Why a rural electric co-op in New Mexico wants green hydrogen

The Kit Carson Electric Cooperative is building every kind of clean energy for its members: renewables, batteries, and efficiency. And soon, hydrogen could be in the mix.

In 2019, New Mexico mandated that rural electric cooperatives in the state must get 100% of their electricity from zero-carbon resources by 2050. That’s forcing rural, member-owned utilities to get creative as they balance increasing amounts of daytime renewables.

Luis Reyes, the CEO of Kit Carson, wants to develop an electrolytic green hydrogen plant inside a shuttered molybdenum mine, which is also a Superfund site. 

“You have land that can't be used for anything else and water that can't be used for anything else. And if you can create energy from that — and create green jobs and green energy — what's wrong with that?” said Reyes, explaining the plan on the With Great Power podcast.

When the mine shut down in 2014, 300 hundred people were laid off, a blow to the town of Questa, New Mexico. The green hydrogen project would offer a surge in construction jobs as well as a handful of permanent ones. 

Chevron, which owns the mine, has discussed the possibility of providing reclaimed mine water as a feedstock for the solar-powered electrolyzers. The stored hydrogen would then be dispatched to the grid, through a fuel cell, when needed. That would only happen at night, since the utility has been sourcing 100% daytime renewables, mostly through solar, since 2022.

That’s the vision. Whether it happens, and at a tenable cost, depends on many pieces coming together, including a few different government incentives — including the not-yet-finalized 45V production tax credit. The utility is also seeking funding from the USDA, through a $9.7 billion program called Empowering Rural America that was launched through the Inflation Reduction Act.

Rural electric co-ops have not historically been at the forefront of clean energy. But that is starting to change, in part because of newly available funding streams and the falling costs of renewables. As non-profits with little tax burden, co-ops were left out of government incentives designed around tax credits. But the federal government removed that barrier through a direct pay option. 

Rural road to renewables

Currently, about 45% of all the electricity Kit Carson distributes comes from renewables. Most of those electrons are sourced from a network of solar installations that enabled the co-op to hit a key milestone in 2022: all of its daytime energy is now renewable. If the hydrogen project happens, around 70% of its around-the-clock energy will be clean. And the utility wants to make that 100% by 2040 — 10 years ahead of the state mandate.

Reyes grew up in Taos, the culturally-rich mountain town where the co-op is based. He’s spent his entire career at the utility, and three decades as its CEO. The utility, which serves 30,000 members across three counties and two Pueblos, started transitioning away from fossil-based energy in the early 2000s. He attributes the change to the community.

“The members own the co-op,” he said. “They elect their board members…They're basically the bosses.” 

Around 2006, when the utility’s power provider announced plans to finance a new coal-fired power plant and extend a contract by 10 years, Kit Carson’s members became increasingly vocal. The longer contract wouldn’t have ended until 2050. Plus, it already prohibited Kit Carson from generating more than five percent of its own energy, which hurt its efforts to build its own renewables.

It took a decade, but in 2016 Kit Carson was able to terminate its contract with the power provider, the Tri-State Generation and Transmission Association. Since then, the Delta-Montrose co-op in western Colorado also left, and others are in the process of leaving — all pointing to Tri-State’s restrictions and slow transition to clean energy. 

As a non-profit co-op, Tri-State’s members are distribution co-ops like Kit Carson and Delta-Montrose. Their exit sent a message, and Tri-State started planning for more renewables in 2019, and was able to use IRA incentives to ramp up its move away from fossil energy. Soon, half of the energy Tri-State generates will be from renewable sources.

According to the National Rural Electric Cooperative Association, co-ops serve energy to 42 million people. That’s only 12% of the U.S. population, but those communities cover more than half of American land and include 92% of counties with persistent poverty. Between 2016 and 2022, rural co-ops increased their use of renewables modestly, from 17% to 22%. But coal still accounted for a third of co-ops’ retail energy mix in 2022.

Reyes considers moving away from fossil energy — while also improving Kit Carson’s resilience to wildfire and extreme weather — a matter of long-term survival for the southwest. As a kid, he said, floods were more common. Now, they’ve been replaced by long periods of drought. 

“I don't need a scientist to tell me there's something changing,” he said. “And I think we have to do something about it.” 

For the full conversation with Luis Reyes about Kit Carson’s transition, listen to his interview on season 3 of With Great Power.

With Great Power is a show about the people building the future grid, today. It's a co-production of GridX and Latitude Studios. Subscribe on Apple, Spotify, or anywhere you get your shows.

Transcript

News anchor 1: In 1935, REA is born. 90% of all American farms without light or power. The cities are lighted, the country's still in the dark.

Brad Langley: The US power grid transformed major cities across the country in the early 1900s. It's from Boston to New York to San Francisco is supporting manufacturing hubs and enabled American households to switch to electric appliances. But across rural America, lots of people were still living off the grid well into the 1930s.

News anchor 1: Well over half a million farms, schools, churches, stores, and rural industrial plants getting electric service for the first time, 300,000 more expected to come on these lines.

Brad Langley: The Rural Electrification Act of 1936 changed all of that. As part of President Franklin D Roosevelt's New Deal, the Act offered nonprofit electric cooperatives low interest loans to pay for power lines. It was billed as a way for farmers to maintain their independence while upping productivity.

News anchor 1: Lights up. 7,500 farm families like Bill Parkinson's get light.

Brad Langley: Today, co-ops make up almost 30% of distribution utilities across the country, including the Kit Carson Electric Cooperative in Northern New Mexico. Kit Carson's CEO. Luis Reyes says the co-op model from the 1930s hasn't really changed much over the years. It's still centered around member autonomy.

Luis Reyes: The members own the co-op, they elect their board members, the board hires the manager. The members are the key. They're basically the bosses.

Brad Langley: And in the early two thousands, some of those Kit Carson bosses started pushing for building more renewables, but in 2006, they hit a wall. The co-op's power supplier, Tri-State, which limited the amount of energy Kit Carson could produce locally to 5% wanted to extend Kit Carson's contract to 2050. That's a whole 10 years longer than their original contract end date. Meanwhile, Tri-State was also financing a new coal-fired power plant. Kit Carson's members were not happy.

Luis Reyes: We had a lot of member meetings, a lot of member engagement, and at the end they did not want us to get into any more fossil fuel generation, and they really wanted us to look at ways in which we could green up our portfolio and give them back the power, give them back the decisions of what kind of power supply we want here in New Mexico.

Brad Langley: That power was not easily won. It took a decade for Kit Carson to break his contract with Tri-State, but the payoff was huge. Since 2022, the utility which serves 30,000 members across three counties and two Pueblos, has sourced all of its daytime energy from the sun.

Luis Reyes: So on any given sunny day, 100% of our energy during the daytime comes from about 20 solar facilities built around the network.

Brad Langley: Luis is deeply invested in his community. To call him a Kit Carson lifer is really no joke. He grew up in Taos in a Kit Carson household. During Christmas break one year when he was studying electrical engineering at New Mexico State, he went with his mom to the co-op office to pay their utility bill.

Luis Reyes: So she's talking to the ladies about how proud she is of me being able to graduate from college. And I was actually the first in my family to get a college degree and the manager comes out and says, "Hey, Ms. Reyes, how you doing?" And she says, "Oh, do you remember Luis? He's going to be an engineer." So he says, "You know, we're looking for an engineer. Would you like a job?" Once I graduated, I had one week to get back home, and I've been here for now 40 years.

Brad Langley: And for 30 of those years he's been the CEO. And over that time he has used different methods to remain connected to co-op members, even hosting the call and radio show for a while.

Luis Reyes: I think we have an obligation to always be talking to our members. They own us. I think it's also important to understand what we're not doing right. I thought the best way was to get out and meet with people in different venues. So whether it's talking at the kitchen table or having a radio show, having an obligation to address whatever concerns you have and in public, in sunshine so that everyone knows what we're talking about.

Brad Langley: This is With Great Power, a show about the people building the future grid today. I'm Brad Langley. Some people say utilities are slow to change, that they don't innovate fast enough. And while it might not always seem like the most cutting edge industry, there are lots of really smart people working really hard to make the grid cleaner, more reliable and customer-centric.

This week I'm talking to Luis Reyes, the CEO of Kit Carson Electric Cooperative in Northern New Mexico. The co-op has already made big strides towards a hundred percent renewable energy, and now it's hoping to develop a green hydrogen project for long duration storage, at a Superfund site of all places. But before getting into that green hydrogen project, I asked Luis to lay out Kit Carson's overall clean energy strategy.

Luis Reyes: In 2022, we hit the 100% daytime with solar, so storage is our next phase, and so we're deploying the same type of model that we did on solar, a distributed model, and those are two to four hour batteries. The third phase then is to go to long duration storage. First project is a 24-hour battery, but the hope is to get it to five days, and that's a green hydrogen project. And then the final is to really start to address what's behind the meter and how we can enable members in essence to create a virtual power plant. And so that when they need the power on a battery, they use it. And when Kit Carson needs it, we can use it. So we're negotiating right now or looking at how do we create a virtual power plant. So we're talking to different people about different pilots so that we can help our folks.

And we're also focusing on the low and moderate income and those with medical devices because in any scheme, those are the people always left out. We need to figure out ways that they always have power. And so in these strategies, we think batteries and storage is going to be the way to do that. So those are the four building blocks that we're building to this 100% around the clock, renewable and also long duration storage. So we build resilience in our network so that we can withstand wildfire issues and we can withstand extreme events. It has got hotter, it has got drier. I don't need a scientist to tell me there's something changing and I think we have to do something about it.

Brad Langley: I want to dig into the storage piece for a second. Even amongst the haves, residential storage still feels like a very small percentage of installation. Not a lot of people have batteries on-site in their homes. Are you guys providing incentives to folks? Talk to me about how you're trying to get more storage into people's homes.

Luis Reyes: The plan we're working on is actually working with a third party so that we actually in essence, finance these batteries, put them on your home, start with the most vulnerable, and then do programs like online financing so that we in essence become the bank. Because if we give credits, you still have to have the ability to buy the battery in the first place. New Mexico is still a relatively poor state, and we have to not use that as an excuse not to do things. And so we're looking at how do we finance that through the bill and we'll control it for you. You give us the rules of when you need it and we'll let you know when we need it, and we'll work out a relationship where we both win.

Brad Langley: Now New Mexico is mandating that rural co-ops transition entirely to carbon-neutral energy by 2050. Are you feeling confident that you're going to hit that timeline or beat it?

Luis Reyes: Yeah, Brad, just with our solar, we're at about 45% now. Through our new power supplier, Guzman Energy, we're going to buy wind from them. So we'll import some wind. By 2030, we'll be 60, 70%. If we can get this green hydrogen project going, which is a long duration storage using reclaimed water, wastewater for the electrolysis system, using solar power to crate the hydrogen, store the hydrogen, and then release the hydrogen through fuel cells when we need it.

We can be in the high 70s when that plant is built. So if everything would to fall in place and we build that plant by 2028, by 2030, we'd be in the high seventies, which means we have 20 years to get probably the hardest 20%. But I'm confident technology will help. Energy efficiency certainly will help because we'll right-size and there won't be as much waste. So I'm very confident that Kit Carson will hit those targets easily even before the 2040 timeframe.

Brad Langley: Let's dig into the green hydrogen plant a little bit. You are building the green hydrogen plant in a town called Questa, an interesting Brownfield site that's actually also a Superfund site. So tell us about who's involved in this project and how'd the idea come about.

Luis Reyes: So the Village of Questa was a location where they've had mining for probably over a hundred years. In 2014, they finally just closed. And so as a result of that closure, a couple of properties were deemed Superfund sites at the mine site and then at a tailings' facility. And so for the past few years, we had been talking to the leaders of the village of Questa, of what economic development opportunities are there.

And we started by can we put a bunch of batteries here or can we make this a solar hub, EV charging, you name it, we put that out there. We had two national labs, Sandia and Los Alamos National Labs help us at least try to craft some ideas around what would work in a town that was kind of devastated by the loss of the mine. 300 people lose their jobs, the biggest employer in Taos County.

And so then we as a group, it's Kit Carson, the village of Questa, Chevron Mining, and the Questa Economic Development Board. We got together, made application and got NREL to do a study for us. Is it feasible to do green hydrogen in Questa New Mexico? And after two years, we think it's feasible. We are looking for funding right now, but we would actually turn a brown field site into a green field. We'd use wastewater from the mine, which really isn't being used for anything else. Clean that up to a level that we can use in the electrolysis process and then create the hydrogen from that and then use it as a battery. So the underpinning of this green hydrogen is really a green economic development project that can create jobs over time.

So that's how this all came about. I think hydrogen is going to be a big player in the future as we transition from fossil fuels. And I think this is a good area to put it because you do have so many positives. You have land that can't be used for anything else and water that can't be used for anything else. And if you can create energy from that and create jobs and green jobs and green energy, what's wrong with that?

Brad Langley: Nothing. But it just sounds like there are a lot of moving pieces, a lot of organizations involved. You mentioned NREL, the National Renewable Energy Laboratory, Chevron, yourselves. Are there certain pieces that need to come together for this project to happen?

Luis Reyes: We're all pretty much aligned. We're at least in the same book, maybe even the same chapter now. We may be on different pages, but I think the community is aligned and how do we create green energy, be really wise about the water? In the Southwest, drought is kind of the scariest thing we have. With drought comes wildfires. With wildfires comes a lot of devastation. So if there's things that we can do to utilize water that's going to go to waste, so to speak, to create energy and from that energy infrastructure create jobs, it's hard for any of our partners to say that's not a good idea.

Hydrogen today is more expensive, and so we need to get the price down so that it can be affordable. But I think that will happen. And I think the other thing, Brad, is hydrogen has been around a long time, so companies like Chevron have been using hydrogen for a while, and so I think in this case we're aligned. The state of New Mexico, the governor has been a leader in pushing the hydrogen economy in New Mexico. And so I think with that type of support, we right now have a good team to make this happen.

Brad Langley: How do your members feel about it, knowing they're involved in the process?

Luis Reyes: We've had a lot of member meetings and there's a big percentage that think it's good. There are some who have some concerns. The reservations, I think one is safety. If you're going to create the storage, we have to make it safe. I think the whole idea of hydrogen, because hydrogen is a gas and it can get into the atmosphere, and if it does that, it does contribute to global warming. But as I mentioned earlier, we're having discussions with them.

One of the first things we did is we went to our members and asked them. We've engaged them along the whole study process. We've talked to all the environmental groups that we can to make sure we know where they stand. There have been a couple who have opposed it, and that's fine. We want to know why, then. So we're at the point where we still have momentum moving forward because right now there's really not an alternative. Battery technology is coming along, but the best you can get batteries is about four hours.

Brad Langley: We talked about VPP, solar storage, green hydrogen. You guys are clearly doing a lot of great stuff. Are there other technology or infrastructure projects you're eyeing as well at Kit Carson?

Luis Reyes: We are looking at different enhancements, storage like vehicle to grid. I mean, can we get enough critical mass so we can have in essence mobile storage where you have a bus or transportation where you can use it as a battery during the nighttime and use it as a bus during the daytime.

I think we're trying to integrate AI into our network so that we really have probably the correct version of a smart grid. When utility was talking about smart grid, it was smart meters. I think you really have to have a grid that understands the elements it's operating in. And so we want to know what happens when the wind speeds are 50 miles an hour or what happens to our system in the surrounding forest when you have 10 days of a hundred degree weather and no moisture. Integrating AI into our network is something we're working on right now.

Brad Langley: Any technologies you're deploying in the field to detect wildfires and do shutoffs and such? You mentioned the battery backup as part of that, but anything Kit Carson is doing specific to wildfire prevention?

Luis Reyes: So we are actually going to build three microgrids in mount communities for wildfire mitigation, introducing AI. So the whole idea is in areas that we have high risk fire, whether it's lightning or a power line falling on the ground is to create a microgrid. And with AI, Brad, the whole idea is with this data, it will do a power shut-off automatically. The battery will power the community so that all critical infrastructure is not damaged.

I think when you do a power shutoff, you lose communications, you use water pumping. The grocery stores, the refrigerator, nothing works. And so we want to create an environment or a system where electricity going to be flowing, critical infrastructures are going to be working. That way, it gives some time or it gives the leaders of that community some time to make some decisions. "Do we have to evacuate? Is the event going to pass? Have we contained the fire?"

Instead of what we saw in California was a lot of panic and a lot of, "What's going on?" In some communities, we have three wildernesses that surround them. So if we had a fire, it would burn for months and hopefully not hurt anyone. But that's not a given. We're working with the DOE and if they... Not if they. They'll work, then we'll just replicate this in another mountain communities. I think that's the best way to mitigate wildfire. We're not going to stop some of it, but if I have the intelligence to shut the power line off before it falls based on data.

Brad Langley: Super cool stuff. Last question for you. We call this show With Great Power, which is a nod to the energy industry. It's also a famous Spider-Man quote, "With great power comes great responsibility." So tell me, what superpower do you bring to the energy transition?

Luis Reyes: I just think it's a, "Let's do it" attitude. I think that it is really having a lot of optimism and hope that we can get this done. Just because we're a small rural co-op in North Central New Mexico, we can't do these things that right now the technology is there. So I think it's that determination to get things done.

Brad Langley: It's a superpower in my book. Well, Luis, thank you so much for your time. I really enjoyed our conversation.

Luis Reyes: Same here, Brad. Thank you very much.

Brad Langley: Luis Reyes is the CEO of Kit Carson Electric. With Great Power is produced by GridX in partnership with Latitude Studios. Delivering on our clean energy future is complex. GridX exists to simplify the journey. GridX is the enterprise rate platform that modern utilities rely on to usher in our clean energy future. We design and implement emerging rate structures and we increase consumer investment in clean energy, all while managing the complex billing needs of a distributed grid.

Our production team includes Erin Hardick and Mary Catherine O'Connor. Ann Bailey is our senior editor, Steven Lacey is our executive editor. The original theme song is from Sean Marquand, Roy Campanella mixed the show, and the GridX production team includes Jenny Barber, Samantha McCabe, and me, Brad Langley.

If this show is providing value for you and we really hope it is, please help us spread the word. You can rate or review with Apple and Spotify and you can share a link with a friend, colleague, or the energy nerd in your life. As always, thanks for listening. I'm Brad Langley.

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