Vema predicts cheap hydrogen could change where data centers are built

The automotive sector has long struggled to adopt hydrogen at a meaningful scale, but industrial customers and data centres may be better positioned to make it work.

Vema Hydrogen signed an agreement in December to supply hydrogen to data centres in California, and has now completed a pilot project in Quebec to power industrial facilities using hydrogen produced deep underground.

Vema’s approach involves drilling wells in areas with specific iron-rich rock formations that naturally release hydrogen gas when exposed to water, heat, pressure, and specific catalysts. The company then captures the hydrogen, brings it to the surface, and sells it to industrial customers.

“To supply the Quebec local market, which is about 100,000 tons per year, you would need 3 square kilometres, which is nothing,” said Pierre Levin, CEO of Vema, in an interview with TechCrunch.

Vema’s first pilot well is expected to produce several tons of hydrogen per day. Next year, the startup plans to drill its first commercial well, reaching depths of roughly 800 meters. The company believes hydrogen from these initial wells can be produced for less than $1 per kilogram, a commonly cited benchmark for clean hydrogen production.

Today, most hydrogen is produced via steam methane reforming (SMR), a process that uses steam to produce hydrogen from methane derived from natural gas. SMR is energy-intensive, and both steam generation and the chemical reaction emit carbon dioxide.

Cleaner alternatives to SMR exist, but they typically cost more. According to the International Energy Agency, hydrogen produced via SMR generally costs between 70 cents and $1.60 per kilogram. Adding carbon capture to SMR can increase costs by roughly 50%, while the cleanest method—using zero-carbon electricity to power electrolysers- drives prices several times higher.

Vema’s process, known as stimulated geologic hydrogen or “engineered mineral hydrogen,” is considered one of the cleanest hydrogen sources, according to the Oxford Institute for Energy Studies.

Once its methods are fully refined, Levin believes Vema will be able to produce hydrogen for under 50 cents per kilogram. At that price point, Vema’s hydrogen would be cheaper than any other source currently available on the market.

Because the iron-rich rock formations Vema targets are widely distributed, Levin said the company intends to drill wells near major energy users, including data centres. California, for instance, contains some of the world’s most extensive ophiolite formations — iron-rich rock that was forced upward from the ocean floor through tectonic activity.

If Vema succeeds in delivering hydrogen at the prices it projects, geology alone could turn California into a central hub for data centre development. “You have a ton of data centres that are trying to get some baseline, decarbonised electricity,” Levin said. “We have powerful traction with them.”