He predicts that cheap hydrogen could change where data centers are built

The auto industry has struggled to adopt hydrogen on a large scale, but industrial users and data centers may have better luck.

Vema Hydrogen signed a deal in December to supply data centers in California, and now it has completed a pilot project in Quebec to supply the energy industry with the hydrogen it produces deep underground.

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

“To supply the domestic market in Quebec, which is about 100,000 tons per year, you would need 3 square kilometers, which is nothing,” Vema CEO Pierre Levin told TechCrunch.

FEMA’s first pilot well will produce several tons of hydrogen per day, and next year, it plans to drill its first commercial well, which will reach a depth of 800 meters underground. FEMA expects to produce hydrogen from the first wells for less than $1 per kilogram, a widely used benchmark for clean hydrogen.

Most hydrogen today is made through a process known as steam methane reforming (SMR), where steam is used to separate hydrogen molecules from methane from natural gas. It consumes a lot of energy, and both the steam-making process and the chemical reaction itself release carbon dioxide.

There are less polluting sources of hydrogen, but they tend to be more expensive. Hydrogen from small and medium reactors costs between 70 cents and $1.60 per kilogram, according to the International Energy Agency. Carbon capture from small to medium models can add about 50% to these prices, while the cleaner process, which uses carbon-free electricity to power an electrolyser, drives costs up several times.

Geocatalytic hydrogen, or “engineered metallic hydrogen,” as FEMA calls it, is one of the cleanest sources of hydrogen, according to the Oxford Institute for Energy Studies.

Once FEMA improves its technology, Levin expects it will produce hydrogen for less than 50 cents per kilogram. At this price, the hydrogen it produces will be cheaper than any other source on the market.

Because the rocks it targets are widely distributed, Levin said the company will drill wells near businesses that need power, including data centers. California, for example, has some of the largest formations of ophiolite, a type of iron-rich rock pushed up from the ocean floor by plate tectonics.

If Vema can supply hydrogen at the price it expects, a flaw in the geology could turn California into a mecca for data centers. “You have a lot of data centers trying to get some basic carbon-free electricity,” Levin said. “We have strong traction with them.”