The Next Big Thing in Hydrogen

The hype around clean hydrogen has come in waves, with investors and policymakers betting that the versatile molecule could help decarbonize everything from fertilizer production to long-haul shipping and heavy industry. Different production methods have come in and out of vogue: Around 2020 it was using carbon capture and storage, then electrolysis powered by clean electricity and subsidized by generous tax credits in the Inflation Reduction Act. More recently, venture capitalists have poured money into the search for naturally occurring deposits hidden underground.

So far, none of these approaches has delivered cheap, low-carbon at any kind of scale. Yet enthusiasm for this latest frontier — so-called geologic hydrogen — has continued to build.

Much of that excitement stems from an even newer concept, alternately known as engineered geologic hydrogen or engineered mineral hydrogen. This is the idea that if naturally occurring hydrogen deposits — which require a precise mixture of geologic conditions — prove too rare or difficult to find, scientists can engineer those subsurface conditions themselves, producing this valuable molecule straight from the earth wherever the right iron-rich rocks are found. Essentially, the approach trades exploration risk for engineering risk.

“I think it’s really a natural evolution,” Sophie Broun, CEO of the seed-stage engineered hydrogen company Anning Corporation, told me. “It’s the evolution that we’ve seen play out from oil and gas — conventional to unconventional — from geothermal to [enhanced geothermal systems], and now we’re seeing it in geologic hydrogen.”

Broun is a member of the new class of Activate Fellows announced on Tuesday morning. The two-year fellowship provides early-stage founders with funding for research and development, as well as a network of fellow founders, mentors, investors, and corporate partners. It’s helped seed cohorts of companies that have gone on to form brand new industries, from clean cement startups Brimstone and Sublime Systems to thermal energy players Antora Energy and Electrified Thermal Solutions.

Dan Recht, Activate’s chief fellowship officer, thinks that the nascent geologic hydrogen industry — which includes both natural and engineered deposits — is next. “This process of seeing these up and coming sectors and industries is routine for us at Activate,” he told me. “At the end of our selection process we now have a pretty good sense of, oh, the U.S. is going to have a geologic hydrogen industry.”

Of the 50 fellows selected this year, nine work in energy. Of those nine, three are hydrogen companies: geologic hydrogen startups Anning and Hydrify, as well as Brint Tech, which is developing hydrogen leak detectors. Anning is squarely an engineered hydrogen company, aiming to stimulate the production of the molecule underground using an undisclosed technology, while Hydrify is building tools to better locate where natural hydrogen deposits already exist.

Like Broun, Recht sees a clear parallel with the geothermal industry, where Fervo Energy is manipulating the subsurface to create the conditions necessary for geothermal power production and Zanskar is using artificial intelligence models to identify previously overlooked conventional geothermal resources. Anning could become the Fervo of hydrogen, while Hydrify could be its Zanskar, he told me. The parallels also extend beyond the companies themselves: The drilling techniques that underpin geothermal development — largely adapted from the oil and gas industry — stand to be just as critical to unlocking geologic hydrogen, which could give this emerging tech a similar bipartisan appeal.

Natural hydrogen company Koloma is by far the best capitalized startup in this space, having raised around $400 million from big-name backers such as Breakthrough Energy Ventures, Amazon’s Climate Pledge Fund, and Khosla Ventures. That said, it has yet to publish any results indicating it’s discovered commercially significant new deposits. That relative silence from the industry’s biggest player has helped fuel the dreams of the even-more-nascent engineered players such as Anning, Vema Hydrogen, Addis Energy, GeoKiln and Eden GeoPower, who think they can achieve quicker, more consistent breakthroughs.

“By being able to deploy the engineered solution, we’re able to be repeatable and scalable, and ultimately, that’s what customers and infrastructure providers need,” Broun told me. Being able to produce hydrogen closer to where it’s actually used could slash transportation costs, often one of the most expensive parts of the hydrogen value chain as the gas typically must be compressed or liquified before transport. “Being able to place that engineered system at a location that’s much more within your control, I think that that is a far stronger or more appealing business case in many cases,” she explained.

Anning raised a pre-seed round last year, and is now raising a $6 million seed round, which would put it more or less on par with other early players in the engineered hydrogen subsector. Vema has raised the most thus far, bringing in an oversubscribed $13 million seed round last February from a group of climate-focused investors including Extantia Capital and Propeller, and is now raising its Series A.

Vema drills its wells into iron-rich rock formations known as ophiolites, then injects water and a proprietary catalyst to trigger serpentinization, a natural geochemical reaction between water and iron minerals that produces hydrogen gas. While this process would typically unfold over millions of years, Vema says it’s aiming to speed up that reaction by a factor of 10,000 to generate commercial quantities of hydrogen on a human timeframe. The resulting hydrogen gas would then flow back to the surface through the well, where it would be purified before its delivery to customers.

The company’s senior vice president of operations, Colin McCulley, told me he expects that it can all be done for less than $1 per kilogram, the so-called “magic number where you start to compete with petroleum-derived hydrogen.” And Vema’s CEO, Pierre Levin, told TechCrunch that once the startup dials in its tech, the price will eventually drop to less than 50 cents per kilogram, making it definitively the cheapest form of hydrogen yet developed.

The company is currently conducting pilot testing in Quebec, home to the well-mapped Thetford Mines ophiolite deposits. But while Vema has yet to release any early results from this pilot, it’s already laying the groundwork for rapid commercialization. Late last year, Vema signed a conditional 10-year offtake agreement with the off-grid data center power startup Verne to supply up to 36,000 metric tons per year of hydrogen, with delivery expected to begin “as soon as 2028.” Then last week, the startup inked a nonbinding memorandum of understanding with Montreal-based sustainable aviation fuels developer SAF + International Group to supply 4,000 tons of hydrogen annually, also beginning “in approximately 2028.” The group will make that fuel at a facility co-located with Vema’s planned Quebec production site to minimize transport costs.

A report shared with me last month from the Cleantech Group, a San Francisco-based market intelligence and advisory firm, cast some doubts on that timeline, however. It called the 2028 target “over aggressive,” given that Vema will need to build a first of its kind facility to fulfill its deals with Verne and SAF + International Group.

“This is the Earth. This isn’t like your lab space where you can exactly control the pressure and temperature and conditions that exist downhole,” Diana Rasner, author of the report and the firm’s group lead for materials and chemicals, told me. “You’re going into territory you can’t see, or that you don’t know how it behaves day to day, let alone like on the scale of what you would think hydrogen production needs to be.”

Even McCulley admits that it’s a stretch, telling me that, “If we have realistic complexity in our project, it will be difficult to deliver on this timeline.” But he thinks the ambition is essential to demonstrate near-term demand and secure commitments for larger projects down the road. He expects the industry to really hit its stride between 2035 and 2040, by which point he says Vema could be looking at a fourth or fifth large-scale commercial project at costs competitive with fossil fuel-derived hydrogen.

But Vema is now facing competition from startups pursuing markedly different approaches to the same problem. Because heat is a natural accelerant of serpentinization, a company called GeoKiln is forgoing chemical catalysts altogether in favor of underground electric heaters designed to stimulate and speed up hydrogen production. Meanwhile, Eden GeoPower plans to apply high voltage electricity to fracture surrounding rocks, which also releases heat and exposes fresh reactive rock surfaces.

Then there’s Addis Energy, which is betting that ammonia production offers a stronger commercial proposition. Hydrogen is often an intermediate molecule in the process of producing ammonia, which is widely used in fertilizers and has become newly interesting for low-carbon shipping fuel. Addis aims to skip that conversion step entirely by injecting water, its own proprietary catalyst, plus a nitrogen-containing compound into the subsurface, triggering a chemical reaction that directly produces ammonia — a molecule that’s simple to transport using existing shipping infrastructure.

Eden raised a $12 million seed round in 2023, backed by a mix of oil and gas industry investors and sustainability-focused funds, while Addis raised a $8.3 million seed round late last year led by climate tech VC At One Ventures.

But investing in the space, Rasner told me, isn’t something everyone in the VC community is comfortable with these days. “It’s not to say that they didn’t believe in it,” she said of investors who did eventually pull the trigger. But it certainly wasn’t an easy decision. As promises of affordable, low-carbon hydrogen production have come and gone, there’s an undeniable aura of uncertainty around the industry, a feeling that has only grown stronger since the Trump administration curtailed clean hydrogen subsidies and froze funding for the previous Biden administration’s hydrogen hubs initiative.

With natural hydrogen players such as Koloma yet to deliver on their early momentum, Rasner told me many would-be backers are approaching the sector with a general attitude best summarized as, “You’re going to be able to do the thing that a lot of the big names in this space haven’t been able to prove out yet, but on your own terms? What’s the catch?”

Recht, however, naturally has a more optimistic outlook. The subsurface has long supplied the minerals that underpin our modern economy, and now it’s increasingly being tapped for geothermal energy as well. In his view, it’s only natural that it might be able to deliver the long-promised hydrogen economy.

“It turns out we’re really good at digging stuff up out of the ground cheaply. If you look at what has humanity decided to do with the past century, it’s to get good at that.”