Can Malaysia clean up its act using green hydrogen to meet its ambitious climate goals?

It is efficient, plentiful and might just be the quickest route to cleaning up Malaysia's gas-and-coal heavy energy mix, but experts warn the march of green hydrogen is hindered by the spectacular costs of set-up in a country already lagging behind on its climate goals.

Malaysia has set an ambitious target of raising its share of renewable energy in its total installed capacity to 40 per cent by the end of the next decade, as it looks to hasten its energy transition from fossil fuels and meet its commitments made at the UN's Climate Change Conference.

This week, the Asian Development Bank added fresh urgency to Asia's quest to avoid climate calamity, in a report warning that the region needs to virtually double the cash it spends on renewables and slash subsidies to its dirty energy producers.

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In Malaysia, renewable energy accounts for 25 per cent of the country's total installed capacity, according to government data, and a new programme is under development to expand solar installations onto the rooftops of public buildings, hospitals, schools and universities.

But there are fears the pace of change is too slow to meet soaring demand in growing cities.

"Solar power is a no-brainer, but you need land to set up plants [to scale up power generation]," Shamsul Bahar Mohd Nor, the group chief executive of the Malaysian Green Technology and Climate Change Corporation (MGTC), told This Week in Asia.

"We also need to consider the amount of direct sunlight available. In Sabah and Sarawak you can expect an average of 4.7 hours a day, but in the south of the peninsula we're looking at three hours."

Instead, he believes the solution lies in the most abundant element in the universe - hydrogen - specifically green hydrogen derived from renewable energy sources.

Shamsul says it is the best option for Malaysia to generate power at scale to at least partly replace the natural gas and coal that are currently the country's energy mainstays.

"Hydrogen is a good solution because you can produce it in situ," he explained. "If you were to use solar energy to produce hydrogen as a source of energy, it wouldn't make sense as you'd lose the energy balance. But now there are other means to produce hydrogen. Instead of just producing electricity, we can use hydrogen to power whole communities."

Shamsul said hydrogen presents a feasible solution, particularly in the short term for the country's many communities yet to connect to the national grid.

Malaysia's Energy Commission said the country had around 32 gigawatts of available capacity as of 2019 - the last year figures were released - with natural gas and coal accounting for well over 70 per cent of the total.

But nearly all of the electricity supplied to end users was produced using fossil fuels.

Renewable energy accounted for just 5 per cent of Malaysia's total final energy consumption that year, according to World Bank data.

Outside solar, the Southeast Asian nation has limited options for wind power while building new dams for large-scale hydroelectric power generation could come with large environmental costs, Shamsul said.

On its own, hydrogen does not generate electricity. As a "carrier", it needs to go through a process known as electrolysis to separate a hydrogen atom from its electron, which in turn creates a current.

The energy generated can then be stored in batteries, in a process producing water as a by-product.

Last year, a pilot project was launched in Sarawak state in Malaysian Borneo where a green hydrogen installation was set up to provide uninterrupted power for a rural clinic serving some 2,000 people in the Long Loyang subdistrict.

Generating power from hydrogen requires an external power source to get the process of electrolysis going. In the case of the Long Loyang installation, it uses solar power.

Sarawak is at the forefront of Malaysia's foray into the hydrogen economy, with a hydrogen production and packing facility to begin operations later this year in the port district of Bintulu. But this was possible largely due to the state's energy surplus from its extensive hydroelectric network.

Experts warn that building the infrastructure from scratch is a far more daunting prospect.

At a recent seminar on the hydrogen economy in Kuala Lumpur, one contributor estimated that it would cost around US$750 million to set up a large-scale green hydrogen power facility that harnesses tidal power off the east coast of Sabah, Sarawak's northern neighbour.

"Malaysia still lacks the resources - input energy source, waste management protocols, regulatory framework - to be considering green hydrogen as a feasible alternative in the short to medium term," said Nithi Nesadurai, regional coordinator for Climate Action Network Southeast Asia (CANSEA).

Proponents of hydrogen power inevitably point to Japan, arguably the only nation to have made significant moves to expand the use of the element as a national strategy. The 2020 Tokyo Olympics, which was delayed by a year due to the Covid-19 pandemic, was fully powered by hydrogen.

But Japan's strategy focused on utilising "grey" and "blue" hydrogen - hydrogen fuels derived from fossil fuels - which do little to reduce emissions, instead of finding ways to bring down the cost of renewable power generation, according to Tokyo-based non-profit think tank Renewable Energy Institute.

And the cost of producing green hydrogen is directly linked to the cost of generating renewable energy, CANSEA's Nithi said.

"Presently green hydrogen remains uneconomical and unproven and serves as a dangerous distraction from the urgent need to transition to renewable energy for developing countries," he said. "Especially when the price of solar keeps reducing and is demonstrably lower than coal."

The International Energy Agency estimates that green hydrogen production costs may fall to US$1.30 to US$3.30 per kilogram by 2060, nearly 60 per cent cheaper than 2019 rates and potentially cheaper than blue or grey hydrogen derived from natural gas or coal.

But to achieve competitive pricing for green hydrogen, governments and corporations need to start investing in subsidies, technology and ecosystems now, MGTC's Shamsul said.

"It is still expensive because demand is low. If demand is high and we reach economy of scale, you can bring the cost down," Shamsul said.

If hydrogen is to be a serious option for Malaysia, experts say a long-term plan is needed.

Renard Siew, a climate change adviser with the Centre for Governance and Political Studies in Kuala Lumpur, says hydrogen will require a more targeted approach to earn the bang Malaysia wants for its buck.

This includes power generation to either supplement the national grid or establish smaller facilities to service off-grid areas, public transport and meet the demands of energy-hungry industries such as refining, chemical production and steelmaking.

"Malaysia could also consider exporting green hydrogen to other countries, particularly those that have set ambitious targets for decarbonisation," Siew said.

Despite the challenges, Shamsul and the MGTC are undeterred.

Hydrogen is officially a part of the government's National Energy Policy for 2022 to 2040. A national hydrogen road map is expected to be unveiled sometime later this year, and Shamsul is bullish over Malaysia's hydrogen potential.

"The plan is to have Putrajaya become the first hydrogen city in Malaysia," Shamsul said, referring to the country's administrative capital.

"We still have to figure out how to reduce the cost of hydrogen production ... but I'm confident we can see it happen within our lifetime. We just have to get the naysayers to agree."

This article originally appeared on the South China Morning Post (SCMP).

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