Hydrogen Demand and Supply in ASEAN’s Industry Sector

Edited by Alloysius Joko PurwantoRidwan Dewayanto Rusli Hydrogen Demand and Supply in ASEAN’s Industry Sector:Current Situation and the Potential of a Greener Future © Economic Research Institute for ASEAN and East Asia, 2024Published in January 2024 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted inany form by any means electronic or mechanical without prior written notice to and permission from ERIA. The findings, interpretations, conclusions, and views expressed in their respective chapters are entirely those ofthe author/s and do not necessarily reflect the views and policies of the Economic Research Institute for ASEANand East Asia, its Governing Board, Academic Advisory Council, or the institutions and governments they represent.Any error in content or citation in the respective chapters is the sole responsibility of the author/s. Material in this publication may be freely quoted or reprinted with proper acknowledgement. Cover Art by Citra and ArtmosphereBook Design by ERIA and ArtmosphereNational Library of Indonesia Cataloguing-in-Publication Data ISBN 978-602-5460-54-8 Foreword Climate change and the energy transition have made research and development in clean energy apriority as countries aim to reach net zero in the next decades. Hydrogen, singled out as a possiblesource of energy in the not-too-distant future, has emerged as a primary focus of discussion on thetransition to sustainable energy. It is widely used for many applications including refining ammonia andpetroleum, and the production of methanol and synthetic fuels. These applications accounted for morethan 93% of global hydrogen consumption in 2020. In the Association of Southeast Asian Nations (ASEAN) countries, currently, hydrogen is used mostlyas feedstock for fertiliser in agriculture, and in methanol production, the steel industry, and oil refining.However, most hydrogen in use in the world today is not ‘green’ or ‘low carbon’ hydrogen, which isproduced from renewable resources. Most ASEAN Member States have realised the importance and potential of hydrogen as an alternativeto fossil fuels and that can be employed across industries, power generation, and transport. Therefore,these countries have begun implementing their own hydrogen strategies to initiate the developmentof the hydrogen economy that will become an essential and crucial aspect of their energy transitionprocess in the future. With this research, the Economic Research Institute for ASEAN and East Asia (ERIA) tries to show thepotential role of hydrogen in the industry sectors in ASEAN in the context of decarbonisation, an areathat has hitherto received limited analysis and remains largely unexplored. ASEAN Member Statesshould have an in-depth look at the findings of this research that can be considered as importantelements to complete and to improve their current hydrogen strategies. Tetsuya Watanabe President, Economic Research Institutefor ASEAN and East Asia Preface Recognising that the current utilisation of hydrogen in the Association of Southeast Asian Nations(ASEAN) countries is predominantly confined to the industrial sector, primarily through conventionalsteam methane reforming with high carbon intensity, this study seeks to provide insights for an optimalhydrogen market development strategy in the region. The significance of this strategy is paramount,given the pivotal role hydrogen is poised to play in ASEAN’s energy transition towards achieving carbonneutrality by the middle of the century. The specific goal of this study is to provide a set of policy recommendations for policymakers in theASEAN Member States to accelerate the process of obtaining lower carbon intensity of hydrogensupply in the industry sector, as part of an optimal hydrogen market development strategy for theASEAN region. This goal is attained via two pathways. First, by understanding hydrogen use in the ASEAN countriesfor the last 5 to 10 years and its current and future demand and supply to the industry sector, andsecond by analysing how the supply of hydrogen in the ASEAN countries can become greener or lesscarbon intensive. This includes an analysis of future production, storage, transport costs, and capacitydevelopment along the different low-carbon hydrogen production routes. To accelerate the process of obtaining low-carbon hydrogen supply in the industry sector, this studyrecommends the governments of ASEAN Member States to proceed with the following:•Continue to increase renewable electricity generation’s share and reduce transmission costs. •From the perspective of sectoral, regional, and international political economy, formulate strategiesand manage the horizontal and vertical institutional interactions to gain maximum support for thegreening of hydrogen production for key industrial applications in the ASEAN region.•Elaborate policies on how to combine public sector co-financing, subsidies, a