Executive Summary

There are not many established commodities that offer the prospect of significant growth in demand from a new end-use segment as platinum does through its importance to the hydrogen economy. The need to decarbonise is more acute than ever and platinum-based proton exchange membrane (PEM) technologies will have a significant role to play in the energy transition. While hydrogen-related demand for platinum is relatively small in 2022 and 2023, it is expected to grow substantially through the 2020s and beyond, reaching as much as 35 per cent of total annual platinum demand by 2040.

Platinum’s strategic and economic importance is underlined with the United Sates, European Union, and China recognising its critical mineral status, while the U.S. Inflation Reduction Act, passed in August, further supports platinum demand from PEM technologies by accelerating growth in green hydrogen production and fuel cell electric vehicle adoption. The urgent need for energy independence is also spurring on investment in hydrogen that is beneficial for platinum.

What are PEM technologies?

Due to its unique chemical and physical properties, platinum is at the forefront of PEM applications – transformative technology that holds the key to unlocking the zero-emissions potential of hydrogen. PEM technology is used in both electrolysers to produce hydrogen and in fuel cells, which power fuel cell electric vehicles (FCEVs).

Hydrogen – the most abundant element on earth – is already used as a fuel source in industry. As it contains no carbon, it produces zero emissions, only water. However, its credentials as a truly sustainable fuel source depend upon the way in which it is produced. For example, grey hydrogen is produced by stripping hydrogen from natural gas, which releases CO2 into the atmosphere, whereas green hydrogen is completely carbon free as its production does not involve the use of any fossil fuels.

PEM electrolysis

During this process, an electric current is used to separate water into its component elements – hydrogen and oxygen. When the electric current is derived from a renewable source – solar photo voltaic panels or wind turbines, for example, it is known as green hydrogen.

Platinum, in conjunction with iridium, is used as a catalyst in PEM electrolysers, which use a solid polymer electrolyte, one of the two leading electrolysis technologies available in the market. PEM electrolysis was developed in the 1960s but only commercialised at scale relatively recently, offering advantages over other electrolysers, being compact and more able to cope with the intermittent nature of electricity from wind or solar sources.

PEM fuel cells

Electrolysis of water consumes electricity to produce hydrogen and oxygen. The PEM fuel cell works in reverse combining hydrogen and oxygen to generate electricity, with heat and water as the only by-products. Molecules of hydrogen and oxygen react and combine using a PEM, which is coated with a platinum catalyst.

Platinum is especially suited as a fuel cell catalyst as it enables the hydrogen and oxygen reactions to take place at an optimal rate, while being stable enough to withstand the complex chemical environment within a fuel cell, as well as the high electrical current density, performing efficiently over the long-term.

Fuel cells share many of the characteristics of a battery – silent operation, no moving parts, and an electrochemical reaction to generate power. However, unlike a battery, PEM fuel cells need no recharging and will run indefinitely when supplied with hydrogen. A fuel cell can have a battery as a system component to store the electricity it is generating.

A single fuel cell alone only produces a few watts of power; several fuel cells can be stacked together to create a fuel cell stack. When combined in stacks, the fuel cells’ output can vary greatly, from just a few kilowatts of power to multi-megawatt installations. Fuel cell stacks that do not use platinum-based PEM technology need to be much bigger to achieve similar power outputs. This makes platinum essential to the efficiency of end-user mobile applications and, in particular its use ensures that the fuel cells are compact enough for use in FCEVs.

Critical mineral status

It is increasingly being appreciated that having a secure stake in the value chains of climate-safe energy technologies, such as green hydrogen production, can boost a country’s economic competitiveness, energy independence, and national security.

Earlier this year, the United States (U.S.) Geological Survey, the science agency for the U.S. government’s Department of the Interior, released an updated list of 50 mineral commodities deemed critical to the U.S. economy and national security.

In the U.S., critical minerals are defined by the Energy Act of 2020 as those non-fuel minerals, which have a supply chain that is vulnerable to disruption and which serve as an essential function in the manufacturing of a product, the absence of which would have significant consequences for the economic or national security of the U.S.

This year’s list – which will be updated again in three years’ time – features the platinum group metals (PGMs) platinum, palladium, iridium, rhodium, and ruthenium as individual elements for the first time, reflecting the increasing importance of PGMs as raw materials in technologies that support the clean energy transition.

In Europe, the European Commission’s Action Plan on Critical Raw Materials 2020, focuses on developing secure, resilient, diversified, and sustainable supply chains that foster the transition towards a green and digital economy. The plan incorporates a list of 30 critical raw materials, designated as such based on economic importance and perceived supply risk, which include the same PGMs as those identified by the recent U.S. Geological Survey, citing their use as chemical and automotive catalysts as well as their use in electronic applications and fuel cells.

In China, platinum is recognised as a metal of strategic importance for its use in PEM technologies. Along with lithium, nickel, and cobalt, platinum is specifically mentioned in the China State Council’s New Energy Vehicle Industrial Development Plan (2021-2035), which encourages Chinese companies to improve their capacity to secure long-term supplies of these rare and in-demand elements.

PEM technologies and carbon reduction

Green hydrogen is an energy carrier that can be used in a wide range of applications to replace fossil fuels. For example, green hydrogen can be used as a feedstock in the production of fertilisers instead of natural gas and as a fuel to power hydrogen FCEVs.

WPIC research indicates that, given proposed PEM electrolyser build-out, platinum’s role in enabling the achievement of global decarbonisation targets could be highly significant. In fact, platinum-based PEM technology could alone deliver up to eleven per cent of global CO2 emissions-reduction targets as set out in the Paris Agreement by 2030.

Figure 1: Potential CO2 savings achieved by platinum-based PEM technologies relative to Paris Agreement CO2 reduction targets

Under the Paris Agreement, which has been signed by every country in the world bar four, it is understood that emissions must reduce by an average of 7.6 per cent each year between 2020 and 2030 to limit global warming to 1.5oC, or by an average of 2.7 per cent per year to limit warming to 2oC. Global CO2 emissions totalled 34.2 gigatonnes in 2020, meaning that by 2030, respective CO2 reductions of 18.7 gigatonnes or 8.2 gigatonnes will need to have been made if either target is to be achieved.

With the volume of electrolyser projects currently planned, and assuming the PEM market share of these ranges from 31 per cent to 96 per cent, between nine million tonnes and 29 million tonnes of platinum-enabled green hydrogen could be produced by 2030. Should this green hydrogen be used to displace natural gas in, for example, heating and industrial end-uses, it would equate to cumulative CO2 savings of anything from 0.18 Gt up to 0.58 Gt from now until 2030.

What is more, the CO2 savings are even greater when the potential to displace internal combustion engine vehicles with FCEVs is taken into consideration, thereby avoiding the CO2 emissions from gasoline or diesel. Under WPIC’s base case scenario, if around 40 per cent of total forecast green hydrogen production is used to fuel FCEVs between now and 2030, cumulative CO2 savings are increased to between 0.24 Gt and 0.63 Gt, or one per cent to 11 per cent of the savings needed to meet the Paris Agreement’s targets of limiting warming to 1.5°C or 2°C, respectively.

Figure 2: PEM electrolysers and FCEVs have the potential to significantly reduce CO2 emissions, making material contributions to the UN’s targeted CO2 cuts by 2030

Annual platinum demand in 2030 from FCEVs and electrolysers combined, dependent on PEM market share, would be between 1.6 Moz and 2.4 Moz.

Figure 3: Platinum demand from PEM electrolysers and FCEVs becomes a meaningful component of global demand by 2030 and potentially the largest segment by 2040

Impact of the U.S. Inflation Reduction Act

Capturing the maximum climate value of hydrogen to deliver the 2050 net zero carbon emissions target reportedly* requires a tripling of investments in hydrogen projects by 2030 to U.S.$700 billion, equivalent to an additional U.S.$460 billion over and above the U.S.$240 billion of direct investment between now and 2030 already announced.

In this context, the U.S. Inflation Reduction Act (IRA), 2022 is an important step forward, aiming to invest U.S.$369 billion over ten years into energy and climate programmes and injecting significant sums into clean energy and electric vehicle incentives and programmes.

It is being hailed as a game changer for the growing green hydrogen sector. By offering a U.S.$3 per kilogram tax credit for lower carbon hydrogen, subject to certain requirements, it is expected to make green hydrogen produced in the U.S. the most cost competitive in the world. At the same time, the IRA also includes a variety of grants supporting the domestic production of clean transportation technologies, including FCEVs.

The passing of the IRA is expected to stimulate the use of green hydrogen in industries that are looking at ways of decarbonising such as shipping, aviation, heavy industry, and transport. For example, the hydrogen division of Howden, a provider of hydrogen compression solutions, has already stated that it will step up its investment in hydrogen projects in the U.S. on the back of the IRA.

European energy independence

Global energy prices, which were already rising due to strong demand caused by the post-pandemic economic recovery, surged to record highs - and remain volatile - following Russia’s invasion of Ukraine. Countries are now looking at ways to pivot away from reliance on Russia’s oil and gas as quickly as possible. Many members of the European Union (EU) are particularly exposed, with in aggregate roughly 40 per cent of EU gas and 27 per cent of EU crude oil coming from Russia.

In response, the European Commission (EC) has announced its “REPowerEU: Joint European action for more affordable, secure and sustainable energy” plan, stating that the case for a rapid clean-energy transition under the European Green Deal has never been stronger and clearer. Under the initiatives set out under RePowerEU, the EU believes that terminating its overdependence on fossil fuels from Russia can be achieved well before 2030.

Among other actions, REPowerEU calls for the creation of a “Hydrogen Accelerator” to develop integrated infrastructure, storage facilities and port capacities. The EC estimates that, with the right investment, green hydrogen could replace between 25 and 50 billion cubic metres per year of imported Russian gas by 2030. This would require a doubling of the five million tonnes of green hydrogen production already targeted for 2030 under the European Green Deal, bringing the new target to 10 million tonnes. It is expected that the balance would come from imports of green hydrogen.

Clearly, electrolyser capacity will need to grow if the intentions of REPowerEU for green hydrogen production are to be met, and the EU is looking to install some 80 gigawatts of electrolyser capacity by 2030, up from a pre-crisis plan of 40 gigawatts.

However, WPIC research suggests that installed electrolyser capacity would need to reach nearer 115 gigawatts, in order to produce enough hydrogen to displace approximately 30 billion cubic metres of Russian gas imports when powered using renewable energy.

The electrolyser capacity required to achieve the intentions of REPowerEU could lead to a significant, incremental increase in platinum demand. Taking a scenario where 115 gigawatts of 100 per cent renewable-powered electrolyser capacity is installed, and assuming that the two major electrolyser technologies – PEM and alkaline – have an equal market share in 2030, incremental annual platinum demand of around 240 koz could by then be required by the EU alone.

Figure 4: Platinum demand for 115 GW of installed electrolyser capacity with 50:50 PEM/alkaline for varying platinum loadings

What is more, the scale of green hydrogen production envisaged would undoubtedly have a positive impact on hydrogen infrastructure in general, accelerating the commercial adoption of FCEVs and bringing forward the significant platinum demand associated with them. Depending upon the pace of FCEV adoption, WPIC estimates that, between 2033 and 2039, this could reach over three million ounces per annum, similar in size to the global demand for platinum in autocatalysts today.

PEM technologies and the platinum investment case

The need to decarbonise is more acute than ever and PEM technologies, be they used for green hydrogen production or to power FCEVs, will have a significant role to play in the energy transition. As a result, platinum benefits from an emerging new end-segment, providing considerable upside to the investment case for platinum.

While hydrogen-related demand for platinum is currently relatively small, in 2023 demand from fuel cells is expected to increase by 24 per cent and PEM electrolyser demand by as much as 129 per cent, albeit from low bases. Throughout the decade and beyond, demand for platinum from PEM technologies is expected to grow substantially and could reach as much as 35 per cent of total annual platinum demand by 2040.

While PEM electrolysers are a key technology for the production of green hydrogen, fuel cells have higher platinum loadings and are expected to be a far bigger driver of hydrogen-linked demand for platinum. Similarly, green hydrogen used in fuel cells is typically displacing gasoline or diesel, which has a greater net CO2 benefit than green hydrogen used to displace natural gas.

In summary, hydrogen is going to play a key role in decarbonising the world, and platinum is a key enabler for the production and use of green hydrogen. As hydrogen-linked demand for platinum grows through this decade, platinum is likely to be seen increasingly as a proxy for investment exposure to green hydrogen, given that green hydrogen itself is not a directly investible commodity.

*Hydrogen Insights 2022 - The Hydrogen Council in collaboration with McKinsey & Co.

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