Why We Invested in Vema

The demand for hydrogen is expected to grow from 97 Mt in 2023 to up to 600 Mt in 2050, driven by climate targets and emerging applications such as steel production, long-haul transportation, aviation, shipping, and electricity generation for energy storage and grid balancing. However, realising this potential requires an abundant, affordable, and clean hydrogen source.

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Currently, “affordable” hydrogen production methods are far from clean. Most hydrogen is derived from methane via steam methane reforming (SMR), otherwise called grey hydrogen, with a carbon intensity of 8.5 kg CO₂ per kg H₂ or higher, falling significantly short of decarbonisation targets. Clean hydrogen alternatives, like green hydrogen from renewables-powered electrolysis, are much more expensive and not yet scaled up. Hydrogen from water electrolysis costs at least five times more than grey due to costly equipment and energy inefficiencies, which drive the energy requirements up to ca. 50-55 kWh/kg H2 (depending on the electrolyser type). While technological progress, economies of scale, and supportive policies may reduce green hydrogen costs over time, it's uncertain whether green hydrogen will ever become cost-competitive with grey hydrogen. As proof of the slow transition, low-carbon hydrogen accounted for less than 1% (under 1 Mt) of total hydrogen production in 2023.
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Another alternative to address this problem that has generated a lot of excitement is natural or white hydrogen. This is a process whereby companies drill for hydrogen that has naturally accumulated in underground reservoirs. While it has the potential to be a viable, clean alternative, the associated exploration risk and uncertainty regarding reservoir purities and flow rates can quickly drive the LCOH up, making the entire operation economically unviable and energy intensive. This is  mainly due to the required separation processes for low concentration H2 mixtures and high transport costs.

The solution: stimulated geological hydrogen production for less than $1/kg

Vema’s innovative approach to stimulated hydrogen production (also known as orange hydrogen) offers an alternative solution with all the above upsides, whilst overcoming much of the aforementioned downsides of white hydrogen. They produce hydrogen underground by injecting water and a catalyst into iron-containing rock formations. Through the use of a catalyst and by controlling certain parameters, such as temperature, Vema optimises these naturally occurring reactions. The result is a process that is reliable, environmentally friendly, and allows for control over the gas produced, translating into high purity hydrogen and a low LCOH.

This makes it a promising alternative to both green and natural hydrogen sources, offering a scalable and cost-effective solution with fewer logistical challenges as wells can be placed near demand centers. Metaphorically speaking, if white hydrogen is like digging for gold, then Vema’s approach is more akin to alchemy.

Abundant, clean hydrogen that is price competitive with grey hydrogen can not only decarbonise existing uses of hydrogen, but a multitude of other industrial processes in hard to abate sectors without the need for novel tech and changes to infrastructure. For example, green ammonia and thereby fertilisers can be produced by simply swapping the feedstock from a dirty to a clean source of hydrogen at no extra cost. Steel can be decarbonised by providing a source of clean hydrogen for direct reduced iron (DRI) furnaces. This is particularly interesting for integrated manufacturing processes where steel production is located in proximity to mines as Vema’s technology requires the presence of iron-bearing minerals (HINT: plenty of that near iron ore mines). For shipping, this can provide an input for green methanol without requiring a price premium. It is thus no surprise that the company is already in off-take discussions with all of these industries, despite being founded just last year. 

Finally, given the relatively low amount of energy that goes into making the hydrogen, Vema opens up the possibility of hydrogen becoming a source of energy, rather than a vector. This could be very interesting for powering data centers and other applications. In short - it’s a game-changing technology that may be the most important discovery in energy in our lifetime.

Source: Vema Hydrogen.

With all this in mind, it takes more than just a great technology to deliver on such a big vision. Having spent much time getting to know the founding team, it's clear that they are perfectly suited to pull this off. The CTO Florian, wrote the seminal paper on stimulated hydrogen and pioneered Vema’s technology through extensive research. Outside of technical depth and expertise, he brings unwavering passion and humility. He is perfectly complemented by CEO Pierre, a seasoned entrepreneur with extensive experience in natural hydrogen and the oil and gas industries. Pierre is a force of nature to be reckoned with. We’re thrilled to join them and the entire Vema team on their journey. 

Vema Hydrogen is EPIC: how the carbon math adds up

To assess Vema's potential to reduce GHG emissions, we looked at two key factors: the carbon intensity of their hydrogen production and the projected size of the hydrogen market. We calculated Vema's hydrogen carbon intensity by considering a baseline for white hydrogen and Vema's own data, assuming a 50% renewable grid. For the projected size of the market, we used IEA projections that expect the hydrogen market to reach 515 million tons by 2050. Using our EPIC methodology (which includes a 20% market cap), we project Vema’s emissions reduction potential (ERP) to peak at 122 Mt CO2e in 2044, and reach 77.6 Mt CO2e by 2050, assuming an ambitious 9% annual grid decarbonisation rate. Using a more realistic 3% grid decarbonization rate, Vema's ERP could surpass 600 Mt CO2e per year by 2050.

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