Good morning, and welcome to the Johnson Matthey QFE Hydrogen Call. Today's conference call will be hosted by Johnson Matthey Chief Executive, Robert MacLeod, followed by a Q&A. I will now turn the conference over to Martin Dunwoodie, the Director of Investor Relations. Please go ahead.
Thanks, Sheila. Good morning, everyone. I'm Martin Dunwoodie, Director of Investor Relations at Johnson Matthey. I'm very pleased today to welcome our Chief Executive, Robert MacLeod, who will be hosting today's call on hydrogen. In this call, we're going to be providing an insight into the role that hydrogen will play in tackling climate change, our hydrogen business, and its competitive positioning, and the attractive growth opportunities that we see in this area. As usual, we will not be giving a trading update as part of this call. With that, I'll hand over to Robert.
Thank you, Martin. Thanks everyone for joining the call today. With me today, I have Jo Godden, who runs our Fuel Cells business. Jo has actually 25 years in J.M. Well, ICI and J.M. today. 25-year anniversary today. She has wide commercial and operations experience across the group, initially in our Catalyst Technologies business. I'm joined also by Eugene McKenna, who joined J.M. nearly four years ago from Shell. Eugene is one of our hydrogen experts and responsible for helping to commercialize our blue and green hydrogen technology. He has deep experience in technology and business development. Let's start with what I hope is a familiar statement, J.M.'s vision. Everything we do is about creating a world that's cleaner and healthier, not just today, but for future generations. This drives our strategy.
One of the themes that is really shaping our strategy today is climate change and the move to net zero. Our role in hydrogen to help solve this challenge is the focus of today's session. When you look at the world around us, it's clear that action around climate change has increased, and there is growing momentum around net zero commitments. By achieving net zero, together, we can all limit global warming to one and a half degrees above pre-industrial levels. To date, 23 countries and regions have put commitments in place to limit their impact on climate change. That level of commitment is really accelerating. Just 12 months ago, 16% of global GDP derived from nations and regions with net zero commitments. This figure is now 53%. Importantly, the recent uncertainty caused by COVID-19 has not slowed this trend.
It's a trend that will only get stronger, and it's going to require significant change. Net Zero means we need to change our entire energy ecosystem, how we supply it and how we use it. Firstly, we will need to switch from fossil fuels to using renewable energy sources to generate electricity for use in many applications. For instance, heating homes and businesses, light duty vehicles such as cars and vans, and many lighter industrial processes. Using renewable electricity doesn't work for all applications, and it's also necessary to have another energy source for electricity and heating during peak periods. That is where hydrogen comes in.
The use of hydrogen will allow us to decarbonize those applications that require higher energy density, such as heavy duty trucks and long distance buses, more energy intense industrial processes such as steel making and cement, and in some marine and rail applications. Of course, in generating hydrogen, in some times, you're going to need carbon capture and storage to decarbonize this process. Where does JM fit into all of this? We have a strong position in hydrogen production, and Eugene will come on to the methods by which hydrogen can be produced and explain our offerings in clean hydrogen production, being blue with carbon capture and storage, and green hydrogen as well. He'll talk about that a little later.
We also help to decarbonize transport through hydrogen-powered fuel cells for heavy duty trucks, buses and cars, as well as trains and marine, as Jo will talk through shortly. What we're seeing is the transition of hydrogen from its position today as a critical feedstock for chemical processes to its future position in energy, where it will also be a fuel and energy carrier. This move to hydrogen is already happening today and gathering pace. We're seeing that across the globe, led by Europe with the recent EU Hydrogen Strategy and the German and French National Hydrogen Strategy. In Asia, there was an announcement earlier in the year from South Korea with their Hydrogen Strategy. This slide shows some of those commitments. It's not just the policymakers that are driving this.
We're also seeing bold statements from OEMs confirming that hydrogen powered trucks will be part of their mix. Before I hand over to Jo and Eugene, I want to summarize what you're going to hear from us today and why I'm very excited about the hydrogen opportunity. We've been a leader in hydrogen for many years, and I'm proud to be a board member of the Hydrogen Council, which is the largest industry-led effort focused on developing the hydrogen economy. Hydrogen is going to be really significant opportunity to JM. The addressable markets are substantial, and we're really well-placed because of our existing positions and our integrated offering. Both of these are backed up by our leading technology. These are our differentiators, which give us competitive advantage.
They're largely built on our science and platinum group metal expertise from across the group, and we wouldn't be in such a good position today without it. Where are we today? We already have an established and profitable hydrogen business, with current sales of around GBP 100 million across both hydrogen production and fuel cells. We have strong segment shares. Our businesses are selling into highly complementary customer base that we know well. For example, our customers for fuel cells are largely the same as for our existing heavy duty diesel business. In hydrogen production, many are the same today as they will be in the future. Our ability to move quickly with relatively low capital intensity makes it especially attractive. The hydrogen economy is already taking shape, and looking forward, the opportunity for JM is significant.
More importantly, this opportunity is completely aligned to our vision. The world has to move to net zero, and we have a key role to play in this with our hydrogen-based technologies. With that, I'll now hand over to Jo, who will talk to you about fuel cells, and after that, Eugene, who will talk about our hydrogen production technologies in both blue and green. Over to you, Jo.
Great. Thanks, Robert. Before we get into the detail of fuel cells, let me start with where we play in the value chain, because this is really important in understanding why we have a competitive advantage. As we do across JM, we play in the complex part. For fuel cells, this is making the components, as I'll come to on the next slide. This is where the clever chemistry lies, and it's the key to delivering a high performance fuel cell. Although the value chain is still developing, it's similar to what you see today in clean air and battery materials. We're a Tier 2 supplier, but we have a very close relationship with the OEM. A fuel cell converts hydrogen and oxygen into electricity and water, therefore, a key technology in the transition to a clean, low carbon economy and the decarbonization of transportation.
You can see from the right-hand side that there are a number of components, but the fuel cell itself is made up of three main layers, an anode and a cathode, which are both platinum-based catalysts, separated by a proton exchange membrane or a PEM. At our sites, automated lines produce membrane reel-to-reel, which is then coated with thin catalyst layers. The catalyst-coated membrane or CCM is then cut to the customer's specific size and sealed. The size of the CCM will depend on the application, but generally, it's around the size of a piece of A4 or A5 paper. A gas diffusion layer is added to the sealed CCM to create the membrane electrode assembly or the MEA. Many of these are then added together to form the fuel cell stack.
Producing a fuel cell is essentially applying a catalyst to a substrate, and this is something that JM deeply understands. It's our bread and butter. The clever chemistry and the piece which gives the best performance is in the membrane, and at the anode and cathode layers, the CCM. This is where the smarts are. We know exactly how to layer the catalyst onto the membrane. We're not restricted to the CCM. We have a strong position throughout. By controlling all of the elements in the value chain, we can influence the performance of the fuel cell. We can tailor exactly to our customers' requirements. Looking now at our competitive advantage in fuel cells. Firstly, there's the science.
You've seen that we manufacture a number of parts in a fuel cell, this is key to making sure the different components in the system work together in the best way. We're unique because we can optimize the catalyst as well as the membrane. No one else can do what we do. It's not just the science used within the catalyst coatings, it's the knowledge and expertise of how these layers are put together to optimize the whole system. We also produce our own membrane. Again, this is important for giving the membrane electrical conductivity and for delivering enhanced power. Not only this, producing in-house ensures we have total control over the technical steps and importantly, the cost. It's this holistic understanding of the fuel cell that means we can offer a customized high performance solution for specific applications.
What really matters to customers in terms of performance is durability or really maintaining that performance over kilometers driven, and our science expertise means we can deliver on that. For a truck, this means achieving over 40,000 hours, and we know how to make improvements that will meet and exceed this. Secondly, we are a world leader in PGMs. If fuel cells have PGMs in them, with our lengthy expertise in this space, then who better to win than Johnson Matthey? We can also recycle these PGMs, so there is potential to have a closed loop offering. This process has a lower carbon footprint. The carbon footprint of primary metal is significantly higher than secondary metal. We're already seeing from our conversations with customers that our ability to offer sustainable sourcing and a lower carbon supply chain is really important to them.
For years now, we've been optimizing the use of precious metals by thrifting out metal from our catalysts in our Clean Air business. Skills we are applying to fuel cells today. We use our science and know-how to reduce the number of MEAs required without impacting the performance of the fuel cell stack, which ultimately reduces cost to the customer. Thirdly, we are a trusted partner, and this has been built over many years, which makes it hard to replicate. We have a commercial product today, our customers come to us because they know that we can deliver the solution that they want. Finally, we have established manufacturing at scale, both in the U.K. and China. We've been manufacturing fuel cell components for over 20 years. This started as a very manual-intensive process, which has been developed and automated over time.
Achieving a high yield is not easy. This is really complex chemistry, and the ability to do this without defects is hard. If there is one defect within one MEA, then the whole stack may be compromised. We've also proven that when volumes ramp up, we can manufacture efficiently at a high yield. In fact, we've managed to increase our yield twofold in the last few years, and we want to go further. We're currently expanding to meet future demand. Let's turn now to our Fuel Cells business today. We're a leader in this market with a strong position in the material handling market as well as the emerging transportation sector. Our business is profitable, and we're seeing very strong growth, 30% compound annual growth rate over the last four years. Our customers are across the main segments: auto, truck, non-road, and stationary.
We're working with big names, including major truck and auto OEMs. In China, we're working with the two main government-approved system integrators. Indeed, China is a huge growth market, and we're already on a significant number of buses and commercial vehicle platforms. In autos, we've had strong success. 25% of our sales are now into auto applications. This is an area where we've seen a real shift in momentum over the last 18 months, and now we're working with a low double-digit number of major truck and auto OEMs on platforms planned to launch over the next few years. This includes the largest truck brands. We're working with the players that you'd want us to work with. With the strong increase in demand that we're seeing, we've invested GBP 15 million to double our manufacturing footprint, which will be complete by March next year.
We're able to quickly add capacity as this business is relatively capital light. As the world pushes towards net zero, there is a huge role that fuel cells can play in the decarbonization of transportation, and the major opportunity in the near term is trucks and buses. Why is this? Firstly, cost. Fuel cell technology is expected to become the lowest cost option for heavy-duty trucks compared to diesel and battery from the latter half of this decade. The weight of a fuel cell is significantly lower than that of the size of a battery needed for the kind of ranges required. Due to the relatively low energy density of batteries, the range offered by a fuel cell truck is much greater than that of a battery truck, and the refueling time is much lower.
Even if the energy density of a battery improves by two to 3x , it will still take in the order of hours to refuel, and a fuel cell truck can refuel in minutes. Fuel cells in these applications make sense, and we're seeing evidence of this today. On the truck side, numerous companies have announced substantial investments in this area. One example is the Cummins acquisition of Hydrogenics for just over a quarter of a billion dollars. In terms of buses and commercial vehicles, we've already talked about our presence in China, but this is just the start. The Chinese government is targeting one to two million fuel cell vehicles by 2030 and over 1,000 hydrogen refueling stations.
Beyond trucks and buses, there will of course, be further opportunities in autos as costs come down through increasing sales volume as well as thrifting out metal and improving efficiencies, but also as hydrogen infrastructure develops and hydrogen prices come down. As we move out past 2030, battery electric vehicles will make up the majority of zero-emission passenger car vehicles on our roads, but fuel cells will also have a significant presence. We see this as a good opportunity, particularly for larger SUVs and vehicles that regularly travel long distances with high utilization, where the rapid fueling and long-range advantages of fuel cells will add value. Beyond this, there will be rail and marine applications. There are already fuel cell trains in commercial operation in Europe today, rising to around 60 trains later next year. We've also seen momentum with fuel cell trains in China.
It is clear that the momentum is gathering in the fuel cells market. We feel this momentum, and we really have a significant opportunity. The biggest opportunity is in the automotive market: trucks, buses, and cars. We already have a leading market share today in emissions control and fuel cell technology. We know the customers, and we have the solutions. The potential revenue in this area is significant. Around 5% of trucks are forecast to be fuel cell powered by 2030. We provided the estimated value of the CCM, and the numbers you see there are expected costs in 2030, which include the cost downs. As I mentioned earlier, we are playing our part in these cost downs.
The main areas of focus being PGM thrifting, which is a core competency for us and something we've been doing in clean air for years, improving yield through manufacturing efficiencies such as automation, and improving power density using our skills in PGM chemistry. We can improve where we place the metals, and with our coating expertise, we can create better catalyst layers. It is the coated layer structure that determines performance. The CCM value to us will be around GBP 2,500 per truck and GBP 800 per car. These are big numbers, multiples of what we supply in a clean air, heavy duty diesel catalyst system today. Putting this all together, you get an opportunity in the region of GBP 1 billion per annum in 2030, and then more than GBP 10 billion per annum in 2040.
Hopefully you can see that we have a really strong position in this market, and we're really excited by the opportunity that lies ahead. I'll now hand over to Eugene to talk about hydrogen production.
Thanks, Jo. We talked about one of the key uses of hydrogen in fuel cells, and now I want to spend some time taking you through how hydrogen is actually produced. Johnson Matthey is a global leader in hydrogen and has been for many years. From 1936, for example. Today, we mainly focus on new technologies in blue hydrogen and green hydrogen, given that these are the technologies that will become increasingly important as we transition to a low-carbon world. As you can see, there are a number of routes to make hydrogen, and these have been given different colors to differentiate them. For example, we have brown, which uses coal as a feedstock, gray and blue, which use natural gas, and green, which uses renewable energy to electrolyze water. Today, the vast majority of hydrogen is manufactured by steam methane reforming.
This is gray hydrogen, where natural gas is converted at high temperatures into hydrogen and carbon dioxide, which is allowed to escape into the atmosphere. The largest markets today for hydrogen are for manufacturing clean fuels in refineries and as a feedstock for methanol and ammonia. Johnson Matthey has leading catalyst technology in gray hydrogen, with 40% segment share, our involvement is selling the catalyst for the process. Now moving on to those cleaner technologies, both blue and green hydrogen. The process can be decarbonized or indeed made carbon-free. You can capture the carbon dioxide from advanced gas reforming technology and store it in a process called carbon capture and storage, this is blue hydrogen. Carbon capture and storage is a process for storing the vast quantities of carbon dioxide produced in geological formations off and offshore using existing assets.
It has been demonstrated at multiple sites globally, particularly in the North Sea, over decades, and it's widely recognized as an essential technology as the world is decarbonized. As the market evolves with the energy transition, we are well-positioned as technology advances towards blue hydrogen production. We know this market well as we have an existing business, understand the customer base. We have strong relationships and the technology expertise to succeed. Finally, you can also avoid carbon altogether by using renewable energy for electrolysis of water, and this is green hydrogen. Now, the estimated cost of production today are higher for blue and green hydrogen, but over time, as these processes scale further and volumes increase, costs will be driven out quickly, and along with the implementation of carbon taxes, the economics will improve.
As we transition towards net zero, the demand for energy across the world will not decline. If it's not hydrocarbons such as oil satisfying that need, then it will need to be something else carrying the required energy, hydrogen. When we look at the move away from gray hydrogen, it's not really a move from gray hydrogen we should be talking about, but all the new applications that will require blue and green hydrogen. Of course, those applications that are currently using gray hydrogen today will transition to using blue and green, and this will take some time, most likely incentivized by carbon taxes. For example, BP's energy outlook is assuming carbon taxes rise from around $40 a ton of carbon dioxide emitted today to $100 a ton by 2030 and $250 a ton by 2050 for developed countries on a path to net zero.
On this chart, you can see a projection of how hydrogen volumes from the different production methods are likely to evolve over time. Importantly, we can see blue and green hydrogen are both playing key roles. Given the levels of greenhouse gas emissions, brown and gray hydrogen will not be viable solutions in the longer- term for their existing applications, with structural increases in the cost of these processes as they will likely be subject to carbon taxes. They are of no use, of course, at all for the new clean applications. Blue hydrogen will enable the transition towards a carbon-free gas system and remain established in certain geographies where it is the lowest cost option, and we will go to more of that on our next slide. Ultimately, blue and green adoption will be driven by geology, infrastructure, and the cost of renewable energy.
We're also likely to see incentives, particularly for green hydrogen, where significant cost downs are needed. Looking at this chart, you can see the extent of the required cost downs. Additionally, the adoption of blue and green will vary depending on region. For example, blue hydrogen is likely to be a long-term solution in places with the right geology and infrastructure, such as the U.K. and the U.S., where there is an existing natural gas infrastructure for the transport of hydrogen, as well as depleted oil and gas fields and locations for carbon storage. Green hydrogen will be favored in some regions more than others, for example, Australia. For wide-scale adoption, renewable energy and capital costs will need to decline. Now looking at our blue hydrogen technology, as you can see from this schematic, we use two processes with a Gas Heated Reformer and an autothermal reformer linked.
The process is used in our existing methanol solution at scale, and we've been able to apply the technology to enable rapid deployment of a unique process that produces low carbon hydrogen from natural gas. Our blue technology differentiates us from our existing competitors in a number of ways, and a number of important ways. It's the most energy efficient. It uses, for example, 9% less natural gas compared to steam methane reforming plus carbon capture to produce a kilogram of hydrogen. For the project the size of phase I of HyNet, which I will introduce in a moment, this would mean a saving per annum of around GBP 67 million, and that's a project that intends to scale up by an order of magnitude from there. We also have the lowest capital costs, 40% lower than conventional steam methane reforming technology with carbon capture.
Our greater efficiency and lower capital intensity comes from clever process engineering, where we use heat as efficiently as possible and keep carbon dioxide in the process stream so we don't have to capture it from the air. This all means that our process is easier and cheaper to decarbonize through carbon capture and storage. Indeed, more than 95% of the carbon dioxide produced can be captured for use or storage. Our existing capabilities have been vitally important in supporting the development of this leading technology, and I'll give some more color around this in the next slide. In gray hydrogen, we supply a range of catalysts, and today this business generates sales of around GBP 60 million a year. This is recurring business, and the catalysts we sell are generally in service for around three to four years before replacement.
We have many years of experience in gray hydrogen, a 40% segment share, and over 400 customers, including oil and gas majors and industrial gas companies. This underpins exactly why we can be successful in blue hydrogen. In blue hydrogen, our offering is much more comprehensive than in gray. We will supply the catalyst, some equipment, engineering expertise, and we'll also license the technology, which means the opportunity is larger for us, something I'll talk to shortly. Our experience in this area is hard to replicate, and we've built on our expertise in gray hydrogen and in methanol to develop the best technology for blue hydrogen. When people spend hundreds of millions of dollars, or indeed billions, on new plants, this is at a massive scale, and people want to have the confidence that the technology will work. Customers get that confidence with us.
They have known us in hydrogen for years. They've seen our commitment to developing blue hydrogen and seen similar processes in methanol working at huge scales. They also know that we will give them the support all the way through the process and guarantees on performance once the plant is running. This means that we expect to achieve a leading segment share. Customers will choose the best process. By that, I mean not only that with the lowest technology risk that I've mentioned, but also the most efficient and lowest capital cost. For example, one of the largest operating costs in the process, is natural gas, so using 9% less than the equivalent process is a huge saving. On the customer side, we're making good progress with both existing and new customers. Our technology is already starting to commercialize.
It's currently being used in a number of projects, including the HyNet project and the Acorn Hydrogen project, which I'll come to in the next slide. HyNet is a hydrogen energy and Carbon Capture, Utilization and Storage project in the northwest of England, and its establishment should create a low carbon cluster in that region. HyNet's aim is to reduce carbon emissions from industry, homes, and transport, and we are delighted to be involved in this high-profile project, which will use our blue technology for the first time. This first deployment is an important milestone in demonstrating our leading technology at scale, and the initial plant is the first of multiple plants planned on that site. Phase I will produce 80,000 tons of low carbon hydrogen for industrial and domestic customers, which is already equivalent to a world-scale hydrogen plant. There are three more phases to follow.
To give you an idea of the scale of this project, by the time all of these phases are complete, to produce the same amount of green hydrogen, it would require 6x the energy of the world's largest offshore wind farm. These are massive projects. HyNet chose us for three main reasons. Firstly, the technology risk is minimal. We use similar process technology in methanol, so it's already proven at scale, and we continue to invest in R&D to ensure we stay market leading. Secondly, the economics are attractive. Our technology requires the lowest OpEx and is least capital intensive. Finally, we are a trusted partner to our customers. We have decades of experience and a strong reputation in this space.
We're also involved in a slightly smaller project in Scotland, the Acorn Project, for blue hydrogen production from North Sea gas, and that will also be based on our low carbon hydrogen technology. Of course, we're working with a number of customers globally, and we have a strong pipeline of future projects. Looking towards this low carbon future, there will be a need for blue hydrogen, and we see significant opportunity here. If we assume around 30% of the global hydrogen demand in 2030 comes from blue hydrogen, the total market size accessible to J.M. would be around GBP 1.5 billion-GBP 2 billion per annum. Our opportunity is primarily through the licensing of our technology and the supply of engineering and our process catalysts.
To give you a few more details, an average one-off fee per plant could be in the region of GBP 50 million-GBP 60 million, this will, of course, vary depending on projects and the size of those projects. Beyond that, a typical change-out period for catalysts is every three to four years, this could be around GBP 5 million per refill. It's a very significant opportunity for us in 2030 and accelerates in the years beyond. Moving on now to green hydrogen. What is it? Put simply, it involves splitting water into oxygen and hydrogen using electrolysis. It's very similar to fuel cell technology, effectively the reverse of fuel cell technology in the process. There are several types of electrolyzers that can be used to make green hydrogen. The main ones being Alkaline electrolyzers and proton exchange membranes, or PEM electrolyzers, which use precious metal catalysts.
Alkaline electrolyzers are more mature. The technology is more mature. They're typically used in larger continuous applications, and the technology is more commoditized, which isn't really where J.M. competes. The particular advantage for PEM electrolyzers is that they can be scaled to the required size. They're very robust in non-continuous use applications. For example, when coupled to renewables such as wind turbines. PEM will also be more cost-competitive at scale. It's a new technology today, and there's plenty of scope for cost downs through, for example, thrifting out PGM content and scaling up manufacturing, something which J.M. can do very well. PEM electrolyzers are a particularly good match for J.M. as they use precious metal catalysts in a similar way to fuel cell technology. Given the economics, this opportunity is slightly further off than blue hydrogen, but we are confident that we will be successful.
PEM technology matches to our core science. It plays exactly to our strengths. Jo has just talked about our long heritage and expertise in fuel cells, and given the strong similarities between fuel cells and PEM electrolysis, we're able to apply our expertise in this space. We have a competitive advantage in PGM catalysis. In particular, platinum and iridium chemistries are important for green hydrogen, and our ability to optimize the yield of hydrogen per gram of noble metal is a core competence for J.M. We also know how to scale up this business. We've got experience of this from fuel cells, and our PGM recycling expertise is also part of J.M.'s DNA, which means there is the potential to offer a closed-loop service to our customers, where we would design solutions from the outset that take into account end-of-life options.
More importantly, we are experienced in enabling new technologies and have already started testing with leading electrolyzer players, including a major global industrial company. The market for green hydrogen is big. We are already starting to see progress with a number of targets. For example, as part of the recently announced EU hydrogen Strategy, Germany alone has committed to invest EUR 7 billion in hydrogen-related businesses and research. We think the estimated addressable PEM market is in the range of GBP 2 billion-GBP 4 billion per annum in 2030. Given the strong overlap of fuel cells and our core science capabilities, we know we have the ability to succeed. We are well positioned to bring new solutions to the hydrogen space and look forward to playing an important role in this energy transition. Back to Robert.
Thank you, Eugene. Thank you, Joe. To conclude, as legislation tightens and concern over climate change gain momentum, we believe that hydrogen will play a significant role in enabling the energy transition. With such a key role to play across multiple sectors, investment in hydrogen-based technologies and associated infrastructure is accelerating. We already have an established and profitable fuel cell hydrogen production business today. With our leading technology, we are uniquely positioned to benefit from what is a very significant growth opportunity in a fast-growing market. Our opportunity in hydrogen is not an accident. It's founded on decades of experience and underpinned by our science expertise across the group. We're proud of our role in enabling the transition to a global low-carbon economy. For us, the opportunities are broad, but more importantly, it helps us to deliver on our vision for a cleaner, healthier world.
That finishes what we were going to present for the day. Now it's over to you for questions. I'll hand over to the moderator first, and then we'll welcome your questions.
Ladies and gentlemen if you wish to ask a question please press star and one on your telephone keypad and wait for your name to be announced. If you wish reconsider request to please press the hash key. Once again to ask a question please press star one on your telephone.
Your first question comes from the line of Tom Wrigglesworth from Citi.
Hi, good morning. Thanks very much for the presentation.
I'll limit myself to two questions, although I've got a lot of learning to do, clearly. First question is around the alternative technologies. I think other companies have started looking at non-PGM-based exchange membranes. Could you maybe help explain do they have any viability? What might change the landscape in that regard? Secondly, could you unpack a little bit of your addressable market from GBP 2 billion-GBP 4 billion in 2030? You've given some assumptions, what percentage of a cost of, say, a fuel cell for a 100 kW vehicle would be the PEM membrane? Similarly, an electrolysis of, let's say, 10 MW, what's the cost of the PEM membrane in a 10 MW electrolysis system would be very helpful. Thank you.
Thanks, Tom, and good morning. Let's go, Eugene, with the first one, and then the second one, I'll try and sort of carve that out a bit, but give you a bit of color. Eugene, the alternative technologies, non-PGM related.
Electrolysis for green hydrogen.
Thanks, Tom. There are alternative technologies being discussed at the moment. They're at much earlier stages of development of technology readiness. In particular, there's a technology called AEM, anion exchange membranes, and at a simple level, they work in a similar way to PEM electrolysis, but there's no requirement for platinum group metals. It is entirely possible as we go decades into the future that AEM technology may catch up with PEM electrolysis. I would say, however, that being expert at PEM electrolysis would position a company very well for moving through into AEM technology as that develops in the future.
Thanks, Eugene. On the addressable market, I think, Tom, you were asking a little bit about car, trucks, and also about green hydrogen. If I just look at green hydrogen first, because that's, I think still on the slide. Maybe it's not on the slides anymore. The GBP 2 billion-GBP 4 billion of addressable market is very much linked to the assumptions that we made previously around the growth in the hydrogen market, which we showed on slide, I'll get the numbers in front of me in a second, on slide 18, 19, which is the sort of terawatt hours required for hydrogen. We've assumed, as have the Hydrogen Council and BP, a pretty much equal split between green and blue. You can debate that's the assumption that we've used.
Coming up with the GBP 2 billion-GBP 4 billion market, we've ranged that between, well, what's the PEM share compared to the other types of technology, as Eugene referred to the alkaline water technology. At the lower end of PEM share, as it says on the slide, assuming 30% share, you end up with a GBP 2 billion market opportunity, at a 60% share, you end up with a GBP 4 billion market opportunity. That's how we've tried to frame it on that. You're talking around about MEA value ex metal of conversationally about $50 per kilowatt. On the fuel cell side, Jo, do you want to give a bit of color on the fuel cell side, on the kilowatt side? Probably focusing on trucks, I guess.
Yeah. Sure. For 2030, for trucks, we see that the penetration starts to happen, with 5% of vehicles, with a fuel cell platform and the kind of GBP 1 per kilowatt there in trucks in 2030, the cost downs are getting towards GBP 25 per kilowatt. This translates into the MEA of the fuel cell stack is about 30% of that stack, you're getting towards GBP 3,000, around that level for the MEA component. The CCM, as we've put down there on slide 16, is around GBP 2,500.
Okay, Tom, does that give you enough?
Thank you. Yep.
all based on assumptions, of course, but that's what we expect the market size roughly to be. Thanks, Tom.
Much appreciated.
Who's next?
Okay. Your next question comes from the line of Alex Stewart from Barclays. Please ask your question.
Hello. Good morning. Can you hear me?
Yes, we can. Good morning, Alex.
Hi there. Thank you very much for the presentation and all the information about the industry side. That's really interesting and helpful. You talked a lot about total addressable market and revenue opportunity, but you haven't talked a huge amount about profitability or relative profitability and returns. Can you give us some sense of which of the various opportunities you talked about today is the most attractive in terms of the return on capital you can make, and whether they all would satisfy at scale your 20% aspiration for the group return on invested capital? Secondly, hopefully a simple question. Your fuel cell component business today, which I appreciate is a small part of the group. Do you have any sense of what sort of share of the market you have? Do you think you're a minority player?
Do you think you have a decent portion of the new orders that come through or the new business that comes through? Any sense of that would be really useful. Thank you.
Of course. Happy to do both of those. I'm going to ask Jo to answer the one on the fuel cell share. On the return on capital and margins, look, I think in all of these businesses, absolutely, we believe we can meet our target aspirations of a greater than 20% return on capital. The exact projection of margins and profit growth will obviously depend on how the market evolves. They're relatively low capital intense opportunities, particularly on the fuel cell side, because they're relatively low capital intensity, as Jo explained. On the hydrogen side, particularly on the blue hydrogen side, we already have developed the technology and the process technology, and the catalysts that will go into those plants come off our existing lines that we already have or production capacities that we already have today.
From a return on capital point of view, they should be attractive. I'm not going to give the relative attractiveness between the different opportunities, but they all are sufficiently attractive. Jo, do you want to talk a little bit about share?
Sure. Well, as you know, we've a well-established profitable business in fuel cells today. We've built our reputation over the last years, really in emerging markets of non-road. We have a 25% share in the material handling market. Now we're really building significant momentum in automotive, and that has grown to 25% of our business. That's primarily been in China, which is very much the early adopters of MEAs that we're supplying onto buses and commercial vehicles, logistics vehicles in China. That's where we're positioning and we're securing more business in that sense there all the time, which is why we've invested in our manufacturing facility in China. It is an emerging market, and it is quite fragmented with different components in different parts of the value chain.
I think, Alex, it's hard to give an absolute number for share. I think we can give a number for share.
The forklift truck.
the forklift truck market because that's more established. I think it's quite hard, particularly in China, to be clear about the exact share that we have. It does feel like we have a meaningful share. What is meaningful? North of 20%, probably. It's really hard to be precise about it.
That's really helpful. Thank you. Perhaps if I could just answer that, or ask it another way. Do you feel like there's a lot of competition for the parts of the fuel cell, the MEA that you're manufacturing, or will this be a pretty consolidated market?
Jo, do you have a view on this?
Well, there's not that many players in the MEA at this time. Actually, we're really well positioned as we're in lots of points of the value chain. As you saw in the slides, we're in the PGM, we're in the catalyst, we're able to coat and supply the membrane as well through to the MEA. That's a real opportunity to be working and collaborating as the market develops with our customers, and tailor the performance of our products to their fuel cell systems.
Okay. Thank you.
Thanks for the question. Next, please.
Your next question comes from the line of Adam Collins from Liberum. Please ask your question.
Yes, good morning. Thanks again. It's been very interesting. I had three questions, please, at this stage. Firstly, on the blue hydrogen opportunity, thanks for the details on the average value per project. I think you said GBP 50 million-GBP 60 million for licenses and GBP 5 million for catalyst refill values. Could you perhaps give us a sort of sense on what the value opportunity then might be for HyNet if it scales to phase IV?
You suggest it's a very big project, but just to give us a sense for what it might mean on what looks like is going to be one of your first and biggest opportunities. On the MEA side for PEM electrolysis. I know that's kind of quite long-term, but would you be able to say whether the value per kilowatt in electrolysis is similar to fuel cell? Essentially, is it the same value proposition?
I've heard it said that the value proposition is slightly less in electrolysis, despite the fact that the technology play is the same. Finally, on PEM fuel cell, could you discuss what the likely role of captives is going to be in this equation? To what extent do you think that the OEMs themselves will be producing part of the value chain?
Adam, nice to speak to you again. Thank you very much for your question. I think you get the prize for being able to make it very easy for me to share the questions out. Three questions, and I'll take one, Eugene takes one, and Jo takes one. A prize for that. We'll start off, Eugene, with HyNet. Maybe you can give an answer there.
I'm quite comfortable with giving numbers for general platinum. First, the HyNet
Phase I is about half the size of the plant that we've given you an example, a size of GBP 50 million-GBP 60 million for, the refill size. It's public information how big that plant's going. Clearly, there will be commercial discussions about the exact size of that opportunity between us and HyNet. I think we can't really give too much on that. I'll ask.
Okay. May I just ask, just a point of clarification. We know how big that project is in terms of production volume, but we don't know when you talk about a typical project and the sales values. What is a typical project then, in terms of blue hydrogen volume?
HyNet is about 80,000 tons a year. One of the typical projects we've scaled to is about twice that size, 160,000 a year, which we think will be heading towards a typical world-scale plant whenever this gets off of scale.
Yeah. Your numbers are based on 160?
When you do get the slides, Adam, if you look at slide 24, which is where we had the data, there's a little superscript one, and under superscript one, it gives basis on an average plant size of 160 kilotons. Those are what our numbers are based on.
Okay, that helps.
The second question about the sort of relative values per kilowatt. I think we see, or we base the numbers at least, on slightly more value per kilowatt on the electrolysis MEA versus the-
Vehicle MEA. That's principally because it's a slightly thicker and needs to be more durable MEA in some respects. Therefore, the membrane will be thicker, and probably the catalyst layers will be a bit thicker, too. As a result, the absolute value per MEA might be greater. We're talking about something like GBP 50 per kilowatt for a green hydrogen MEA in 2035, going down to, say, GBP 40 per kilowatt. Jo's already said that we would expect GBP 25 per kilowatt in 2030 for a truck. Those are the rough sort of numbers.
Great.
That's how we base the numbers that we've presented to you. We're not warranting that those are going to be the absolute right numbers, but that's the sort of pathway that we expect to be going under. Jo, your question on the likely role of catalysts in the fuel cell market.
Thank you. I think the earlier adopter OEMs that have been leading on fuel cell vehicles have certainly been doing a lot of their deep research, their learning, and developing of the fuel cell system in-house. That's been at a time when the supply chain is just becoming established. It's always difficult to say what will happen over time in an emerging market, but we're certainly in a great position to start to work with those, which is where we are working with those OEMs for business as the market starts to scale. For example, if we are able to supply something that has better performance, improved durability, high quality for a competitive cost, then that's something they would really want to evaluate as they scale their business and require a broader supplier base.
What we're doing now is working with them, proving this to them, and it's the reason why OEMs and Tier 1 customers want to work with J.M., because they recognize the need for continual improvements, and believe that we're well-positioned to do this. There's lots of opportunity to collaborate and supply some or indeed all of our components.
May I ask a quick follow-up?
Of course, yeah.
Is there a strategic or technical value in the fact that you do both the electrode and the membrane, as opposed to just doing CCMs?
Yes, there is. As you know, we're deeper experts, really, in these aspects, from the catalysis, the ability to coat the membrane, placing those molecules where we exactly want them. We can really optimize those key elements that really give the durability and performance, as I mentioned in the presentation. That structure of membrane, together with how we coat the catalyst layers and it all interacts, really determines the performance. That's where our capabilities really are and delivers that competitive advantage.
We absolutely think we have strategic advantage as a CCM, the catalyst-coated membrane, where you then go on to the MEA, which is where you're putting a seal in the gas diffusion layer. That's more about, what's the word I'm looking for? It's more about assembly, which is not where our competitive advantage lies.
whilst there might be more value in supplying an MEA, the real competitive advantage, we believe, is in the catalyst-coated membrane.
Thank you very much.
Okay. Thanks, Adam, for your question. Next, please.
Your next question comes from the line of Charlie Webb from Morgan Stanley. Please ask your question.
Hello, Charlie.
Morning. Morning, everyone. Thank you very much for the presentation. Definitely some insight in there. A few from me. Just first off on blue hydrogen, just wanting to be clear, is this all about new opportunities as in there isn't really a retro opportunity for the gray hydrogen, where you already, I guess, serve traditional catalysts? Is there any way you can upgrade or scale this? Is this very much for new blue hydrogen plants? Just to clarify that. Just on green, kind of circling back to, obviously, this is nascent, you guys mentioned it. The technology's continuing to evolve. How do you ensure, is this an area where you need to have partnerships with some of those other leading electrolyzer producers, I guess Hydrogenics, ITM? Is that where you need to form some sort of technology development partnership to ensure that your technology has a good chance?
How do you ensure that? It does feel like there's a lot of different paths being taken right now in terms of moving towards green hydrogen, how to scale it up. How are you thinking about developing your product offering? Lastly, tying it together, thinking about the capital cost, the CapEx, you clearly see growth opportunities across all three of these production and on the fuel cell side. How much CapEx do you need to put to work to continue to support the growth? Is that captured in your already planning today, or are there changes here where you need to invest more to make sure you're positioned for this growth?
Charlie, thank you for the question. Start off, Eugene, on blue hydrogen, the new versus retro.
These are new applications for hydrogen that we're interested in, where it's being used as an energy vector at really high volumes, which is quite difficult to high gray hydrogens being used. There are benefits of doing this at large scale, where you're close to carbon capture and storage. A lot of gray hydrogen is small, inland, close to end markets. We think the hydrogen infrastructure will evolve in a different way over the next 20 years. And indeed, the gray hydrogen market is already transforming, where traditional small plants are being replaced by larger, more efficient plants that then distribute their hydrogens on a pipeline network rather than building them like that. I think that gray hydrogen will be replaced, but it won't be as simple as simply replacing an existing gray hydrogen plant with a new blue hydrogen plant.
Sorry, just a quick follow-up on that. Does that mean that when you think about these large hydrogen opportunities, therefore you're more steered towards, I guess, opportunities in methanol, ammonia, which traditionally, I guess, have been the larger world scale type hydrogen plants? Or is it, as you say, more the energy vector side? Just trying to get a sense, is it more industrial use or do you think it's more energy use?
Well, it's for production of hydrogen at scale, at very large scale, for example, in HyNet, hydrogen will go into the gas distribution network for domestic use. It'll also go into large industrial users. It'll also go into transport. There are advantages in producing the hydrogen at very large scales. Typically, that 160,000 ton a year size would be a good world scale to think about to get the efficiencies of scale there. It'll go into all of those applications, which are very different to where gray hydrogen is used today.
Okay. Thank you.
Okay. On the green hydrogen, you're absolutely right, Charlie. It is nascent. We are working with a number of the suppliers of electrolysis at the moment. How we exactly move this forward, I don't think we'll be doing it all ourselves. We will be working in development partnerships and stuff like that. Exactly how this moves forward, we'll navigate our way through. Absolutely, I suspect it will be very much like the way we work in our existing businesses, which are working in partnership with our customers because this is a technology solution and people will want to work with us on the technology to develop it together. Lastly, on CapEx for all three. Well, I've mentioned that it's relatively low capital intensity in these areas.
In particular in hydrogen, we have the capacity at the moment for the catalyst production. Once you've developed the technology, you don't need to put the licensing, you don't need to invest. That's a very capital light business because it's a technology and people engineering business. On the fuel cell side, the doubling of our capacity that we are close to finishing, we'll finish by the end of this year, cost us about GBP 15 million, I think it was, Jo, to double our capacity from where it was before. I think the ability to scale up, we can do that. We did that project within less than a year, therefore, the ability to scale up rapidly, and at relatively low capital cost is there for us.
That is clear. Thank you very much.
You're welcome, Charlie. Thank you. Next, please.
Your next question comes from the line of Sebastian Bray from Berenberg Bank. Please ask your question.
Good morning, thank you for taking my questions. My first one would be on the cost structure for blue hydrogen. Rob, you mentioned earlier a figure of about GBP 40 per kilowatt for electrolysis. If I take your market share assumptions and accessible market sizes, is it fair to say we're talking about roughly a figure of half of that on a per unit hydrogen or per kilowatt basis for blues of roughly GBP 20? As a second question on that, is there any precedent for licenses being quite as big or as valuable as the GBP 50 million-GBP 60 million? I do have a third question on green electrolysis, but I'll pause there.
Sorry, Sebastian. Thank you for your questions. I'm not sure if I got your first question. Could you repeat it again, please? I think there was puzzled faces in this room.
For a unit, let's say that Is, all things being equal, Johnson Matthey providing the catalyst of a technology to make one kilogram of annual capacity of blue hydrogen worth roughly half of what it would get for the equivalent amount of green hydrogen capacity in an electrolyzer?
Crikey. Can we come back to you on that one? I think we've looked at it in a slightly different way, and I don't know if I have all the detail per kilowatt.
I guess I would say there's a slightly different way in which the revenue flows, because there are upfront lump sum payments to us in blue hydrogen at the start, followed by refill once every three to four years as things progress forward, which is a slightly different way things go in green hydrogen. If you want a straight translation over, the kilotons per year of hydrogen production will have a translation directly across into kilowatts, and we can get that to you immediately after.
Yeah. I think the translation we've used is roughly 40 kW per kilogram of hydrogen. That's the well-used rough range of value. I guess I'd have to get my calculator out and work about 160 kW and then turn that into terawatt hours and gigawatts, and then compare that with the value for the green hydrogen. Hopefully, your calculator will be better than mine, Sebastian.
I just was wondering, perhaps in principle, from revenue or profitability terms, or maybe both, would you prefer one unit of green or one unit of blue hydrogen?
I don't think I look at it like that. I look at the opportunity. I think the opportunities are good in both. The return on capital should be good for both. I think that with the offering that J.M. has, I think we could be competitive and both of them could be attractive for us. If you think about J.M., the way we operate, we operate in niches. Our strategy is very much to operate in niches which require a technology solution. The technology solution required for green hydrogen is around an MEA that works with drifting the PGM content in that system, which allows us to capture value. The same thing is true in blue hydrogen, around the technology and the catalyst. If you can make a better catalyst, you can attract more value. In both of them, I think they're potentially attractive markets.
On the licensing question, Eugene, GBP 50- GBP 60 per plant, do you want to answer that one? It was around have we seen something of that scale before.
In methanol?
I think it-
Yes, we've seen plants of this scale in methanol. No blue hydrogen plants exist at the moment. However, plants using this scale of technology, our scale of technology, do exist where the final application is methanol. We're quite confident of the scale.
That help answer your question, Sebastian? Because as Eugene said, blue hydrogen plants of this scale don't exist at the moment.
Understood. It is helpful. Thank you. My last question was on the electrolysis area. What exactly is it that Johnson Matthey can sell to the electrolyzer providers that they themselves are not doing at the moment? If you were to say, let's say on a five-year view, is it likely that there will be any commercial sales to this area by 2025? Not as a matter of guidance, but just what does your gut feeling say?
I think the opportunity in green hydrogen is here, coming very rapidly. It's incredible how it's evolved in the last 12-18 months, and probably even, arguably, even six months. There are a relatively small number of players here in the PEM market. What they'll be looking for is an MEA, so the membrane electrode assembly, exactly like they'll be looking for the truck manufacturers and the auto manufacturers are looking for in for their fuel cells stack. What we would be looking to offer is either the catalyst-coated membrane, or if some people wanted it'd go further down to the MEA. We think where we have competitive advantage would be the catalyst-coated membrane. We are talking to, at the moment, not all, but certainly some of the existing main players.
Obviously, what we think we can offer is, and why they'll be attracted to us, is our deep PGM chemistry expertise and the fact that we've got proven track record in fuel cells, because actually, the fuel cell for a truck is not that different from a fuel cell for a green hydrogen plant.
That is understood. Thank you for taking my questions.
You're welcome, Sebastian. Do we have another question? We do. Next, please.
Your next question comes from the line of Andrew Sott from UBS. Please ask your question.
Yeah, thanks.
Morning, Andrew.
Yeah, morning, Robert. Thank you for the presentation, and also to Joe and Eugene. I had a couple of questions. First of all, I just want to check the methodology in the numbers. Very useful getting that overall view of your addressable markets in each of the three segments. Just checking that that is a revenue number as is normal with JMAT, so it's ex substrate ex PGM content. It's the revenue number that then you apply a margin to. I just wanted to check that, first of all.
That's very easy.
Yeah.
Yes.
Okay, perfect. Sorry, just while we're on that margin application, I sort of got a sense from what you were saying through the presentation that the margin might be a bit above the average of the group. I just wanted to check if that's right.
I guess the question is, so in the medium- term or let's say longer- term?
The answer to that, absolutely yes.
It will be. There's no reason why it shouldn't be higher than the current average margins for the group. Yes.
Great. Thank you. Second question was entirely different. It was around the slide on autos and trucks. I am just trying to work out the trade-off between your existing HDD franchise and the opportunity in fuel cells. I just want to check this maths with you, basically. Are we looking at a similar margin on the CCM business to HDD, and therefore I just apply the multiple difference on the revenue line to get to my EBIT? In other words, about, I think I am right in saying about 3x the opportunity in trucks. I wanted to check that maths, please.
I think you're absolutely right. At the moment, it all depends on the size of the truck, of course.
Yeah.
This number is based on the 2,500 is based on a sort of type 160 kW truck. That's a mid-size truck rather than a large one. If you look at our existing Clean Air business, the catalyst content is about GBP 1,000 equivalent, and this is going up to GBP 2,500-GBP 3,000 per vehicle. Yes, a tripling. Exactly the margin structure, as you know, in Clean Air, you've got obviously quite a significant substrate cost that we then coat. I would hope that the margins in Fuel Cells should be better than the margins in Clean Air when you get to scale.
Sure. Perfect. Thank you. Sorry, I'm going to steal another one if I can. Just really a question around the development so far of electrolyzers. It seems to be the common view, consensus thinking, that PEM is just the better model for the green hydrogen market because of some of the comments that you mentioned, actually, which was obviously the variability of the grid and also the footprint. Yet the last two major contracts, the Nel contract with Nikola, the Saudi JV with Air Products and Neom, they both used alkaline technology. I wondered if you can reconcile that, please.
The good news is, I've got Eugene, who hopefully can. There's a great demand to move forward with decarbonization and to produce green hydrogen. The Alkaline technology is currently the most advanced. If you want to get a project on the go now, you can play to the strength of Alkaline. You can do it at scale, where footprint isn't a problem. You can connect it to a source of electricity which doesn't suffer from variability. For example, hydroelectric, where you get a standard flow of electricity or just connecting to the grid. These will not be the mass deployments of green electricity, but you can find examples which will play to the strength of Alkaline. Given that it's more advanced than PEM at the moment, that's a natural choice for a demonstration plant at the moment to get you going.
Okay, essentially, you think it's a scaling thing and a CapEx per kilowatt-hour thing at the moment.
Technology readiness.
Yeah, technology readiness. Okay. Brilliant. I appreciate your thoughts, everybody. Thanks a lot.
Thanks, Andrew. Next, do we have another question?
Yes. Your next question comes from the line of Lucy Hancock from Bernstein. Please ask your question.
Hi, Lucy.
Hi. Hello, everyone, and thank you for the presentation. Very insightful, very useful. A lot of the questions I had have already been asked, but there is a couple of clarifying points that are still sort of outstanding from my side. It is clear then from the MEA versus the CCM, you think that the MEA is not exactly where your capabilities are. It is a less valuable part of the value chain. Just going forward then, because obviously the GBP 33 million will be MEA and CCM, are we to assume that the MEA is a much smaller part of that revenue, the GBP 33? Therefore going forward, you have shared this estimate of GBP 1 billion for just CCM. Is there an incremental revenue opportunity for MEA that is missing there, or is it much smaller given that you have not included it? That was the first question.
Second question was around stationary applications, around 50% of the revenue at the moment from the slide that you've shared. We haven't talked about that. Is that to assume then you don't see significant growth opportunities on that one? I'll just sneak in a last third one on green hydrogen. Is it possible, I again realize it's nascent technology, are you able to share any of the equivalent, I guess, economics that you have for blue hydrogen, which is around the upfront CapEx, the refill size, and particularly the replacement cycles? If you said three to four years for blue hydrogen, does that sort of apply to green as well? Thank you.
Those were different questions. I guess hopefully, as you say, we answered the rest of them well. Yes. Jo, do you want to answer the first two? First one, I think, on MEA versus CCM, and then on stationary.
Yes. Could you just say exactly that question, the first part again, just so I get it precise to answer you, Lucy?
Sure. The GBP 33 million, if I understand, is CCM and MEA.
That you've sold to customers, you see that CCM is the higher value and sort of where Johnson Matthey adds the most value, you've given a number, a market size estimate of GBP 1 billion, which is just CCM. Is there an incremental market opportunity for MEA that we're missing?
Well, in the current GBP 33 million, much of that we are going through to the MEA at the moment, just because most of the customers require that as they're developing, really. We've projected the CCM value going forward is that's where our core capabilities play. We do add value to the MEA also because we've got skills and technology in how we apply the seals, which is also complex. It's more of an assembly than the real smarts and the chemistry and the catalysis that goes into producing the CCM. There is more incremental value on that GBP 1 billion. In an MEA, about 80%, 85% of it is a CCM in value. Going on to the second point around stationary.
Stationary was a market that certainly was emerging first, and we've had a longer history there with the types of catalysts and products that we've sold into that market. We don't see the trajectory of growth in stationary. We will serve our customer base there and look for opportunities, but the real growth, as you see from the vehicle figures that will start to adopt fuel cell technology, particularly in trucks, is where the really exciting place to play is for us, and it plays to our strengths. We're well connected to that market.
Okay. Thank you, Jo. Eugene, do you want to answer the question about the equivalent economics?
Yeah. In green hydrogen, we've looked at a model of supplying MEAs and charging for the MEAs, and we see those, a typical value for when we would expect those to be changed out would be about once every five years. That would be for a variety of reasons, performance, but also there's going to be such quick technology development here that after five years, the new MEAs that are available are going to be so much better that people will be trying to change them out to get more performance out of the equipment.
Does that answer your question, Lucy?
Yes. That's really helpful. Thank you. Thank you very much, all.
Thanks very much, Lucy. Do we have any more questions?
Yes. Your next question comes from the line of Chetan Udeshi from JP Morgan. Please ask your question.
Yeah. Hi. Thanks. A couple of questions.
Hi, Chetan.
Hi. Just based on my understanding, it seems in clean air catalyst market, outside of Toyota, maybe everybody else uses merchant products from JM, Umicore, BASF, et cetera. Is that going to be the same, you think, in the fuel cells market? We hear GM talk a lot about their own proprietary fuel cells technology, which they are now going to license to Nikola. Do you think the sort of captive involvement could be similar or higher than what we see in the clean air catalyst market? That's the first question. The second question on the PEM electrolyzer market. I acknowledge that it's a small market, but I'm curious why is J.M. not involved in with any of the existing, whatever, small scale projects that might be ongoing on PEM electrolyzer side?
Is it just maybe you guys did not focus on that market in the recent years, just because now it's getting bigger, that's increasing in focus. If you can, are the competitors for PEM CCM similar to what you have in fuel cells as well? Thank you.
Okay. Thanks, Chetan. Jo, what would you say about the captive market and how that's going to evolve?
Yeah. Well, we talked a little bit earlier around the captive market and the early adopters. It is still an emerging market, and there are OEMs developing early generation fuel cell systems. As you talked about the clean air catalyst, similar players in that market also are in fuel cell catalysts. Indeed, we have leading fuel cell catalysts. Where we're able to optimize the catalyst, the anode and cathode layers, the membrane to get to the CCM, we're also completely in control of that performance and the costs along that supply chain, because we're putting those materials together. We're very well-placed to support the roadmap of where our R&D is targeted to get along the path to cost down. We talked about the thrifting and the efficiency and automation. These all come together to be more competitive.
There will be elements where some stay captive, but as this market really scales, the best technology, working in collaboration in the way that we do with OEMs and tier 1s, we will have a really good place, and this is where our capabilities are in this.
Yeah. I think if you look at the clean air market, I guess years ago, a lot of people did their initial research in-house, but then.
As the market developed, they went out to the market as it scaled.
Yeah.
I think we expect a similar thing to happen.
Eugene, do you want to answer about the why not now? Why aren't we there?
With existing customers?
I think it's probably fair to say that there is no current supply chain for CCMs for green hydrogen and for electrolysis. The interest has absolutely exploded at the moment, and there is a commitment to put a lot of capacity down in the ground in the next five years, and then in the next 10 years. But that supply chain has not yet developed. Lots of people, the OEMs, some OEMs are making CCMs artisanally themselves at the moment. It's absolutely not something they're actually interested in doing because they're in the business because they're good at other parts of the electrolyzer.
I think this is a market that's forming right now, and I think we're very well-positioned right now. I think the time is right. I don't think we're late. I think the time is right for us to increase our efforts in this area right now.
Thanks, Eugene. Thanks, Chetan. Next.
Your next question comes from the line of Maggie Scary from Berenberg. Please ask your question.
Morning, everybody. I had three quick questions as well, if I may. The first, could you give us an understanding of the PGM loadings of a PEM fuel cell stack for an FCEV versus, for instance, what you would have in a typical catalytic converter with an LDD or HDD? That would be the first, to have an understanding of how that plays into PGM services. The second question was, within CCM, coating is obviously the key. Can you give us some indication of are you using high-speed ink printing or plasma technology to better understand how you can produce this at scale? The last question, apologies, is when we talk about the flow sheet for low carbon hydrogen and the capital costs, does that include the air separator unit as well, or is that outside of that 40% reduction in capital cost? Thank you.
Maggie, those are good questions. That's a euphemism for Robert can't answer them. If I take the details, Jo, PGM loadings of an MEA versus, or CCM versus, say, a catalyst.
Yeah. Well, they're in the region of 4x, 5x, 6x , depending, it depends on the type of vehicle, to an emission control catalyst.
Okay.
Yeah.
That's an aggregate for the vehicle, not on a single MEA, because there are how many MEAs on a sort of 80 kW car?
300 or so MEAs.
Yeah, exactly.
5 g per vehicle. Okay.
Yeah.
The second question was about how do we coat a CCM without telling our competitors how we coat.
Yes. Well, we've learned a lot over the last 20 years to be really good at coating. Well, longer, really, because we coat our substrates. It's core to our technology in Johnson Matthey and part of our core science. As I mentioned, that we've got a very clear R&D roadmap of how we're continuing to develop our manufacturing technology and to get to the most efficient processes to be able to deliver on the target cost and total cost parity, ownership parity for this market to really establish itself in the future.
Okay. Thanks, Jo. Eugene, the flow sheet for low carbon hydrogen, the extra units.
It's 40% cheaper for the total capital cost of the units required to produce the hydrogen. The major saving is in carbon capture and storage, where because the carbon dioxide is produced at high pressure, you need a much smaller carbon capture and storage unit to capture the carbon. That's where the real big hit comes in capital costs.
Okay. Fabulous. Thank you so much. I appreciate the answers.
Not at all, Maggie. Thank you for the questions. Do we have another question?
Yes. Your next question comes from the line of Sanjay Jha from Panmure Gordon. Please ask your question.
Thank you. Thank you for taking my question. Most of my questions have been answered. I just had a couple of questions, if I may. I've noticed that some of the bus and truck manufacturers are experimenting with solid oxide fuel cells, probably more as a range extender with batteries. Do you have any sort of thought on how important that is as a technology? Do you see that as a threat to your PEM-based technology?
Yeah.
Secondly, on PEM, I always wanted to check, is the purity of hydrogen really key? What I'm just trying to see is green hydrogen, is that an important way to produce high purity hydrogen? Because I understand PEM needs much purer hydrogen.
Well, hold on. Thank you, Sanjay. Jo, Solid oxide versus PEM fuel cells.
Well, certainly, you're right, the range extenders on buses and trucks in China were a way of demonstrating fuel cell technology. It really doesn't have the durability in the automotive application to be a long-term solution. As we're really starting to see the PEM technology take root in automotive, it gets us to the higher kilowatt hours of power. It gets us to long hours of cycle time on a fuel cell system. We're getting to those levels where you get 1 million miles out of a truck. It's not a suitable technology long-term for the fuel cell automotive market.
Okay. Thank you, Jo. On PEM and the purity of hydrogen.
PEM does produce hydro. It has the capability to produce hydrogen at much higher purity levels. Also, another advantage is it can produce it at pressure, which can be very useful if you're trying to store the hydrogen as well, unlike alkaline electrolyzers. How important that purity is depends on how you're getting it to its end application. For example, in HyNet, the gas going into the grid are being mixed with all sorts of other things. Typically, hydrogen is brought to the specific purity required for the end application by purification just before that application. For example, there will be plants built where the application is right beside the production of hydrogen, when the purity may be very useful indeed. However, if it goes into pipelines, then that final purification step is where things will be adjusted to the needs of the end application.
Does that answer your question, Sanjay?
Thank you.
Good. Okay. I think we've got three more questions. Next.
Yes. Your next question comes from the line of Ranulf Orr from Redburn. Please ask your question.
Morning or just afternoon. Just one question left from me. I'm just wondering about potential benefits in adjacent businesses, in ENR. I'm thinking about the use of ammonia as a sort of transport medium for hydrogen. I think you have a license business there. I guess the question is, do you see any uplift or benefit to your ammonia license business from a hydrogen economy as well, and you can probably answer that one.
We are also global leaders in ammonia. There's lots of synergies between the technology that we're developing for blue hydrogen and our ammonia and methanol businesses. It's one of the reasons why we think we'd be good at blue hydrogen, why we think we're a good owner for blue hydrogen. No specific link into our existing ammonia technology from blue hydrogen. We are very interested in the fact that ammonia could be a carrier for hydrogen-based energy.
I think when we talk about the opportunities for the rest of the group, for green hydrogen as well as fuel cells, et cetera, we talk about the catalyst-coated membrane. You have to make the catalyst first, and that's part of our. To make the catalyst, you need the PGMs. To make the PGMs, if you've got recycled PGMs, then you can go to your customer and say, not only are we giving you a product which has zero emissions at the tailpipe, or if you're generating hydrogen through electrolysis, but also the embedded carbon through the PGMs that are going into the manufacturing process are very low.
That integrated capability that J.M. offers, not only around the technology associated with PGM catalysis and what we know there, but the recycling and all the other ancillary benefits of being part of the integrated J.M. Group, is why we think that J.M. Is not only well-placed to play this area, but I would go further and say uniquely placed. I think there are lots of opportunities for the broader group that these opportunities derive. Did you have another one or is that?
No, I was just going to say thanks for the answer.
You're very welcome. Next.
Your next question comes from Nicola Tang, from BNP Paribas.
Hi, everyone. Actually, Robert, thanks. You just touched on my question a little bit just then. I wanted to talk a bit more about this closed-loop offering that you mentioned a bit, because I'm thinking that could be one area of your competitive advantage versus any new entrants as you were just flagging. I was wondering if this is something that comes up in your discussions today with either existing customers or potential customers. At what point should we start thinking about closed loop in fuel cells? Thinking actually about the recycling of fuel cells. Thanks.
Jo, do you want to talk about what actually the customers are saying to us at the moment?
Certainly the customers or the major truck OEMs are obviously very interested in a sustainable supply chain and where their raw materials are coming from. The fact that we've got these capabilities and we're developing even further in recycling and being able to provide a secondary metal rather than a primary, because as I think I mentioned earlier in the presentation, there's a significantly lower carbon footprint associated with secondary PGMs. You're right, this is definitely differentiating, and we've got the skills within the organization to really optimize that.
I think what we're seeing at the moment, if I contrast this with battery materials, where maybe a couple of years ago when we were talking to customers about battery materials, were they really talking about the embedded carbon within the battery materials? Not really. They were talking about cobalt and where cobalt came from, i.e., the artisanal mines in DRC. Now they really are talking about the whole embedded carbon within the whole supply chain and really driving that down. That's particularly true with the Western OEMs, the Europeans and the American OEMs. Less so for the Chinese OEMs. Certainly, we would expect that trend to absolutely happen in this space as well.
We absolutely believe having that closed-loop offering and the ability to offer low embedded carbon PGMs into the generation of a fuel cell and/or a MEA to go into green hydrogen production will be a competitive advantage and something that we should be able to extract some value for.
Great. Thank you.
Thanks, Nicola. Next.
Our final question comes from the line of Jean-Baptiste Rolland from Bank of America. Please ask your question.
Jean-Baptiste, you get a prize for being patient.
Hi, Robert. Thank you very much for taking my question. A lot has been answered already. I know I appreciate that the focus today is really on hydrogen. I would like to know if you could elaborate a little bit further, maybe on where you see in the transportation sector, your technology for fuel cell articulating with battery materials. Given your current investment in eLNO, I guess there are probably some synergy that you can extract between the two products for the powertrain. Any vision that you have around where this powertrain is going would be really helpful if you could share it. Thank you.
I think they are very complementary, the capabilities and having both skills. To be clear, I don't actually think that the customers are going to come to you because you can do both. I think you have to have the best battery capability and technology. The cathode material needs to give the right level of energy density at the right level of cost, at the right level of longevity and performance. The same is absolutely true on the fuel cell technology and the MEAs or catalyst-coated membranes going into that. Buyers, I don't think being necessarily the one-stop shop, being able to supply battery materials and fuel cells are necessarily going to help. Understanding the customer's demands, understanding what their particular requirements are, will allow a degree of complementarity that will help. You still need to have the best technology.
Being the best average is not good enough because you've got to have in each application the best, and that's what the customers buy. There is a complementarity to it. Having said that, as we talked about, we do expect that in fuel cells, the first push will be in heavy-duty applications, so trucks and buses, long-distance buses. Obviously, as you know, the first push for battery materials and the battery market is battery electric vehicles, which is a different application.
Okay. Makes sense. Thanks very much.
Very good. Are there any more questions that have been added at all?
We have no further questions. I'll now hand the conference back to Robert for closing remarks.
Well, look, thank you very, very much indeed for joining today. I hope you found today helpful and you got a bit more insight on, firstly, the hydrogen market itself, but also J.M.'s position in the market and why we are so excited about the opportunity, which has evolved very rapidly over the last few years. For those of you who have followed J.M. for a long time, you know we've been in the hydrogen market for many years, not just in the hydrogen production side that Eugene talked about, but also in the fuel cell business. We've had optimism and encouragement about the fuel cell market for many years, but it does feel very much like its time is coming now.
In many ways, the fact that we're actually starting to see penetration into China now and lots and lots of interest in Europe and America is really exciting. I think we're very well-placed. We're very excited about the opportunity and excited to share it with you. With that, thank you very much for listening. I'm sure we'll see you all again over the coming months. We'll happily give more answers to your questions as I'm sure you'll have them over the next coming months. Please feel free to call Martin or Louise or Jane in the IR team if you've got any further questions. Thank you very much for listening, and see you again soon.
That does conclude our conference for today. Thank you for participating. You may all disconnect.