Digging for Geological Hydrogen
Geological hydrogen (also referred to as naturally occurring, gold, or white hydrogen) startups have been snagging $$$ in a frigid market. Koloma racked up $246m in its Series B to locate reservoirs of geological hydrogen. In early February, the Energy Department announced it was investing $20 million into 16 projects related to geological hydrogen.
What’s the gold rush? Geoffrey Ellis, a geoscientist at the U.S. Geological Survey (USGS), has calculated that there may be approximately 10 trillion tons of geological hydrogen buried underground worldwide. Even a small fraction could potentially meet the world's hydrogen needs for 200 years. However, he quickly cautions, “We have to be very careful in interpreting this number, though. Based on what we know about the distribution of petroleum and other gases in the subsurface, most of this hydrogen is probably inaccessible."
VCs are seeing dollar signs in their eyes, but challenges abound. This week, you’ll get a balanced view of geological hydrogen so you know the potential, but also the challenges of tapping into this resource.
Gigaton Potential
By 2050, clean hydrogen could help abate seven gigatons of CO2 emissions annually, which is about 20 percent of human-driven emissions. If geological hydrogen can be effectively harnessed and scaled up, it could play a crucial role in reducing global CO2 emissions.
For reference:in 2019, the world emitted 51 gigatons of CO2-equivalent greenhouse gases. Project Drawdown estimates we need to cumulatively eliminate 1,000 GT from 2020-2050 to keep global warming below 2 degrees Celsius
What You Should Know
As a quick reminder, hydrogen can be used as fuel for transport, heat for industrial sectors, and inputs for chemicals. Its ability to be used by many massive markets is why McKinsey once estimated that hydrogen would generate $140B in revenue by 2030.
Hydrogen requires large amounts of heat to separate the hydrogen molecules for use. Traditionally, this is done by fossil fuels, but startups have been trying to power this process using renewable energy (🟢 green hydrogen), carbon capture (🔵 blue hydrogen), and more. Check out our older article on hydrogen here.
But what if you don’t need to heat the process to produce hydrogen? What if you can just find hydrogen… in the ground? This is the promise of geological hydrogen where it is formed naturally through geological processes - by the earth rather than humans.
Because the hydrogen is naturally occurring in the ground, startups are claiming that geological hydrogen can even be cheaper than hydrogen produced by fossil fuels. It can potentially be found everywhere around the world.
Better yet, it is potentially a resource that is renewable. Natural hydrogen is thought to be made remade when underground water reacts with iron minerals at elevated temperatures and pressures. The explorers who first found natural hydrogen in Mali say that the flows have not diminished for over a decade.
Comparison of geological hydrogen against other methods
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Map of potential sites for geological hydrogen
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How natural hydrogen is made underground
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Challenges
Now you probably understand why VCs have dollar signs in their eyes. Yes, the potential for geological hydrogen is massive, but it is still nascent. Geological hydrogen is currently only powering the energy needs of one small community in Mali.
Here are the key challenges to be sorted:
🔍 Identification of viable deposits: The USGS has developed a "first-of-its-kind" geologic model to help find U.S. locations with exploitable hydrogen reserves, but it can only map 50-kilometer areas, not pinpoint exact drilling locations.
🛢️Extraction complexity: While you can save costs on the hydrogen naturally occurring in the earth, you still need to 1) drill for it 2) collect and purify it 3) transport it. We haven’t extracted hydrogen at scale yet, and it is still uncertain if startups can achieve a cost lower than hydrogen produced by fossil fuels.
🚗Headwind to scaling hydrogen without infrastructure: Hydrogen is the lightest element on the periodic table, can’t be transported with natural gas infrastructure, and is highly flammable. Building out this infrastructure is expensive, risky, and highly regulated.
📈Unclear costs: The actual production costs are still uncertain and will depend on factors like deposit depth, purity, and proximity to markets where it can be used.
🧪 Science versus hype: It is still early days for natural hydrogen. Scientists don’t completely understand how it forms, migrates, and whether it accumulates in a commercially exploitable way.
Key Players
Koloma has developed a unique, proprietary approach to locate these reservoirs of geological hydrogen.
Natural Hydrogen Energy (NH2E) has drilled an exploratory well in Nebraska
Australian company Gold Hydrogen led a geological hydrogen exploration effort on the Yorke Peninsula and achieved remarkable results, including the confirmation of natural hydrogen purity levels of up to 86%.
Canada-based producer Hydroma claims to extract geological hydrogen at an estimated, remarkably low cost of $0.5 per kg in Mali. For comparison, green hydrogen (produced via electrolysis) typically costs $3-8/kg, while grey hydrogen (from natural gas) costs around $1-2/kg. The scalability and replicability of this low-cost production in other locations remain to be proven.
Australian company HyTerra has received a permit to drill for natural hydrogen on land in the US state of Kansas. The exploration acreage covers approximately 39,000 acres.
The U.S. Geological Survey (USGS) and the Colorado School of Mines launched a research consortium focused on geological hydrogen. Eight member companies have already signed on, including major players in the mining and energy industries and geologic hydrogen start-ups: BP, Chevron, Eden Geopower, Petrobras, Fortescue, Koloma, Hydroma USA, and HyTerra.
Longhorn Exploration received final TSXV approval for a geological lease acquisition for the Lily Rock Hydrogen Project and closes financing. They are partnering with PureWave Hydrogen who will help with the discovery and development of the project.
It's worth noting that geological hydrogen exploration is still in its early stages, and many companies are keeping their specific exploration sites confidential.
Bottom Line
Natural hydrogen is a moonshot technology. It could blow all other hydrogen plays out of the water (including fossil fuel generated hydrogen) with its promised cost of $0.5 per kg. But scientists disagree on how to find it and how much of this stuff is out there.
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