The automotive industry has struggled to adopt hydrogen at scale, but industrial users and data centers might have better luck.

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

The startup drills wells in regions with specific types of iron-rich rock that release hydrogen gas when treated with water, heat, pressure, and some catalysts.

Vema then draws the hydrogen to the surface and sells it to industrial users.

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

Vema’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 800 meters into the earth.

Vema 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 by a process known as steam reforming of methane (SMR), in which steam is used to break hydrogen molecules off methane from natural gas.

It’s energy intensive, and both the process to make steam and the chemical reaction itself release carbon dioxide.

Less polluting sources of hydrogen exist, but they tend to cost more.

Hydrogen from SMR costs between 70 cents and $1.

60 per kilogram, according to the IEA.

Capturing carbon from SMR can add around 50% to those prices, while the cleanest process, which uses zero carbon electricity to power an electrolyzer, drives costs up several fold.

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Boston, MA | REGISTER NOW Stimulated geologic hydrogen, or “engineered mineral hydrogen,” as Vema calls it, promises to be one of the cleanest sources of hydrogen, according to the Oxford Institute for Energy Studies.

Once Vema has refined its techniques, Levin expects it to produce hydrogen for less than 50 cents per kilogram.

At that price, Vema’s hydrogen would be cheaper than any other source on the market.

Because the rocks that Vema is targeting are widely distributed, Levin said the company will drill wells close to companies that need power, including data centers.

California, for example, has some of the largest formations of ophiolite, an iron-rich type of rock that was pushed up from the ocean bottom by plate tectonics.

If Vema can deliver hydrogen at the price it’s forecasting, then a quirk of geology could turn California into a mecca for data centers.

“You have a ton of data centers who are trying to get some baseline, decarbonized electricity,” Levin said.

“We have very strong traction with them

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