Hydrogen continues to be a game changer for platinum as Alberta looks to develop Canada's first hydrogen-powered community
(Kitco News) - The hydrogen economy continues to grow by leaps and bounds, and one of Canada's prairie provinces is looking to break ground on the country's first 100% hydrogen-fueled community this year.
Hydrogen demand as part of the green energy transition is expected to provide long-term support for platinum, according to many analysts. Platinum is a critical metal used in electrolysis, the process of separating hydrogen from water molecules.
"Platinum will continue to attract new buying from, and possibly investment interest on the back of the hydrogen sector," said Jonathan Butler, precious metals analyst at Mitsubishi Corporation, in his 2023 outlook forecast.
Butler looks for platinum prices to rise to $1,300 this year. This week, the precious metal has managed to bounce off support at a four-month low just above $900 an ounce, with April platinum futures last trading at $956.60 an ounce, up 0.84% on the day.
The new buying interest comes as Canada looks to make its mark on the hydrogen economy.
On Tuesday, Alberta Innovates, a provincial crown corporation, announced a total of $20 million in funding for 18 hydrogen products including $2 million for a feasibility study on how to use hydrogen to heat new homes.
The study will be conducted by ATCOenergy, Alberta's third-largest energy retailer. ATCO, in partnership with private real estate company Qualico, is expected to use the research to build Canada's first all-hydrogen community.
Qualico is planning to prepare the site for the proposed Brenner community, in Strathcona County just east of Edmonton, later this year. The company expects to see its first residents in the new community by 2025.
The community is expected to house up to 85,000 residents once it's fully developed and will have a mix of different housing options, from single-family homes to townhouses and apartments.
"If we're successful, this will be the first pure hydrogen community in Canada," said Brad Armstrong, Qualico's Vice President of Community Development for Northern Alberta in a press conference. "It helps put us on the path towards net-zero in homebuilding and community development."
However, before the homes can be built, ATCO needs to figure out how to construct the community's infrastructure to pump hydrogen into the proposed homes. The study will also look at regulatory hurdles for equipment, including hydrogen-powered appliances.
"Right now, the rules are not clear," Jason Sharpe, president of ATCO Gas. "So part of this study is to provide recommendations to government on how this could be done so that we would know the cost for someone who's buying one of those homes."
Alberta Innovates said the projects it has invested in will examine everything from production, transmission, distribution, storage, to end-uses of hydrogen.
Although nations worldwide increasingly embrace hydrogen as a new energy source, the sector is still in its infancy. Analysts have said that the hydrogen economy has significant potential for the platinum market and will be a significant source of demand to support long-term prices.
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"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," said analysts at the World Platinum Investment Council in a report from December that highlighted the precious metal's role in the global green energy transition.
"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," the analysts said. "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."
Along with Canada's initiatives, the U.K. just wrapped up Hydrogen Week, which the British government used to reaffirm its commitment to developing its own hydrogen economy.
In December, the British government's Department for Business, Energy and Industry Strategy updated its hydrogen plan as it looks to build ten gigawatts of low carbon hydrogen production capacity by 2030. At least half of the hydrogen is expected to be produced through electrolysis.
And last fall, the European Union announced the creation of a new European Hydrogen Bank that would bridge the investment gap between future supply and demand.
As part of its REPowerEU plan, the E.U. said it is looking to produce about 10 tonnes of green hydrogen by 2030.