IRA Updates, Geological Hydrogen, and Thanksgiving Wishes

Hello VoLo Earth Community!

Happy (belated) Thanksgiving! We hope everyone had the chance to take some time to enjoy family and friends. We are certainly grateful for each of you. 

In March, we talked about geothermal energy. Or, as Joe called it, the “the sleepy-giant energy resource which, once awakened, can power the world alongside wind and solar.” Today we will discuss geothermal’s young and elusive cousin, geological hydrogen. 

Similar to geothermal energy, geological hydrogen represents a massive potential energy source lying dormant beneath our feet. 

Geological hydrogen is naturally occurring hydrogen found in the Earth's subsurface. Unlike hydrogen produced through industrial processes, geological hydrogen is generated through natural geochemical reactions under the Earth’s surface. This naturally occurring hydrogen has been observed in various locations worldwide, including Mali, where “a cigarette sparked a slow-burn search for buried ‘gold’ hydrogen.”  This small village in Mali now utilizes this reservoir of hydrogen to generate its electricity. 

The Mali instance does not stand alone. Over the past decade there has been a global recognition that the tools used to characterize geologic gasses systematically fail to identify hydrogen (H2) in geologic gas samples (oil and gas wells, water wells etc). In response, the USGS and other private and public entities have begun assessing geologic hydrogen as a potential energy resource. Initial estimates put the resource at thousands to billions of metric tons (Mt). At the upper end of these estimates (billions of tons), it could theoretically supply global energy needs for decades. Further, in some locations the resource may be generated contemporaneously with extraction and qualify as renewable. 

However, this is where geothermal and geological hydrogen diverge. While recent innovations are ramping the geothermal industry, geothermal is well established as an energy source and as an industry. On the contrary, while the geological hydrogen resource potential is large, the resource is largely unverified and critical tools (means and methods) for development are primitive. Specifically, tools to discover geologic resources, verify resource size and produce are just at the beginning of the cycle. This makes the discovery and verification phase a key bottleneck to the industry’s development. We see the market valuing the critical role of discovery accordingly:

• Koloma is a geological hydrogen discovery company that was founded in 2021. In February, Koloma raised a Series B at an $845M valuation. Just this month, Koloma announced a $50M Series B extension round led by Japan’s Osaka Gas and Mitsubishi. 

• KoBold Metals, discussed in last month’s newsletter, provides an analog in the mining industry. Kobold is an AI-based discovery platform for critical minerals. Founded in 2018, the Company is reportedly raising a current financing targeting a $2B valuation. 

There is an opportunity for energy discovery-focused companies (including geological hydrogen) to potentially accrue substantial value without incurring the costs of heavy infrastructure like pipelines or power plants.

VoLo Earth’s first geological hydrogen investment

As such, we see discovery tools as a natural place to start in the investment cycle. This month, we completed an investment in a geological hydrogen resource discovery company. The Company remains in stealth, but focuses on Machine Learning models for target zone identification and AI enhanced signal processing algorithms for real time detection sensors. The Company is led by a pair of previous Google X employees who focused on applied ML in earth science AI/ML products and novel geophysical sensors. The duo is supported by advisors with deep industry experience ranging from natural hydrogen systems, field sampling, reservoir characterization, and gas analysis. 

As we potentially enter the beginning of the cycle for geologic hydrogen that may reshape electricity, SAF, and fertilizer markets, we are excited to take a strategic position in the discovery services business. We remain aware of the myriad potential obstacles and are working with the founders to position the business model and team accordingly. 

Why now? 

The rise of artificial intelligence (AI) and machine learning is intersecting with geopolitics, and particularly the race for energy independence. This is creating a new paradigm for how resources like hydrogen (or critical minerals) are discovered and leveraged. 

Advanced machine learning algorithms, signal processing tools, expansive geophysical datasets, and exponential growth in computational capabilities are facilitating subsurface exploration with precision and scale previously unattainable. This convergence is driving rapid acceleration in the discovery market across different segments of the energy transition, with AI-powered platforms unlocking tools that deliver spillover benefits to tangential sectors, including geothermal, our once "sleepy giant."

On the geopolitical front, geological hydrogen can contribute to energy security through domestically sourced, firm, dispatchable power. Based on VoLo Earth economic analysis we see geologic hydrogen diversifying the current energy supply mix alongside current solutions. 

As we look to the future, we see that the energy transition may be defined as much by what’s below the surface as what’s above it…