Green hydrogen might have its moment sooner than previously thought: As gas prices in Europe continue to skyrocket due to Russia’s war in Ukraine, green hydrogen has suddenly emerged as a viable and lucrative substitute that has drawn interest from governments and private players who are moving fast to bring the alternative energy source into the mainstream, Bloomberg reports.

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Record high gas prices sparked the scramble for green hydrogen: European countries have long planned to increase green hydrogen’s place in their energy mixes but the process has been slow. It wasn’t until gas prices began rising in Europe last year that the case for green hydrogen was solidified. Prices have soared 450% over the past year on the back of tightening global supply and, most recently, the conflict in Ukraine.

And, of course, war: The problem of heavily depending on Russian hydrocarbons has been thrown into sharp relief this year as tensions have soared following Moscow’s invasion of Ukraine. Russia supplies 45% of the EU’s gas imports and some 40% of its total gas consumption, according to the IEA. Some 93% of hydrogen producers, users and investors polled by BloombergNEF last month said that they project the war to accelerate the development of the green hydrogen industry.

The industry has long been held back by high costs, but this is expected to change:

Green hydrogen is produced using a process known as electrolysis where H2O (water) is separated into H (hydrogen) and O (oxygen), enabling hydrogen to be extracted. Only 0.1% of the world’s hydrogen supply is actually green, which is largely due to the fact that the process is more expensive than its non-green equivalent. Now, by virtue of soaring gas prices, green hydrogen has become the more cost-effective option. Adding to that is the rising price of carbon in the EU, which has nearly doubled in the past year, making the green version even less expensive by comparison.

Government policy is also helping usher in the transition: The EU has now doubled green hydrogen targets, and wants to have 80 GW of capacity by the end of the decade, up from less than 1 GW currently. The UK is doing likewise, and has set a goal of producing 5 GW of power from electrolyzers by 2030.

Companies are already pouring bn’s into production plants and infrastructure projects to facilitate the transition: Australian iron ore producer Fortescue Metals Group have agreed to a USD 50 bn project to develop the hydrogen supply chain with German utilities company E.On while hydrogen infrastructure investment platform Hy24 has earmarked some USD 1.6 bn for various projects. “The economics are moving in favor of green hydrogen. The projects we’re seeing look more bankable from a finance perspective now,” Ivan Pavlovic, executive director at French bank Natixis CIB, told Bloomberg.

Here in Egypt interest in green hydrogen is picking up steam: Two green hydrogen plants have been signed off on in recent months. Norway’s Scatec, Fertiglobe and Orascom Construction will build a 100-MW facility while Emirati renewable energy company Masdar will work with Hassan Allam Utilities to establish a facility capable of producing 480k tons of green hydrogen a year.

And there’s more to come in the lead up to COP27: The EU is gearing up to sign MoUs on green hydrogen and ammonia production during the COP27 summit in November, EU Executive Vice-President Frans Timmermans told Oil Minister Tarek El Molla last month. Timmermans also discussed a plan to develop a “Mediterranean Green Hydrogen Partnership,” for which little is known beyond it being something akin to “the East Mediterranean Gas forum, but for green hydrogen.”

This is all part of a larger policy push towards green hydrogen adoption: President Abdelfattah El Sisi last year issued a directive to establish Egypt’s green hydrogen strategy, with an eye towards launching an initial phase of projects that could be worth USD 3-4 bn. These ambitions are being supported by tax incentives that would allow companies involved in a number of key areas that include green hydrogen and green ammonia production, storage and export to deduct 30-50% of their investment costs from their tax bills.