Southeast Asia Hydrogen Generation Market Size & Share Analysis - Growth, Trends, and Forecasts (2024 - 2029)

• Grey hydrogen is the most common form of hydrogen production, and it uses natural gas (via stream methane reformation) or coal (via coal gasification) to produce hydrogen. The process of hydrogen production is a carbon-intensive process, as significant carbon emissions are released into the atmosphere during these production processes.

• According to the Global CCS Institute, approximately 120 Mt of hydrogen is produced annually, of which approximately 98% of current hydrogen production is from the reformation of methane or the gasification of coal or similar materials of fossil-fuel origin (e.g., petcokeor asphaltene). A similar trend is expected to continue in the Southeast Asian region during the forecast period.

• As grey hydrogen is manufactured from fossil fuels using mature technologies, it has one of the lowest manufacturing costs, which other alternatives, such as blue and green hydrogen, cannot compete with. It has been estimated that in regions with low fossil fuel prices, such as the Middle East, Russia, and North America, the cost of grey hydrogen production can dip as low as USD 1/kg H2, while in other regions, such as Europe and Southeast Asian region, the cost is well below USD 2/kg H2.

• The region's attempt to minimize emissions, mainly from heavy industries like petrochemicals, iron and steel, and power generation, are resulting in measures to limit grey hydrogen production and usage. As a result, investments in the industry are fast declining, and capacity growth is likely to be severely limited during the forecast period. Despite lowering costs for blue and green hydrogen technologies, grey hydrogen production is predicted to remain cost-competitive with both types over the forecast period.

• The chemical industry now employs hydrogen gas in relatively limited quantities. Grey hydrogen is used mainly in the steel industry. One kilogram of hydrogen requires 50-55 kWh to generate, while a ton of steel requires 50 kg of hydrogen. Steel output is expected to increase by 2022, with hydrogen playing an important role. Hydrogen helps to reduce the cost of steel.

• Furthermore, in August 2023, Malaysian steelmaker Eastern Steel Sdn Bhd began operation of its newly developed blast furnace, which is expected to increase the company's annual steel production capacity to 2.7 million tons from 700,000 tons. The company has been exporting 40 percent of its steel products to other Southeast Asian countries, including Thailand and Indonesia. The company also intends to install an additional blast furnace with an annual production capacity of 1.3 million tons within the next few years, further expanding its production capacity to 4 million tons. All these types of projects are likely to increase steel production and are expected to increase the demand for hydrogen across the region during the forecast period.

• Therefore, owing to such factors, the grey hydrogen segment is likely to significantly impact the hydrogen generation market during the forecast period.