Vema predicts cheap hydrogen could change where data centers are built

While the auto industry has struggled to implement hydrogen at scale, industrial users and data centers may be in luck.

Vema Hydrogen signed a contract to supply data centers in California in December and has now completed a pilot project in Quebec to power industry with hydrogen produced deep underground.

The startup drills wells in areas with certain types of iron-rich rock that release hydrogen gas when treated with water, heat, pressure, and some catalysts. Vema then pulls the hydrogen to the surface and sells it to industrial users.

“To supply the local market in Quebec of about 100,000 tons per year, we need three square kilometers, which is not a lot,” Vema CEO Pierre Levin told TechCrunch.

Vema’s first test well is expected to produce several tons of hydrogen per day, and the company plans to drill its first commercial well, which will reach 800 meters underground, next year. Vema expects to produce hydrogen for less than $1 per kilogram from its first well, which is widely used as a benchmark for clean hydrogen.

Most of today’s hydrogen is produced by a process known as steam reforming of methane (SMR). This process uses steam to separate hydrogen molecules from methane from natural gas. This is energy intensive and produces carbon dioxide, both in the process of producing steam and in the chemical reaction itself.

While less polluting hydrogen sources exist, they tend to be more expensive. According to the IEA, the price of hydrogen from SMR is between 70 cents and $1.60 per kilogram. Capturing carbon from SMRs can increase prices by about 50%, while the cleanest processes, which use zero-carbon electricity to power electrolyzers, increase costs several times.

Stimulated geological hydrogen, or “artificial mineral hydrogen” as Vema calls it, promises to be one of the cleanest sources of hydrogen, according to the Oxford Energy Research Institute.

Once Vema refines its technology, Levin expects it can produce hydrogen for less than 50 cents per kilogram. At that price, Vema’s hydrogen will be cheaper than any other hydrogen source on the market.

Because the rocks Vema targets are spread out over a wide area, the company will drill wells near data centers and other businesses that need power, Levin said. For example, California is home to some of the largest formations of ophiolite, a type of iron-rich rock that was pushed up from the ocean floor by plate tectonics.

If hydrogen can be delivered at the prices Vema predicts, geological peculiarities could turn California into a data center mecca. “There are a lot of data centers that are trying to get baseline decarbonized power,” Levin said. “We have very strong traction with them.”