“I see hydrogen as the way forward. [In] Malaysia, we have the edge or the advantage in becoming an exporter of green hydrogen, with Sarawak as an example,” Minister of Science, Technology and Innovation Malaysia Chang Lih Kang tells ESG.

The first hydrogen refuelling station in Peninsular Malaysia is in the works, while Sarawak has already introduced hydrogen buses and multiple hydrogen fuel stations, and struck up collaborations to build production facilities.

The real breakthrough lies in exploiting the full potential of green hydrogen to decarbonise supply chains in large-scale applications, the minister says.

Hydrogen is currently produced almost entirely from natural gas reformation and coal gasification, which are highly carbon-intensive processes.

Depending on production methods, hydrogen can be grey, blue or green, which are the most common classifications. There are also pink, yellow and turquoise hydrogen.

Grey hydrogen, produced through steam methane reforming, contributes to carbon emissions as it releases carbon dioxide and uses non-renewable energy (RE) for production. It is currently used in the chemical industry as a feedstock, in the steel industry as a reducing agent and for special applications in various industries.

Green hydrogen is the only type produced in a climate-neutral manner and would play an important role in the global efforts to reduce emissions to net zero by 2050, according to the World Economic Forum.

Blue hydrogen, produced from natural gas with carbon capture and storage, can also be considered “clean” if it meets strict carbon capture standards.

Though theoretically versatile, green hydrogen has not been widely adopted due to its high cost of production compared with fossil fuels and because the technology to produce it is not yet commercially mature, according to the Global Hydrogen Review 2023 by the International Energy Agency.

However, decarbonisation efforts are likely to drive hydrogen use in new applications, especially in sectors where reducing emissions is challenging and alternatives are limited.

Sarawak is aiming to become a frontrunner in green hydrogen energy by leveraging its hydropower resources. Kuching, the state capital, is a beneficiary of the US$3.4 billion (RM16 billion) investment for developing a network of power-to-transport projects, according to reports.

Initiatives in Kuching include a fleet of three free-to-ride, hydrogen-fuelled buses manufactured in China. These buses refuel at multi-fuel stations equipped with dedicated hydrogen bays. Since Sarawak is the only state in Malaysia to have a hydrogen production facility, UMW Toyota gifted five Toyota Mirai to state officials in 2023. The Toyota Mirai is the world’s first mass-produced hydrogen fuel-cell car.

The HETR sets out three phases of development. Phase 1 involves the initiation, foundation and demonstration of hydrogen use cases in the domestic market and for exports. This phase spans the years 2022 to 2030.

This phase focuses on competitive, small and commercial-scale projects to demonstrate feasibility. This includes deploying various carriers of hydrogen to determine which physical state is most suitable for use. Currently, hydrogen is widely used in its gaseous state, which is suitable for transportation and metal or glass manufacturing.

In its liquid state and as ammonia, hydrogen is used for the production of fertilisers and in shipping. In its solid state as sodium borohydride, it can be used for light-duty vehicles  according to the HETR.

“We have different phases, we do pilot projects, we showcase technologies that are already on the market to gain confidence from the public and also [to raise] public awareness. But of course, we cannot commercialise right away. For instance, we cannot import the Toyota Mirai to Malaysia [for public use yet] because we do not have [large-scale hydrogen] production,” says Chang.

“We have pilot production plants [in Sarawak], then slowly, we will scale up [to other levels of production]. So, that is the first phase from now until 2030, the second phase is 2031 to 2040, and we are anticipating that by the second phase we will have production [facilities] and we can start exporting.”

Notably, Petroliam Nasional Bhd (Petronas) and Sarawak Energy have teamed up to commercially generate green hydrogen.

The NETR identifies hydrogen as one of six key energy transition strategies for Malaysia. Under this initiative, the government has planned three catalytic green hydrogen projects including one in Kuching for domestic use set for completion by 2025 and two in Bintulu for export, due by 2027.

Malaysia could be a hub for producing green hydrogen, not only for domestic use but also for export to other countries, observes Chang.

This vision is guided by a roadmap focused on commercialising a fuel that, despite being significantly more expensive than natural gas and presenting logistical challenges for bulk transport, is an important lever in Malaysia’s decarbonisation efforts.

According to the IEA, hydrogen plays an important role in sectors where reducing emissions is particularly challenging and where other mitigation methods may not be feasible, such as in heavy industry, long-distance transport, shipping and aviation.

“Now the problem we have is cost. Technology-wise, we are quite okay. Only now, how do we lower the costs? But also, if there is no demand and there is no supply, how to speak of costs?” says Chang.

According to the HETR, grey hydrogen produced with natural gas costs US$2 per kg in the US, while in Europe, Australia and Asia, it costs US$5 to US$6 per kg due to higher natural gas prices. Blue hydrogen produced from natural gas paired with carbon capture and storage costs between US$5 and US$7 per kg in the US and between US$7 and US$11 in Europe and Australia.

Among the many colours of hydrogen, green hydrogen is the most expensive to produce. Green hydrogen is produced through electrolysis and uses renewable power, costing US$10 to US$15 per kg, depending on availability.

With the economy of scale and maturity of the technology across the hydrogen value chain, some countries have developed the infrastructure to reduce the levelised cost of hydrogen (LCOH) to the range of US$1.5 to US$2 per kg.

Chang believes that to lower the cost of hydrogen, it has to be policy-driven. For instance, by subsidising clean energy, especially cost-intensive ones like hydrogen.

“I think this could be one of the ways to encourage more usage of hydrogen or other renewable energy. [Because] it doesn’t make sense if we say that by 2050, we are going to achieve net zero, but at the same time, we are still subsidising fossil fuels. It is contradictory. Slowly, we are going to move towards that direction. Instead of subsidising fossil fuel, we should be subsidising RE and maybe allowing tax rebates for hydrogen car buyers,” he adds.