Southeast Asia’s hydrogen transition faces steep cost and infrastructure barriers

Southeast Asia's push to decarbonize heavy industries using low-carbon hydrogen could face major economic and infrastructure obstacles as green hydrogen remains significantly more expensive than conventional production pathways, according to a new study examining hydrogen supply systems across the ASEAN region.

Published in the journal Resources, the research found that while hydrogen is increasingly viewed as critical for reducing emissions in sectors such as refining, fertilizers, chemicals, and steelmaking, the transition will depend heavily on cheaper renewable electricity, large-scale infrastructure expansion, and stronger project governance.

The study, titled "On the Economics of Low-Carbon Hydrogen Production for Large-Scale Industrial Facilities in Southeast Asia," compared four major low-carbon hydrogen pathways for ASEAN industries and found that blue hydrogen currently remains more cost-competitive than green hydrogen under most regional conditions.

Researchers model four hydrogen pathways for ASEAN industries

The study examined four representative pathways for supplying low-carbon hydrogen to large industrial facilities in Southeast Asia. These included blue hydrogen produced through steam methane reforming combined with carbon capture and sequestration, on-site green hydrogen generated using solar-powered electrolysis, remote green hydrogen production requiring hydrogen transport infrastructure, and remote solar electricity transmission combined with on-site electrolysis.

The analysis was designed to address a major research gap in ASEAN hydrogen economics. While previous studies have explored global hydrogen markets or national export opportunities, few have conducted side-by-side economic comparisons of hydrogen production and delivery systems specifically tailored for Southeast Asia's industrial sector.

Hydrogen is increasingly viewed as one of the few realistic decarbonization options for hard-to-abate sectors such as ammonia, methanol, refining, and steel production because it can function both as a chemical feedstock and energy carrier. Unlike electricity, hydrogen can also be stored and transported over industrial supply systems.

However, the study notes that nearly all hydrogen produced globally today still comes from fossil fuels, mainly natural gas and coal. Around 96% of the world's annual hydrogen production remains carbon-intensive, despite growing international pressure to transition toward low-carbon alternatives.

The paper identified major infrastructure challenges for green hydrogen development in ASEAN. Supplying hydrogen to medium-sized ammonia or methanol facilities would require roughly 75,000 to 85,000 tonnes of hydrogen annually, demanding massive renewable electricity generation capacity and gigawatt-scale electrolyzers.

According to the study, a single 2-gigawatt solar photovoltaic installation may require up to 20 square kilometers of land area. Because such land availability is often limited near industrial zones, many green hydrogen projects would require either long-distance electricity transmission systems or hydrogen transport infrastructure connecting remote renewable energy sites to industrial facilities.

ASEAN electricity systems remain heavily dependent on fossil fuels, meaning green hydrogen can only achieve low-carbon status if dedicated renewable electricity sources are used instead of average grid electricity mixes.

Blue hydrogen remains cheaper while green hydrogen faces electricity cost pressures

Blue hydrogen currently holds a substantial economic advantage over green hydrogen in Southeast Asia because renewable electricity and electrolyzer systems remain expensive across much of the region. Using multiple cost scenarios, the researchers estimated blue hydrogen production costs ranging from roughly US$1.47 to US$3.01 per kilogram depending on natural gas prices, carbon capture costs, and future capital expenditure reductions.

Green hydrogen economics, meanwhile, were found to depend heavily on electricity pricing, electrolyzer utilization rates, financing costs, and renewable energy availability. Electrolysis-based hydrogen production requires enormous amounts of electricity, making power prices the single most important factor affecting overall hydrogen costs.

The paper reviewed previous ASEAN hydrogen modelling studies showing that green hydrogen production costs currently range from approximately US$8.4 to US$12.9 per kilogram under today's market conditions. By 2050, technological improvements and falling renewable electricity prices could potentially reduce those costs to around US$2.7 to US$4.1 per kilogram.

Solar photovoltaic electricity costs also vary widely across ASEAN economies. Indonesia currently faces some of the highest estimated solar electricity costs in the region, while countries including Myanmar, Thailand, Cambodia, and Vietnam have comparatively lower projected renewable electricity prices.

The researchers found that green hydrogen becomes economically competitive only under several favorable conditions simultaneously, including low electricity prices, lower electrolyzer capital costs, high carbon prices, and elevated natural gas prices. The paper noted that electrolyzer costs may need to decline by roughly 60% before green hydrogen can compete consistently with fossil fuel-based hydrogen systems.

The study also evaluated how low-carbon hydrogen would affect industrial product costs. For ammonia production, the researchers found that blue hydrogen-based ammonia remains cheaper than green ammonia under most current conditions. Green ammonia only becomes competitive when electricity prices fall substantially and stronger carbon pricing systems are introduced.

Methanol production showed similar trends. Methanol produced using natural gas combined with carbon capture remained more competitive than green methanol when electricity prices exceeded key thresholds identified in the study.

Steel production was identified as one of the most challenging sectors for hydrogen economics because hydrogen-based direct reduced iron systems consume significantly more electricity than conventional gas-based steelmaking technologies. This sharply increases both production and infrastructure costs.

Transport systems and project governance could shape ASEAN's hydrogen future

The paper identified transport infrastructure and governance capacity as some of the largest long-term barriers to Southeast Asia's hydrogen transition. The researchers found that transporting hydrogen itself can become nearly as expensive as producing it because hydrogen requires specialized compression systems, storage facilities, pipelines, and transport infrastructure.

The study examined both gaseous hydrogen pipelines and compressed hydrogen trucking systems. Pipeline transport was found to be technically feasible and economically preferable for large-scale industrial hydrogen movement over medium and long distances. Existing hydrogen pipeline networks in the United States and Europe already demonstrate the technical viability of industrial hydrogen transport systems.

Compressed hydrogen trucking, however, was identified mainly as a temporary or smaller-scale solution because costs increase substantially as hydrogen demand rises.

Among others, a key finding was that transmitting renewable electricity may often be cheaper than transporting hydrogen itself. This suggests ASEAN countries may gain greater economic benefits from strengthening regional electricity grids and renewable power interconnections rather than immediately investing in extensive hydrogen transport systems.

The researchers also highlighted concerns regarding Southeast Asia's record in implementing large infrastructure projects. The paper noted that many billion-dollar public-private projects in developing economies frequently face delays, procurement inefficiencies, governance problems, and major cost overruns. To account for these risks, the study incorporated regional cost buffers of up to 30% into future hydrogen infrastructure projections.