This stock’s WA Green Hydrogen project just got cheaper

Frontier Energy (ASX:FHE) reported it has found a way to save $10m building its WA Green Hydrogen project on Tuesday. 

The Bristol Springs Green Hydrogen Project positions Frontier in line to become the first domestic WA green hydrogen producer and among the lowest cost producers in all of Australia. 

Key to its plans is a solar farm which will generate energy needed to power electrolysis producing the hydrogen gas in question. 

Green H2 recap 

Green hydrogen is produced using renewable electricity only, and is differentiated from ‘blue hydrogen’ or ‘grey hydrogen’ which is made via treating natural gas with steam. 

Green hydrogen, therefore, offers the lowest possible scope 1 and scope 2 emissions profile possible for the production of the preferred gas of the energy transition. 

$10m in savings 

Frontier’s ability to cut costs back by $10m relates to optimisation of the full-scale 500MW capacity solar farm (however, the first-stage version will have a capacity of 114MW).

Stage One of the project will see Frontier establish the solar farm in question and even port excess electricity into WA’s grid (the South West Interconnected System [SWIS] which is separate from the east coast infrastructure underpinning the National Electricity Market [NEM]). 

In short, the company has found a cheaper way to connect to the SWIS by re-locating the Point of Connection (POC) to a terminal nearby the project (the Landwehr Terminal).

One connection terminal option previously unavailable to Frontier at the time the PFS was produced has now been opened up following an agreement with privately held Waroona Energy.

Waroona is developing an unrelated solar farm practically next door. 

Significant reduction in capex 

A pre-feasibility study published in August last year put Stage One costs at $166m. 

The implication of Tuesday’s news is that capex will now reflect a lower $156m, though, cost inflation since the time of publication may offset these expected discounts.

Still, management suggested the same outcome. 

“With costs continuing to rise across all industries due to global inflation and supply chain pressures, to have such a significant capital reduction identified is pleasing,” Frontier managing director Sam Lee Mohan said. 

Mohan was the former chief of hydrogen strategy at ATCO. 

A Definitive Feasibility Study (DFS) for stage one is set for publication next month. 

FHE's one year chart

Disclaimer: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. Frontier was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice.