India is the latest among big economies to approve green hydrogen plans, a component of its National Green Hydrogen Mission, a $2.4Bn incentive programme. This will assist India in becoming a global powerhouse for hydrogen and encourage major industrial sectors to decarbonise. This is mainly in line with policy developments in other major economies throughout 2022. The European Commission launched its European Green Deal in January 2020, which served as the foundation for all future European measures. However, the most recent investment in the hydrogen economy arose only after the pandemic as part of a more significant transition toward a greener (carbon-free) global economy. The European Green Deal was followed by the Commission’s Fit-For-55 package, which boosted the E.U.’s greenhouse gas reduction target by at least 55 per cent by 2030 and called for climate neutrality by 2050.
In the United States, investment was made possible through the Bipartisan Infrastructure Act. China’s 14th Five-Year Plan, issued in early 2021, identified hydrogen energy as a cutting-edge technology requiring a plan to incubate and advance the industry; this has been followed up this year with more concrete provincial-level goals and investments.
Russia-Ukraine war changes the direction of energy
However, following Russia’s invasion of Ukraine in early 2022, the need for energy security in the west switched governmental attention back to hydrogen as a long-term answer, culminating in a new wave of public investment. In Europe, this occurred in May 2022 in the form of REPowerEU. Numerous legislative follow-ups have been enacted as a result, including Hy2Tech and Hy2Use, frameworks that will infuse €5.4Bn and €5.2Bn of public investment, respectively, into the development of the industry. The U.S. approved the Inflation Reduction Act in August 2022, which included a $739Bn investment, of which more than half will be spent on energy security and climate change. How this figure will be split and how much will be hydrogen-specific is not known.
A hydrogen hub is a centralised place for production, storage, delivery, and possible usage. In the Regional Clean Hydrogen Hubs (H2Hubs) programme (a component of the U.S. BIL), six to 10 hydrogen hubs will be announced in the United States. Similar regional centres are being planned and created worldwide, which would channel private investment to specific places, allowing investors to take advantage of external economies of scale and accelerating industrial growth.
Effects on platinum group metals
This expansion and investment will significantly impact the industry and platinum group metals (PGM) demand in 2023, as per the Metal Focus newsletter. In 2022, total PGM consumption in the hydrogen economy increased by almost one-third year-over-year to an anticipated 48koz; nevertheless, we expect the industry to double in size this year. This mainly helps platinum, which accounts for around two-thirds of the total PGM consumption in hydrogen. This causes the demand for platinum hydrogen to increase at a rate comparable to that of the electronics industry, eventually surpassing it within a few years. Notably, the bullish sentiment of investors towards the sector, together with continually robust Chinese platinum imports and a widening physical imbalance, will sustain the price. This is expected to climb by 6% from the previous year’s average to $1,020 in 2023.
In contrast, palladium will get a slight advantage, consuming less than 2koz in the green hydrogen region this year, whereas rhodium will play no role. Platinum’s superior oxidation and corrosion resistance, especially at high temperatures, makes it more desirable than these two metals for usage in electrolysers and fuel cells.
But, the greater cost of palladium and rhodium discourages their adoption. Palladium, for instance, was initially utilised more extensively as a catalyst for liquid organic hydrogen carrier (LOHC) technology in the hydrogenation and dehydrogenation stages but has since lost market dominance to the less expensive platinum. While the generation of green hydrogen will take time to ramp up, it is anticipated that grey and blue hydrogen will be utilised more frequently. In such instances, the demand for palladium purification membranes could surge.
However, industry advancements are occurring at a phenomenal rate. Before a year ago, the name “hydrogen combustion engine” was obscure, even though the technology dates back to the 1800s. Cummins, Toyota, and Porsche are all developing prototypes of fuel-agnostic engines as part of the broader car market electrification initiative. This is just one possible direction for the sector. Hydrogen combustion may not produce CO2, but inefficient combustion generates NOx. Given palladium and rhodium’s ability to reduce NOx, these metals could still profit from this emerging market. However, their prices would undoubtedly need to decrease to stimulate growth.