Should Southeast Asia Jump on the Low-Carbon Hydrogen Industrial Hub Bandwagon?

The concept of hydrogen industrial hubs increasingly features in the low-carbon hydrogen strategies and roadmaps released by major economies as part of their net-zero commitments. These industrial hubs have various labels — they are called regional hydrogen hubs in the USA and Australia, integrated green hydrogen hubs in India, and hydrogen valleys, which can be interconnected via hydrogen corridors by the European Union (EU). Terms like “hydrogen cluster”, “hydrogen industrial park” and “hydrogen economy industrial belt” are used in Japan, China, and Korea.

While the terminologies differ across countries, they share the core concept of developing low-carbon hydrogen ecosystems with strong government financial support and incentives, and industry involvement. For example, the US government has allocated US$8 billion for its Regional Clean Hydrogen Hubs Program (H2Hubs), Australia has committed over AUS$500 million (US$340 million), while the EU has invested close to €200 million (US$220 million) under a public-private partnership with investments totalling over €1 billion. These hubs aim to increase accessibility and adoption, enable economies of scale and embody a combination of characteristics. They are geographically defined, have substantial shared and co-located infrastructure facilities, large-scale, broad value-chain coverage, involve cross-sector collaboration and supply to more than one sector or application.

Low-carbon hydrogen is also a promising vector for ASEAN’s goal towards carbon neutrality and for ASEAN members to fulfil their net-zero carbon emissions pledges.

However, should Southeast Asia similarly establish hydrogen hubs? And what is ASEAN’s role in facilitating hydrogen developments in the region?

Low-carbon hydrogen refers to blue and green hydrogen produced with minimal CO₂ emissions. Blue hydrogen uses fossil fuels with carbon capture, while green hydrogen uses renewable energy and electrolysis, making it the cleanest but most expensive form. They differ from black, brown, and grey hydrogen, which are cheaper but more polluting.

Global demand for low-carbon hydrogen remains low, with 95 million tonnes of hydrogen used in 2022, while low-carbon hydrogen represented less than 1 per cent of global production in 2023. The International Energy Agency assessed that low-carbon hydrogen production needs to increase by over 100 times by 2030 to limit global temperature rise to 1.5°C in line with the Paris Agreement.

The global low-carbon hydrogen economy remains nascent, with major technological, market, logistical, sustainability and geopolitical challenges ahead.

Southeast Asia’s annual hydrogen demand stands at approximately 3.2 million tonnes in 2023, with negligible amounts of low-carbon hydrogen. While demand for low-carbon hydrogen is currently low, there is strong interest in its potential to decarbonise various sectors, create jobs and generate export revenues, given Southeast Asia’s renewable energy potential. Singapore, Malaysia, Indonesia and Vietnam have released ambitious hydrogen strategies envisioning economy-wide value chains and becoming key players in the global hydrogen landscape. Malaysia is the forerunner in hydrogen industrial hub development with plans for three low-carbon hydrogen hubs by 2050 with the Sarawak H2 Hub expected to operate by 2030.

However, governments should not rush into setting unrealistic targets and plans for “fear of missing out”. The global low-carbon hydrogen economy remains nascent, with major technological, market, logistical, sustainability and geopolitical challenges ahead. Many hub projects are in the early stages of planning and development while market demand for low-carbon — especially green —  hydrogen and green fuels has not materialised as projected. They risk over-sizing and misaligning their infrastructure. Geopolitics could also curtail hydrogen’s export market potential as governments focus on domestic supply production to reduce overseas dependence on energy security.

The setting of hydrogen targets and policies, including plans for hydrogen industrial hubs should therefore be carefully assessed and calibrated in Southeast Asia with regional economies of scale in mind.

First, Southeast Asian countries have different resource endowments, access to finance and investment requirements, industrial experience, governance structures, as well as socio-economic and political conditions. Planners should formulate low-carbon strategies according to domestic conditions and comparative advantages. For example, Singapore lacks land and renewable resources but its international networks, efficient business infrastructure, and innovation ecosystem confer unique advantages for it to develop as a “hydrogen service hub“. Meanwhile, Sarawak in Malaysia has the comparative advantage of becoming a green hydrogen hub because it has access to cheap hydropower, abundant water supply and an established industrial track record attained from serving the energy and petrochemical sector for decades.

Second, the hydrogen strategy should complement, not dictate, a country’s broader low-carbon industrial policy. The application of hydrogen should be fit for purpose within the wider low-carbon technological framework. It should be used to tackle hard-to-abate sectors where it has an advantage and avoid application areas where direct renewable energy can perform better. Instead of hydrogen-centric hubs, it may be useful to consider the suitability of low-carbon industrial hubs where hydrogen forms a subset of such an industrial ecosystem.

Third, ASEAN members need to prioritise regional collaboration to maximise the impact of their national hydrogen efforts. In an encouraging sign, work has started on assessing national strategies and plans for hydrogen as part of the ASEAN Low-Carbon Energy Technologies Roadmap (ALERT). A regional hydrogen economy will serve the ASEAN Economic Community well. It would also bolster collective efforts at carbon neutrality and green growth as expressed in the Framework for Circular Economy for the ASEAN Economic Community and the Strategy for ASEAN Carbon Neutrality. ASEAN members should explore the idea of special joint low-carbon industrial hubs that incorporate hydrogen as a component and leverage their comparative advantages. They should also capitalise on ASEAN’s Dialogue Partners for knowledge and support.

A successful national hydrogen strategy requires consideration of the uncertainties and risks inherent in the nascent global low-carbon hydrogen economy while leveraging the country’s unique strengths and advantages. To thrive in today’s evolving net-zero global landscape, ASEAN members must deepen collaboration to create an integrated ASEAN low-carbon economy that can effectively utilise hydrogen as part of an array of low-carbon technological solutions.

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