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

Vema Hydrogen signed a deal in December to provide California data centers, and now it has completed a pilot project in Quebec to power the hydrogen industry that is 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 certain catalysts. Vema then captures the hydrogen at the surface and sells it to industrial users.

“To supply the local market in Quebec, which is about 100,000 tons per year, you need 3 square kilometers, which is not available,” 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 of today’s hydrogen is produced through a process known as steam reformation of methane (SMR), where steam is used to break down hydrogen molecules from methane from natural gas. It is energy intensive, and the process of making steam and the chemical reaction itself releases carbon dioxide.

Less polluting sources of hydrogen are available, but they tend to be more expensive. Hydrogen from SMR costs between 70 cents and $1.60 per kilogram, ACCORDING of the IEA. Removing carbon from SMR can add 50% to prices, while the cleanest process, which uses zero carbon electricity to power an electrolyzer, increases costs many times over.

Stimulated geological 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 is cheaper than any other source on the market.

Because the rocks Vema is targeting are widely distributed, Levin said the company will drill wells near companies that need power, including data centers. For example, California has some of the largest formations of ophiolite, a type of iron-type rock pushed up from the ocean floor by plate tectonics.

If Vema can deliver hydrogen at the price it predicts, then a quirk in geology could turn California into a mecca for data centers. “There are a ton of data centers trying to get a baseline, decarbonized electricity,” Levin said. “We have very strong traction with them.”