Malaysia Launches Hydrogen Economy & Technology Roadmap

09 October 2023

On 5 October 2023, the Deputy Prime Minister, Datuk Seri Fadillah Yusof, launched Malaysia’s much-anticipated Hydrogen Economy & Technology Roadmap¹ (‘Hydrogen Roadmap’) at the International Greentech and Eco Products Exhibition and Conference Malaysia 2023.

The Hydrogen Roadmap is intended to be a supporting document to the National Energy Policy 2022-2024², which envisages the development of a hydrogen economy in Malaysia. This also follows the launch of Malaysia’s National Energy Transition Roadmap³ on 29 August 2023, in which hydrogen was identified as one of the six energy transition levers that will drive the country’s efforts to be a net-zero nation by 2050.

STATE OF PLAY: HYDROGEN IN MALAYSIA

Hydrogen is widely considered to be the alternative fuel of the future. In addition to playing a role in the reduction of greenhouse gas emissions, hydrogen can be utilised to address concerns on energy security by virtue of its versatile nature. Countries such as Japan, South Korea and Singapore are taking active steps towards developing a hydrogen economy.

The State of Sarawak is spearheading the venture into hydrogen in Malaysia, with the development of two ongoing major hydrogen manufacturing projects that are expected to commence operations in 2027 as well as an urban transportation system utilising hydrogen-powered smart trams which has begun testing in Kuching⁴. In addition, there are projects in the pipeline that focus on the utilisation of hydrogen in, among others, telecommunications, mobility and production.

Notwithstanding the foregoing, the use of hydrogen as a fuel in Malaysia is very much in its infancy. The cost of production is high, making the economic feasibility of venturing into hydrogen less attractive. In addition, the difficulties relating to transportation and storage of hydrogen have to be considered. There is also an absence of a clear legal and regulatory framework, which is a deterring factor for potential investors.

MALAYSIA’S GOALS FOR HYDROGEN

The Hydrogen Roadmap recognises the need to address the abovementioned challenges in order to make hydrogen a viable fuel source and to develop the hydrogen economy in Malaysia. To that end, there are three goals set under the Hydrogen Roadmap:

Hydrogen to be the cornerstone of a new energy economy in Malaysia, with the country establishing a strong presence globally with respect to the hydrogen supply chain.

Malaysia to achieve a sustainable energy mix and increasing the share of clean energy in the country’s energy mix by promoting the use of hydrogen in energy storage and as a fuel in combined cycle gas turbines.

Malaysia to invest in hydrogen technologies in order to address domestic consumption, energy security, sustainability of international energy trading and decarbonisation.

The achievement of these three goals will be premised on five strategic thrusts, which are considered below.

FIVE STRATEGIC THRUSTS UNDER THE HYDROGEN ROADMAP

Each strategic thrust under the Hydrogen Roadmap sets out proposed action plans, a summary of which is as follows:

#1: GOVERNANCE SYSTEM, INSTITUTIONAL FRAMEWORK & REGULATORY MECHANISM
STRATEGY	ACTION PLAN
*National Hydrogen Governance and Ecosystem*	Establish a National Hydrogen Economy and Technology Steering Committee to provide direction on, facilitate and oversee national hydrogen initiatives and hydrogen export. Develop collaborative platforms and strategic partnerships on a government-to-government basis with countries such as Singapore, South Korea and Japan. Implement a centralised database and impact tracking system for monitoring of the status of technology development across the hydrogen value chain in Malaysia.
*Regulatory framework, and existing policies and legislation*	Review and identify measures for the hydrogen economy, including amendments to existing regulations under the Gas Supply Act 1993 as well as developing guidelines for a verifiable certification system and guarantees of origin scheme and safety aspects across the value chain. Enhance mechanism to facilitate hydrogen production and consumption in the power sector, including conducting studies on special tariffs for generation, business models and blending of up to 20% hydrogen in combined cycle gas turbine power plants. Adopt hydrogen taxonomy, technical codes and safety standards across the value chain to facilitate future trade of hydrogen.

#2: ENABLING ENVIRONMENT AND ECONOMIC INSTRUMENTS
STRATEGY	ACTION PLAN
*Accelerate adoption of hydrogen by local industries*	Introducing subsidies and incentives for generation and adoption, which will involve phasing out fossil fuel subsidies for diesel vehicles. Establish dedicated funding and allocation to support hydrogen initiatives. Establish a National Hydrogen Fund for hydrogen projects and technology. Develop portfolio for feedstock availability and supply to support hydrogen production. Study economic feasibility of production of blue hydrogen from natural gas together with / carbon capture, utilisation and storage facilities. Source opportunities from energy-related mobility trends in the heavy vehicles segment and public transport, including tracking developments on future powertrains and determining fuel of the future. Capture value pools from international marine bunkering fuel regulations. Track developments in aviation that affect energy demand.
*Accelerate transition to circular economy*	Study feasibility of adoption of hydrogen economy by industries through a circular economy approach.
*Low-carbon hydrogen to mitigate greenhouse gas emissions*	Implement low-carbon hydrogen projects that contribute to Malaysia’s long-term low emissions development strategies.

#3: COMMERCIALISATION OF TECHNOLOGY TO ENABLE EXPORT AND DOMESTIC UPTAKE
STRATEGY	ACTION PLAN
*Advancing research and development, innovation, commercialisation and economy with a build-some, buy-some strategy*	Increase renewable energy competitiveness for hydrogen production from renewable energy sector, including a demonstration project for hydrogen production through on-site, off-grid generation and an industrial-scale project by both local and international players to support domestic consumption and export. Develop localised hydrogen infrastructure for domestic consumption and export, including the deployment of hydrogen fuel-cell trucks for transportation of hydrogen and large-scale hydrogen production plants. Allow for technology penetration into the market with a build-some, buy-some approach. Develop integrated low-carbon and hydrogen industrial clusters for captive production and demand.

#4: CAPACITY DEVELOPMENT AND CAPABILITY ENHANCEMENT
STRATEGY	ACTION PLAN
*Build competent and adaptive talent for the hydrogen economy*	Leverage hydrogen talent development to cater to job losses among low-skilled workers and increase awareness in hydrogen-related education and career pathway.
*Strengthen knowledge for continuous enhancement of skills*	Develop a dedicated continuous development programme in hydrogen covering the value chain. Implement an effective science, technology, engineering and mathematics education that incorporates a hydrogen component. Enforce local content and transfer of knowledge and technology.

#5: COMMUNICATION, EDUCATION AND PUBLIC AWARENESS
STRATEGY	ACTION PLAN
*Enculturation and acculturation of hydrogen economy*	Create awareness to the consumers through the application of hydrogen as a fuel in public transport. This will include deployment of hydrogen fuel cell-powered public transport in the Federal Territory. Nurture interest and awareness in hydrogen-related education and career pathway through strategic partnerships with local and foreign industries. Develop understanding on the application of hydrogen through platforms with substantial public outreach.

HYDROGEN AS A FUTURE FUEL IN MALAYSIA

Meeting the goals under the Hydrogen Roadmap will be a gradual process, with the targeted timeline for implementing the various action plans ranging from 2024 to 2050. However, this roadmap marks the beginnings of the development of a hydrogen economy in Malaysia, one which is projected to result in a potential revenue of RM89 billion by 2050. It is also reflective of the efforts that are being taken to address and manage the energy trilemma in Malaysia.

In his novel “The Mysterious Island”, Jules Verne wrote that “…water will one day be employed as fuel, that hydrogen and oxygen which constitute it, used singly or together, will furnish an inexhaustible source of heat and light, of an intensity of which coal is not capable”. It would seem that this vision is on its way to becoming a reality within the foreseeable future.

For enquiries on matters relating to energy transition, please contact Richard Khoo (Partner) and Rachel Chiah (Senior Associate) of the Energy Practice of Skrine.

¹ The Hydrogen Roadmap has been published on the Ministry of Science, Technology and Innovation’s website and can be viewed here.

² Our earlier Alert on the National Energy Policy can be viewed here.

³ Our earlier Alert on the National Energy Transition Roadmap can be viewed here.

⁴ ‘Smart-Tram’ launched in Malaysia powered by hydrogen, Rail Technology Magazine, 3 October 2023.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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Malaysia Launches Hydrogen Economy & Technology Roadmap