Experts from IDTechEx assess the future of proton exchange membrane (PEM) technology in the hydrogen economy
The long-awaited deployment of the hydrogen economy is increasingly defined by the promise of a green tomorrow, while simultaneously limited by economic constraint. Hydrogen manufacturing, particularly for green hydrogen, and hydrogen applications, such as PEM fuel cells (PEMFCs) are advancing in parallel, yet both face challenges that complicate their short-term scalability and commercial success. IDTechEx covers the hydrogen economy extensively, providing details on all aspects of the value chain, from component suppliers to stack manufacturers and system operators, along with assessing the pain points holding back this society-altering technology.
Regional trends for green hydrogen production
The upstream segment of the hydrogen value chain, hydrogen production, is undergoing its own recalibration. While green hydrogen has been widely promoted as a cornerstone of decarbonisation, its current market dynamics reveal a more complex picture. High production costs remain the primary barrier to widespread adoption, limiting demand and slowing project development. While grey hydrogen typically costs only $1-2/kg, green hydrogen production costs range from $5-10/kg, making it economically uncompetitive in most applications. Even as renewable energy costs decline and electrolyser technologies improve, the overall economics of green hydrogen remain challenging. This has led to a growing disconnect between announced project pipelines and actual implementation, with many initiatives facing delays or reconsideration.
According to IDTechEx Technology Analyst Dr Cherie Wong, demand-side uncertainty is a key factor in this dynamic. Industrial users and other potential offtakers are often hesitant to commit to green hydrogen at current price levels, particularly in the absence of strong policy incentives or regulatory mandates. This hesitancy, in turn, affects investment decisions, creating a cycle in which limited demand constrains supply expansion, and vice versa.
Policy frameworks play a critical role in shaping these outcomes, and their impact varies significantly across regions. In some markets, evolving regulations and shifting priorities have introduced additional uncertainty, complicating project planning and financing. In others, sustained policy support continues to drive development, though not without challenges related to cost and infrastructure. Regional variation is a defining feature of the green hydrogen landscape. Differences in renewable energy availability, industrial demand, and policy support lead to distinct market conditions across geographies. As a result, the global hydrogen economy is not developing as a uniform system, but rather as a collection of regionally specific ecosystems, each with its own constraints and opportunities, all of which are extensively covered by IDTechEx.
PEMFC’s dependence on platinum
These regional dynamics are mirrored in the PEM fuel cell market, where adoption patterns and manufacturing capabilities also vary. Some regions are emerging as leaders in deployment, while others focus on supply chain development or technological innovation. This fragmentation reflects the broader complexity of scaling hydrogen technologies within diverse economic and policy contexts. However, Principal Technology Analyst at IDTechEx, Dr Conor O’Brien, argues that adoption of PEMFC is restricted by the limited supply of high-purity and cheap hydrogen alongside high stack costs.
At the core of PEM fuel cell performance lies platinum, a catalyst material essential to enabling the electrochemical reactions that generate electricity. Platinum’s role in facilitating both the hydrogen oxidation reaction at the anode and the oxygen reduction reaction at the cathode makes it indispensable within PEM systems, both electrolysers and fuel cells. The difference for fuel cells is the requirement to utilise platinum at both the anode and the cathode. However, this reliance introduces a significant cost sensitivity. As platinum prices rise, the economic viability of PEM fuel cells becomes increasingly strained, particularly in applications where cost competitiveness is critical.
Efforts to mitigate platinum dependence are underway, and they represent one of the most active areas of innovation within the PEM fuel cell sector. Advances in catalyst design have focused on increasing the activity of platinum at the atomic level, thereby reducing the total quantity required per unit of output. Alloying platinum with other metals has proven particularly effective, enhancing catalytic performance while lowering overall loading requirements. Similarly, engineered catalyst structures, such as configurations that maximise active catalytic sites at the catalyst surface, are improving overall catalyst efficiency.
Meanwhile, research into alternative catalyst materials continues to progress. Non-platinum group metal systems offer a potential pathway to cost reduction, though they currently fall short of matching platinum’s performance and durability. As a result, these alternatives are not yet viable replacements in most commercial applications, but they remain an important component of long-term research strategies. Manufacturing processes are also evolving to address cost pressures. More precise deposition techniques and scalable production methods are helping to reduce material waste and improve consistency across fuel cell components. These improvements, while incremental, contribute to a broader effort to bring down system-level costs and enhance commercial viability.
Despite these advances, platinum remains a defining constraint for PEM fuel cells. Even with reduced loadings, total demand is expected to increase as deployment expands, particularly in sectors such as heavy-duty transport, where fuel cells offer distinct operational advantages. This suggests that material constraints will continue to play a central role in shaping the pace and direction of market growth.
Advances in catalyst design have focused on increasing the activity of platinum at the atomic level, thereby reducing the total quantity required per unit of output
The hydrogen economy is connected
The interdependence between PEM fuel cells and green hydrogen further complicates the outlook. Fuel cells rely on a steady supply of hydrogen to operate effectively, while the growth of hydrogen production depends in part on demand from fuel cell applications. When either side of this relationship encounters barriers such as cost, infrastructure or policy, the effects are felt across the entire value chain. Success of the hydrogen economy at large will depend on co-ordinated efforts to maximise efficiency across the value chain. Improvements in fuel cell efficiency or reductions in platinum usage, for example, can enhance the attractiveness of hydrogen as an energy carrier. Similarly, lowering the cost of green hydrogen can expand the range of viable applications for fuel cells, supporting broader adoption.
However, the current state of both markets suggests that progress will be incremental rather than exponential. The initial wave of optimism surrounding the hydrogen economy has given way to a more measured outlook, acknowledging the complexity of achieving cost parity with established energy systems. The long-term potential of hydrogen technologies remains, but the challenges highlight the need for realistic expectations and sustained effort.
In the case of PEM fuel cells, the path forward will depend on continued innovation in catalyst materials, system design, and manufacturing processes. Reducing reliance on platinum remains a central objective, not only for cost reasons but also for supply chain resilience. Achieving meaningful progress in this area will require both scientific breakthroughs and industrial scaling. For green hydrogen, the primary challenge lies in aligning production costs with market demand. It will also require the development of infrastructure and supply chains capable of storing and distributing hydrogen at competitive prices.
Ultimately, the future of the hydrogen economy will be shaped by how effectively the challenges are addressed across both segments. The relationship between PEM fuel cells and green hydrogen is one of mutual dependence, and progress in one area is closely linked to developments in the other. As such, a coordinated approach is essential – one that considers the full value chain rather than isolated components.
For more details on the materials and component demand for PEM fuel cells, market trends and emerging challenges, see the IDTechEx market report ‘Materials for PEM Fuel Cells 2026-2036: Technologies, Markets, Players’. For more information on IDTechEx’s other reports and market intelligence offerings, including PEM electrolyser stacks, please visit here.
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Please note, this article will also appear in the 26th edition of our quarterly publication.
