, the wind blows, rivers flow and Earth's core radiate heat, we waste green energy in proportions that dwarf the energy produced by the entire global oil and gas sector. If these renewable energy resources were a power station, the plant would be millions of gigawatts in size. To put that into perspective, Australia produces all of its electricity from just 70 gigawatts of power. There's enough pollution-free renewable energy out there to last the entire Anthropocene.
The Anthropocene is the age of mankind. Just as the Mesozoic was the age of dinosaurs, humans now have their very own geological period, except the markers of our era won't be Tyrannosaurus rex teeth or asteroid craters, they'll be giant landfills of single-swig, plastic water bottles, which effectively become fossils the moment they're made. We have no idea how long the Anthropocene will last. But if we don't stop warming our planet, it could be geological history's shortest era.
The solution lies in hydrogen. The greatest natural resource Australia has isn't iron ore, it isn't gold, it isn't gas, it's certainly not oil or coal, it is hydrogen. Hydrogen is by far the most common element of the universe. We aren't going to run out of it anytime soon. It makes up 75% of the mass of the universe. Down here on Earth, hydrogen is just as abundant. To make it, all you need to do is run electricity through water. The result is green hydrogen, the cleanest source of energy in the world, and one that could replace up to 75% of our emissions, if we had the technology and the scale.
But right now, what do we do with hydrogen? Well, we treat it as just an ingredient in various industrial processes, not as an energy source. And we make it from burning fossil fuels, quaintly calling it grey hydrogen to hide the fact it's a pollutant.
Green hydrogen—the good stuff—is virtually ignored by the economic world. We're missing a colossal opportunity. The green hydrogen market could create revenues of US$12 trillion by 2050, way more than any industry that exists today. Even Australia's enormous iron ore sector, which has an export revenue of more than $150 billion, is barely one-100th of this.
And Australia, with characteristic luck, is sitting on everything it needs to be the world leader, but only if it capitalises on its advantage immediately. Why? Because the journey to replace fossil fuels with green energy, which has been moving at glacial speed, has suddenly slipped into high gear. The energy markets have finally started to move, quickly and violently. In the past six months, every major government in the world has wrenched economic levers to force the transition away from polluting fuels. Japan, South Korea and China each have plans to have between 800,000 and 6 million hydrogen fuel cell vehicles each on the road in the next decade or so.
Even Boris Johnson, who once said that wind power 'wouldn't pull the skin off a rice pudding,' has invested £12 billion green industrial revolution. And I think most importantly, he has banned the sale of all fossil fuel engines by 2030. In climate change terms, this is bigger than Ben Hur.
Australia has declined to commit to a zero-emissions target, but even we are investing AU$300 million in hydrogen technology. Europe though has allocated €1 trillion—that's €1,000 billion—to reaching zero emissions by 2050. And the United States has pledged US$2 trillion US dollars. In almost every major business in the world has committed to net zero emissions by 2050, including Australian companies, marching ahead of government.
These are laudable and genuine ambitions. But if we wait until 2050 to act, our planet will be toast. We're already way behind schedule. The science says that to keep things halfway normal is to limit global temperature rise to 1.5 degrees Celsius. The science also says that to do this, we need to make major emission cuts every year between now and 2030.
Right now we're heading for a 3 degree Celsius increase in temperature, at least. That's how science works. You can predict it. Bushfires will rage out of control, we've seen that. Tourists will no longer have a Great Barrier Reef to visit. Our cattle and our crops will struggle with incessant drought. There is only one solution, and it will require businesses to work closely with governments.
Green energies need to be available at an industrial, global scale, and at a price that competes with fossil fuels. When fossil fuel energy becomes more expensive than renewable energy, that's when we will reach the tipping point, that's when the world will begin the journey in earnest to become zero carbon, not because it's the right thing to do but because it makes business sense. And the shift will be lightning fast. Forget 2050; zero emissions will begin to happen overnight. That's how capitalism works. You can predict that too.
One of my favourite songs is Tom Petty's 'Runnin' Down a Dream'. In the song he's chasing a dream that won't happen unless he pursues it, wherever it leads. It's a song that makes you feel like anything is possible. We played it every time our plane took off on our recent five-month journey around the world to find the best places on Earth for renewable energy, and a way to really change the world's source of energy. The song is now tradition, part of the folklore of that trip.
While net profit after tax continues to elude Tesla, it has a market value of over US$800 billion. Its major climate innovation is a battery that runs on whatever fuel is in the national grid, instead of a fuel tank.
I think the real climate change challenger could well be Fortescue. We have a market capitalisation of less than US$60 billion, but we made a net profit, after tax, of US$941 million in December alone. Based on this position of strength, the Fortescue board and management recently took one of their most important strategic decisions in our history. We decided to become one of the world's biggest renewable energy production businesses to catalyse a global solution to climate change by rapidly increasing the supply of green energy. It's a plan we have been working on for two years and been thinking about for ten.
In August 2020, myself and a team of 50, in the midst of a global pandemic, left behind the relative safety of Western Australia to visit almost 50 countries. From the Democratic Republic of the Congo, to -30 degrees Celsius Tajikistan, it wasn't a glamour trip.
Timing was everything. The world was in lockdown. Economies and oil markets were collapsing. The diaries of political leaders were eerily empty, and foreigners were a rarity. Those five months were some of the most surreal of my life.
And when I caught Covid, and spent three days on oxygen in Switzerland, you could be forgiven for fearing the worst. Being medevaced between countries was no fun. Looking out of the isolation chamber, a tightly sealed plastic capsule, just made me wonder why I had ever left home.
But private discussions I've had with sovereign leaders, businesspeople, politicians, financiers and technology developers made me see their genuine thirst for our green energy. It made me suddenly, and no longer just hesitantly, optimistic. I felt a change in the global mood, a shift in belief, that the impossible could be possible.
American and Asian captains of industry met us with a tirade of enthusiasm for hydrogen, as did Europe, particularly Angela Merkel's office. In Bhutan, the Prime Minister opened the border for the first time in months, just to allow my team to enter, even though any staff who met us had to then quarantine for three weeks. If you've done quarantine, you'll know what a sacrifice that is.
In Afghanistan, the Vice President displayed huge conviction that his country could play a major role in the world's green energy future. On the same day that he survived a bomb and a seven-minute gun battle in which ten people died, and with bandages on his hands and burns to his face, he negotiated the final clauses of our sovereign investment agreement, just so the President, one of the most selfless leaders I have ever met, could sign the agreement before we flew out.
On our way back to Australia, we took an unusual flight path out of Central Asia; from Kyrgyzstan to Seoul, South Korea. If we hadn't done this, we wouldn't have seen that thousands of wind turbines and the foundations for what looked like tens of thousands more on the Mongolian-Chinese border. This is a massive move into green energy, and China is making it without fanfare.
In short, my time on the road made me realise that our ambitions, while risky, are far from radical. Harbouring a global ambition to produce green hydrogen and its liquid form, ammonia, on a scale to begin to match the oil and gas industry might leave me a little lonely in Australia, but step outside into the big wide world and many other leaders are thinking the same way.
The question isn't whether or not green hydrogen will become the next global energy form, it's who will be the first to mass-produce it. Which company could be so strong that it could allocate sufficient risk to truly test green hydrogen at global industrial scale? In August 2020, the board and I decided Fortescue would be that first mover. Our first steps have locked in exclusive access to almost 300 gigawatts of hydro and geothermal power. That's more than four times what Australia consumes.
We targeted hydro-power electricity, generated from the flow of rivers, and geothermal, which taps into heat from the Earth's core, because, unlike solar or wind, these renewables work around the clock. But we are scaling up wind and solar acquisitions too, exploring over 500 gigawatts of energy assets and potentially thousands more gigawatts will follow.
We aim to produce or help produce more than 1,000 gigawatts of zero-emissions energy to create so much momentum and value that consuming energy from a polluting source, even if you are a Tesla car battery, doesn't only become commercial nonsense but also a conscience non-sense.
It sounds daunting, and there will certainly be plenty of naysayers. But as someone who's made a career out of doing what other people said was impossible, this doesn't feel any different. You need a thick hide to withstand criticism, and, apparently, I have that. A former colleague once said you could shoot me in the tail and I wouldn't feel it. To which I'd answer: it runs in the family.
John Forrest, my great-great-uncle, was born to indentured Scottish migrants who arrived in Perth in 1842. John became WA's first qualified surveyor, and pulled off a series of highly calculated death-defying expeditions, including the first transect through Australia's centre which joined our east and west coasts as one country, an eight-month, 2,000-kilometre journey, largely on foot. John received a knighthood from Queen Victoria, and went on to become WA's first premier and a Founding Father of Australia's Federation.
But for me, one of John's greatest achievements is the risk he took in building the vital water pipeline from Perth out to the Goldfields around Kalgoorlie. Masterminded by the engineer CY O'Connor, he dug a 30-metre dam out of the bedrock at Mundaring Weir near Perth, and, pumping the water 560 km inland, they trialled on the spot new technologies for the first time. They had to pump it up a gradient of almost 400 metres, acquiring eight relay stations along the way. Each of the 60,000 sections of pipe they laid, often by hand, weighed a tonne. The logistics were formidable and still would be today.
Forrest faced huge criticism over this project and was told to stop wasting public funds on an impossible task. O'Connor ended up shooting himself on his horse on a beach near Fremantle due to the incessant pressure. But the pipeline was built, and without it, the Gold Rush of the late 1890s, which helped build cities as far away as Melbourne, would never have taken off the way it did.
Most of the world's iron ore formed roughly 3 billion years ago, when bacteria first evolved the ability to make oxygen. The oxygen reacted with the iron, sinking to the bottom of the ocean and creating the rich deposits in the Pilbara we have today. Ironically, this ancient event is what's allowing us to modernise today.
Iron ore is used to make steel, and steel is fundamental to everything you see around you, from your home, to your car, the roads, the bridges you drive on, to your ability to listen to this Boyer lecture. But right now, Australia makes barely any of that steel. We just dig up the iron ore and export it.
In some ways, that's a blessing: blast furnaces, where most steel is made, generate 8% of global emissions, because coal is used in the process. Now, imagine if we could find a way to make green steel, zero-carbon steel, in Australia. This isn't a pipe dream.
Enterprising businesses around the world, like Germany's Thyssenkrupp, Sweden's SSAB, and Japan's Nippon Steel have already figured out the technology. There are two ways. In one, you replace coal in the furnace with our old friend, green hydrogen. You get steel. But instead of emitting vast clouds of carbon dioxide, you produce nothing more than pure water vapour. To strengthen the steel, you simply add the carbon separately. It bonds into the metal rather than dispersing into the atmosphere. Beautiful.
The other way to make green steel—the more radical approach—is to scrap the blast furnace altogether and just zap the iron ore with renewable electricity.
Fortescue is trying out both methods. We aim to start building Australia's first green steel project in the Pilbara, powered entirely by green hydrogen from local wind and solar, in the next few years. Why the Pilbara? Because it's the largest iron ore province in the world and perfect for renewable energy too. In short, Australia is in an absolutely unique position to scale green steel.
If we do it, the immediate and multiply impact on the Australian economy will be nothing short of nation-building on a grand scale, capturing just 10% of the global steel market, which we could easily do as we produce 40% of all iron ore globally every year, it would create enough jobs to employ Australia's entire coal industry, some 40,000 jobs. Not any old jobs, but similar jobs using similar skills—construction workers, mechanics, electricians—all of the sectors that'll be hit the hardest if coal is ever phased out.
I promised at the start of this lecture that this wouldn't be a lecture, that actions speak louder than words. So, I want to tell you what we're doing to decarbonise Fortescue. By the end of the decade, all our trucks will run on renewable electricity, green energy. The entire fleet will switch to green hydrogen ultimately. Imagine that: a fleet of vehicles and massive trucks that produce nothing more than steam as exhaust.
We're aiming to develop a green iron ore train, one that either runs on renewable electricity or a four-stroke combustion engine that is powered only by green ammonia. Ultimately all our trains will run on green energy. And this year we will begin to settle designs that allow our ships to run on green ammonia. We are willing to share that knowledge and learning to help our competitors go green too, including Vale, one of the largest iron ore mining company in the world. We are all in the same boat, with our emissions from shipping outstripping the emissions from our projects.
But where will we get all this hydrogen from? In the Pilbara, we're planning large-scale wind and solar generated electricity and hydrogen with a view to generating over 40 gigawatts of power, enough for every Fortescue operation and to make a dent in global industrial emissions.
In the Northern Territory, I've personally invested in Sun Cable. This will be the largest solar farm and battery storage facility in the world, and provide 20% of Singapore's needs via a nearly 4,000-kilometre-long cable on the sea floor.
With all these technologies, the day that Australia can mine iron ore without generating emissions is rapidly approaching. And if a major player like Fortescue does it and substantially reducing operating costs, then the rest of the global mining industry will follow suit.
You may have noticed that I've been talking about climate change for almost half an hour now and haven't pointed any fingers at anyone or asked anyone to make any sacrifices (apart from me). I'm a realist. I know we can't expect our CEOs to act like Mother Teresa, they'll get shot by shareholders, and the next, less principled CEO, wheeled in.
Don't get me wrong, I do believe that business can be steered by ethics, business isn't just business. The environment, business, family, health, society and our communities, they're all connected. For example, I've never invested in coal, even though I knew years ago it would have doubled the cash flow of our company.
I've made an allowance for natural gas, as a critical stepping-stone, a way to keep the country running. My private company Squadron Energy is building a dual fuel 800-megawatt power station at Port Kembla. It will be powered by liquid natural gas, by dual fuel, switching to bulk, pollutant free green hydrogen as soon as possible. All of Fortescue's Sovereign Agreements with countries all over the world come with strict conditions.
All of our hydro schemes include multiple, small dams along each river, rather than one huge dam. This is called run-of-river and it's environmentally respectful. And if a country wants our investment, it must commit in the contract to hitting targets, vanquishing forced marriage, child marriage and eliminating modern slavery in all its forms. Ensuring equality of education outcomes between girls and boys, that means equality of employment between women and men. No commitment, no deal. We dust off our shoes and we go to another country.
Change takes courage. And that must be encouraged by our society. We must be prepared to fail in pursuit of improvement, or we as individuals or as societies or as a nation will stagnate.
I'm used to fear, I feel it as much as anyone else. But my job is to persevere through it. Eighteen years ago, I was just a young upstart trying to set up Fortescue. Everyone told me I was crazy to take on BHP and Rio Tinto. They between them had a stranglehold on the Pilbara. Almost everyone I met in the industry said it was impossible. But we did it. And in the process, we reduced costs from around US $48 to $13 a tonne. How? It wasn't down to dumb luck or unexpected breakthroughs. There was no one hero, there was no single great technology, it was thousands of people with great ideas, and thousands of improvements that made our operations safer and more efficient day by day, year by year.
At Fortescue, we call this the flywheel. We nudge the wheel, make sure our systems work, reduce costs, free up capital and create demand. Then we encourage with that momentum to reduce costs even further, creating an even larger, more reliable supply, that again creates more demand. The flywheel begins to spin on its own, faster and faster. Now, we're building, at global scale, the flywheel of green energy.
But let's not underestimate the challenge. The fossil fuel sector will react to increasingly competitive green hydrogen prices by slashing the cost of oil and gas until it's almost zero. In the end, it will be grim, like a knife fight in a telephone box. And Big Oil's last stand will be to use fossil fuels to create blue hydrogen, storing the emissions somewhere (underground?) and peddling it as clean energy. But it's not clean energy. So-called blue hydrogen just displaces the pollution from one part of the world to another. It's the same dog, just a different leg action.
But it's not just the agendas of oil companies that we need to be wary of. Elon Musk recently called hydrogen cars 'mind-bogglingly stupid'. He has every reason to fear them, and his description is perhaps better suited, in my view, to someone who peddles a battery technology as green when it runs on fossil fuel. Battery materials are finite and will run out of fossil fuel probably before we destroy the planet. We will never run out of green hydrogen or the stuff we need to make it, and it can handle all parts of our economy, not just cars or transport.
There are two futures ahead of us. Fly less, drive less, live out in the open, or you're killing the planet. Or the alternative one that doesn't demand such austerity and sacrifice, one where quality of life improves and we reduce carbon emissions in the atmosphere at the same time, one where we decouple economic growth from damage to our environment, damage that threatens our very existence.
I choose hydrogen.
What will you choose?
Geraldine Doogue: Well, I hope you enjoyed Confessions of a Carbon Emitter, presented by Dr Andrew Forrest. I'm Geraldine Doogue and I do hope you can diarise us and join me at the same time next week when Dr Forrest shines a light on something he is quite passionate about: the fight to clean up our oceans.
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