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Kit Carson Electric’s new contract with Guzman has provision for possible green hydrogen project


Taos-based Kit Carson Electric Cooperative has a new contract with wholesale supplier Guzman Energy through June 2041, and this contract includes a provision to explore joint green hydrogen development in Kit Carson’s service territory in northern New Mexico.

“We think it’s a viable project,” said Luis Reyes, the general manager of Kit Carson, in an e-mail to Big Pivots.

Reyes said he has been to Washington D.C. to explore funding with officials of the Department of Energy and Rural Utilities Services. The latter is the federal agency created by New Deal legislation to work with Kit Carson and other electrical cooperatives.

Both the Infrastructure and Jobs Act passed by Congress in 2021 and the Inflation Reduction Act of 2022 provide funding opportunities for projects such as the one underway at Questa, the former mining town north of Taos. A PowerPoint prepared by Kit Carson also identifies potential other sources of money, such as tax credits and grants available in New Mexico for grid modernization and a brownfield cleanup revolving loan fund.

In 2016, Kit Carson left wholesale supplier Tri-State Generation and Transmission after agreeing to pay a $37 million separation fee. Kit Carson contracted with Guzman Energy, then a relatively new company, for wholesale supplies. Guzman also agreed to help Kit Carson build out its local solar generation.

In June 2022, Kit Carson made the last of its payments to Tri-State and completed the last solar project that now gives it 41 megawatts capacity of solar capacity at several locations in its service territory along with 15 megawatts of battery storage.

This new contract provides opportunity for continued expansion of local renewable resources, including more solar and battery storage.

Kit Carson sees green hydrogen being one possible way to meet peak demands on winter nights with non-fossil fuel energy. However, this technology has yet to be proven as cost effective.

Unlike “grey” hydrogen, which is produced using natural gas, or “blue hydrogen,” which uses natural gas but with emissions sequestered, green hydrogen is produced using renewable electricity and water to create the substance that can be stored for longer periods.

NREL and New Mexico’s two national laboratories have been exploring the feasibility of green hydrogen in a project at Questa on land formerly devoted to molybdenum mining. The site seems to have water, if there are some questions about ownership, and Kit Carson has been adding renewable energy, both local solar and wind from eastern Colorado.

As explained by the Taos Daily News in a September 2022 article, Questa was among 24 communities chosen for a Department of Energy technical assistance grant.

That article noted an analysis by the law firm Shearman and Sterling that the incentives delivered by the IRA, the 2022 law, could kick hydrogen development into high gear. However, Hal Harvey, co-author of “The Big Fix,” told Big Pivots in December that while the law overall is very good at pushing the United State along on the necessary energy transition, the way it treats hydrogen is “quite insane.” See: Can Turning the corner on global heating really be this simple?”

The technical analysis of the project at Questa is expected to be completed in March.

According to a release from Guzman and Kit Carson, this new contract will save Kit Carson $150 million to $170 million over the life of the 15-year contract.

This savings figure is based on what Guzman projects Carson would have paid had it remained an “all-in” member of Tri-State. The phrase all-in refers to energy, capacity, cost of ancillary service and deliver of power to meet demand, i.e. load.

Allen Best
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