Sarawak is positioning itself as a future exporter, yet the state’s hydrogen ambitions remain constrained by structural and economic hurdles. Despite policy alignment and hydropower advantages, short-term investor caution and skill shortages continue to inhibit momentum.
Datuk Dr Hazland Abang Hipni, Deputy Minister for Energy and Environmental Sustainability, addressed these limitations candidly during a State Legislative Assembly session, noting that while hydrogen is integral to Sarawak’s Post-Covid-19 Development Strategy 2030, it remains an emerging sector struggling to compete with the entrenched oil and gas industry.
Investor appetite is skewed towards sectors offering quicker returns. With Sarawak’s economy still tethered to fossil fuels—oil and gas comprised approximately 27% of Malaysia’s export revenue in 2023—hydrogen’s capital intensity and longer ROI timelines pose a deterrent. Unlike oil infrastructure, hydrogen value chains require entirely new production, storage, and distribution systems. The cost of electrolyser installation alone typically ranges between US$800 to US$1,200 per kW, excluding transport and storage costs.
Sarawak’s strength lies in its abundant hydropower capacity, derived from large-scale dam projects such as Bakun and Murum. This gives it a competitive edge in generating cost-effective green hydrogen. Lower industrial tariffs—among the most competitive in Southeast Asia—could support economically viable electrolysis. Still, realising this potential depends on scale and long-term offtake agreements, neither of which are firmly in place.
The H2biscus and H2ornbill initiatives, the state’s flagship hydrogen projects, illustrate early-stage activity but stop short of mass production. H2biscus, a joint effort between South Korean and Malaysian entities, aims to export clean hydrogen and ammonia by 2027, but has yet to confirm final investment decisions (FIDs). Meanwhile, H2ornbill is still in its feasibility stage. These projects signal strategic intent but also highlight the nascency of hydrogen infrastructure in Sarawak.
Labour readiness is another persistent challenge. Hydrogen production, especially via electrolysis and ammonia synthesis, demands high technical competence across engineering, safety, and system integration. According to Dr Hazland, Sarawak lacks a ready pool of skilled workers, and training initiatives will take years to close the gap. In contrast, oil and gas sectors offer faster job placement and more mature training ecosystems.
Even as Sarawak commits to reducing coal dependency—designating the Balingian plant as its last coal-fired project—the pace of clean energy integration must contend with grid stability. The state’s gas roadmap, developed in collaboration with Sarawak Energy and Petros, reflects a hedging strategy: balancing renewable investment with thermal power to meet growing industrial and domestic demand.
This dual-track approach is pragmatic, yet it slows hydrogen’s trajectory toward competitiveness. Without significant offtake from either domestic industry or export markets, large-scale hydrogen infrastructure remains a fiscal risk. The current global green hydrogen cost—averaging US$4–6/kg—is still uncompetitive against grey hydrogen (US$1–2/kg) unless supported by subsidies, carbon pricing, or firm contractual demand.
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