Hydrogen Startup Secures Funding from Bill Gates' Climate Fund

An Unexpected Journey to Leading C-Zero

Zach Jones initially embarked on a due diligence assessment of C-Zero, a Santa Barbara, California-based startup focused on innovative hydrogen production, while employed at a small family office. He hadn't anticipated becoming the company’s chief executive officer.

Nor did he foresee the company securing funding from Breakthrough Energy Ventures – a substantial investment vehicle dedicated to technologies reducing greenhouse gas emissions – alongside major players in the industrial and oil & gas sectors.

Initial Assessment and Transition

Jones was previously associated with Beryllium Capital, a South Dakota investment firm, where he first identified C-Zero as a potential investment. The company was pioneering a novel hydrogen production method developed by Eric McFarland, a professor at UCSB.

However, a key challenge existed: McFarland possessed the research expertise but lacked experience in company management. This is where Jones’ involvement deepened. Although his firm didn’t initially invest, a seed round was secured from PG&E and SoCal Gas, California’s prominent utilities, following Jones’ assumption of leadership.

The Imperative for Cleaner Hydrogen Production

The investments from these utilities stemmed from the same rationale that attracted Breakthrough Energy Ventures. Despite the rapid expansion of renewable energy sources, fossil fuels will likely remain a significant part of the global energy mix for the foreseeable future.

Consequently, minimizing greenhouse gas emissions from fossil fuel utilization is paramount.

C-Zero’s Innovative Technology

C-Zero is developing a technology that transforms natural gas into hydrogen, a cleaner fuel alternative, with solid carbon as its sole byproduct. This carbon can be utilized in electrical generation, process heating, and the creation of commodity chemicals like hydrogen and ammonia.

“Our CTO often describes it as operating a coal mine in reverse,” Jones explained.

The company’s process utilizes methane pyrolysis, employing a unique chemical catalyst to separate hydrogen gas, leaving behind solid carbon. While not entirely waste-free, and reliant on natural gas, this method is cleaner and more cost-effective than existing hydrogen production techniques.

Cost and Energy Efficiency Considerations

Producing hydrogen through renewable means involves using electricity to split water into hydrogen and oxygen. However, this process demands significantly more energy than separating hydrogen from carbon.

“Hydrogen’s value lies in its ability to complement intermittent renewables,” Jones stated. “It’s fundamentally about energy storage… long-duration storage, whether daily or seasonal, becomes prohibitively expensive. A chemical fuel will be essential for complete decarbonization.”

Pre-Combustion Carbon Capture and Industrial Applications

Jones characterizes the technology as “pre-combustion carbon capture,” believing it could unlock hydrogen’s potential across diverse industrial sectors, including heavy-duty vehicle fueling, utility power generation, and industrial processes for manufacturing.

This perspective is widely shared within the industry.

“Annually, over $100 billion worth of commodity hydrogen is produced,” noted Carmichael Roberts of Breakthrough Energy Ventures, the lead investor in C-Zero’s $11.5 million funding round. “However, the vast majority is created via steam methane reforming, generating substantial CO2. Low-cost, low-emission hydrogen production methods – like C-Zero’s – are crucial for realizing hydrogen’s potential to decarbonize agriculture, chemicals, manufacturing, and transportation.”

Strategic Partnerships and Funding

Alongside Breakthrough Energy Ventures, the funding round includes participation from Eni Next (the investment arm of the Italian energy company), Mitsubishi Heavy Industries, and AP Ventures, a venture firm specializing in hydrogen technology.

Mitsubishi Heavy Industries has a direct application for C-Zero’s technology, planning to re-power a coal plant with a natural gas and hydrogen blend by 2025. C-Zero’s technology could play a role in achieving this goal.

Potential Tax Credits and Competitive Landscape

C-Zero may also qualify for new U.S. tax credits for carbon sequestration, established by the IRS earlier this year. These credits offer $20 per ton of sequestered solid carbon – the precise waste product of C-Zero’s process.

Despite its promise, C-Zero faces competition from established chemical companies.

BASF, a German chemical giant, has been developing its own methane pyrolysis technology for nearly a decade and is constructing facilities to scale up production.

Air Liquide and Siemens Energy have also formed a joint venture to pursue hydrogen production.

A Stepping Stone to a Circular Economy

Jones acknowledges that the current technology is an interim solution. He envisions a future where renewable natural gas from waste sources fuels a circular hydrogen economy.

“In a century, this technology will persist only if we utilize renewable natural gas,” Jones stated. “Significant steps remain, but I am confident in the project’s near-term success.”

“A highly energy-dense fuel will always be necessary. Liquid hydrogen boasts the highest energy density outside of nuclear sources,” he concluded. “Hydrogen is here to stay. Ultimately, the lowest-cost energy with the lowest avoided CO2 cost will prevail.”