Green hydrogen has long been hailed as a “fuel of the future”, yet it has remained on the sidelines of the energy transition due to its high production costs. But this picture is fast changing. As the cleanest form of hydrogen, it is poised to play a leading role for achieving net-zero, especially replacing fossil fuels in sectors that are hardest to decarbonise.

In fact, the global green hydrogen market is projected to surpass the value of the liquid natural gas trade by 2030 and grow further to reach a staggering USD 1.4 trillion by 2050, according to Deloitte. Existing applications in heavy industry and transport will be the biggest demand drivers until 2030, followed by a wider uptake in new applications by 2050.

With a strategic location, abundant resources, and robust energy infrastructure, Malaysia is strongly positioned to become a leading hydrogen exporter in Southeast Asia and beyond. Steered by comprehensive and coordinated policies, the nation is advancing an integrated hydrogen economy that converts ambition into investable, export-ready opportunities.

Charting a course for Malaysia’s hydrogen economy

Today, almost all hydrogen produced is “grey” hydrogen or hydrogen produced from unabated fossil fuels, as they are the most economically viable form of hydrogen. In contrast, “green” hydrogen is currently more expensive as it is produced using renewables like solar or hydroelectric power, without emitting any CO2 in the process.

But as the cost of renewables continues to fall, green hydrogen production is expected to reach a cost parity with other clean energy sources within the next decade. In the interim, capturing CO2 released during grey hydrogen production with carbon capture and storage (CCS) – a.k.a. “blue” hydrogen – serves as a critical steppingstone.

Low-emissions hydrogen accounted for less than 1 million tonnes (Mt) from the total 97Mt of global hydrogen demand in 2023, but momentum is growing as major projects take shape. After 2025, all new hydrogen production is expected to be clean hydrogen, and by 2050, clean hydrogen demand will reach 125 – 585Mt per year, based on McKinsey estimates.

For Malaysia, clean hydrogen presents a home-grown opportunity to effectively monetise renewable capacity while supplying decarbonisation solutions to power, mobility and industry. Which is why the National Energy Transition Roadmap (NETR) emphasised hydrogen as one of the six critical levers for Malaysia’s net-zero transition.

For Malaysia, clean hydrogen presents a home-grown opportunity to effectively monetise renewable capacity

The subsequent Hydrogen Economy and Technology Roadmap (HETR) deepens this focus with a clear blueprint for scaling the hydrogen supply chain as well as attracting investors. The impact is already visible, with pilot initiatives laying the groundwork for Malaysia’s first wave of export-ready clean hydrogen ventures.

Sarawak as the frontrunner for green hydrogen in ASEAN

The clearest signs that Malaysia’s hydrogen ambitions are becoming reality can be found in Sarawak, which is fast emerging as a regional hub for green hydrogen production. Blessed with long coastlines, rivers, and heavy rainfall to harness an abundance of hydropower, the State is defying challenges that might cloud the clean fuel’s prospects elsewhere.

Green hydrogen is made through electrolysis, which relies on a cheap and steady supply of electricity as well as plenty of fresh water to separate hydrogen (H2) from oxygen (O2). Sarawak stands out for having the highest hydropower capacity among similar regions, providing a better renewable fuel choice for green hydrogen production than solar or wind.

Sarawak Economic Development Corporation (SEDC Energy), the state subsidiary responsible for developing Sarawak’s hydrogen value chain, will soon commence a pilot project to export hydrogen to Singapore. This will mark the first green hydrogen molecules produced in Sarawak to be exported, building the foundation for a regional trade ecosystem.

What’s more, two flagship projects in Bintulu – H₂biscus and H₂ornbill – have just completed their front-end-engineering design (FEED), with operations set for 2028/29. Assuming both projects gain approval, they will collectively produce 240,000 tonnes of green hydrogen annually for export to Japan and South Korea.

This will exceed Saudi Arabia’s NEOM green hydrogen plant, touted in 2023 as the world’s largest approved facility that can produce up to 219,000 tonnes annually. Crucially, utilities in Osaka and Busan have already committed offtake agreements, demonstrating the bankability of large-scale hydrogen export pipelines.

Building on these successes, Sarawak could soon outflank Australia as Northeast Asia’s preferred pitstop for trading green molecules.  With growing recognition, the State could even play an influential role in driving global clean hydrogen developments, spanning harmonised regulations, cross-border infrastructure and new value chains.

Building a commercially viable clean hydrogen ecosystem at scale

Beyond Sarawak, other national-level projects are moving ahead to meet the targets laid out by the HETR and NETR. This includes Malaysia’s first large-scale green hydrogen hub in Terengganu, jointly spearheaded by Tenaga Nasional Berhad (TNB) and Petronas, that will support an integrated end-to-end value chain while enhancing grid infrastructure.

Overall, the HETR’s implementation would enable Malaysia to scale green hydrogen production to 16Mt annually by 2050, unlocking export revenues worth approximately RM905 billion. What’s more, it would add more than 200,000 potential job opportunities at the same time achieving up to 15% in GHG emissions reduction.

Despite this immense potential, hydrogen adoption is not without challenges in terms of its technical and commercial feasibility. As with any nascent technology, support is required from both the supply-side and demand-side to address existing risks and spur the widespread deployment of clean hydrogen across industries.

For instance, the recently launched Mobile Hydrogen Refueling Station (MHRS) in Putrajaya aims to expedite the adoption of hydrogen as a clean fuel in the mobility sector. The RM15 million pilot is capable of dispensing 50 kgs of hydrogen daily through a small-scale station, supporting the viability of hydrogen fuel cell electric vehicles in Malaysia.

Meanwhile, Sarawak is the first city outside China to implement a hydrogen-powered autonomous rail transit (ART), with future plans for waste collection trucks and even boats. In logistics, MISC and Gentari are jointly exploring integrated shipping and floating storage solutions to safely and cost-effectively transport green hydrogen derivatives.

Going forward, the highly anticipated carbon tax on the iron, steel, and energy industries starting in 2026 will drive more businesses to consider hydrogen in their decarbonisation pathways. Targeted government incentives and grants can further promote the commercial viability of hydrogen-based projects as an encouraging source of economic growth.

Making hydrogen society a reality in Malaysia and beyond  

Malaysia’s hydrogen journey is shifting from aspiration to execution, marrying its abundant renewable endowments with deliberate policy design to become a leading player in the global low-carbon economy. Its distinct advantage lies in packaging hydrogen to be market-ready, aligning climate commitments with commercial imperatives.

The test now will be endurance: scaling grid infrastructure, mobilising long-term capital, and cultivating market resilience to withstand volatility in global energy demand. Managed with foresight, lessons from Malaysia’s hydrogen leap will feed into the nascent global hydrogen ecosystem, anchoring clean energy trade and shaping the contours of a new energy order.