Is Kit Carson’s renewable goal also the answer to rural America’s woes?
by Allen Best
Taos, the resort community in New Mexico, is not hardscrabble in the way of so much of rural America. Billionaire Louis Bacon has been plowing money into the Taos Ski Valley, one of four ski areas in the area. Julia Roberts lives in Taos when not working somewhere. And it has 60 art galleries, a reflection of the playful light in high, desert landscape that has drawn artists and writers since Georgia O’Keeffe, Ansel Adams, and D.H. Lawrence.
Now, Taos is seeking to get creative with its energy systems. Last year Kit Carson Electric, the cooperative that serves 31,000 customers in Taos and three adjoining counties, ended its contract with its long-time wholesale supplier of electricity. That supplier, Tri-State Generation & Transmission, delivers electricity to 43 member co-ops across four states, including those that serve Durango, Telluride, Crested Butte, and Winter Park. About a quarter of that electricity comes from the big hydro dams of the West, but Tri-State remains strongly invested in coal-fired power plants. It long resisted the shift to renewables. Just too expensive for rural America, it has argued.
Kit Carson disagrees. It maintains that rural American can’t afford the steady price increases that have come from coal-fired power plants. Working with a new wholesale supplier, Guzman Energy, Kit Carson plans to install 6 to 7 megawatts of solar generation this summer around Taos, with a goal of generating up to 30 megawatts by 2022. That would be enough to meet peak day-time demand.
This is the path forward for rural America, say officials with Kit Carson. It’s like the standard Chamber of Commerce shop-at-home campaign, but instead of shirts and groceries, it’s electricity. They preach the value of job generation of local renewable energy, a way to shore up the fraying economies of rural areas. If Taos itself has polished shoes, surrounding areas look like much of rural America, distressed and worn.
A decade ago, this make-your-own-electricity argument might have seemed obscure, like home-brewing. Nice, if you have time. But prices of renewables have been tumbling so rapidly that they have become the low-cost choice for new generation. Wind prices have fallen most significantly, but solar is rapidly becoming affordable. From $12 per kilowatt-hour in the late 1990s, the price for solar-plus has dropped to just 4.5 cents per kilowatt-hour a deal announced by Tucson Electric this past week.
Taos and a few other renegade co-ops offer a striking example of disruption in a utility sector that was long sluggish if not resistant to change. Instead of behemoths of coal-fired power to supply broad areas, the new model being created is of localized generation, especially renewables, backed by natural gas and storage.
If the disruption is not yet complete, with much remaining to be proven, the looming question posed by Kit Carson to other utilities is this: can they afford to stick to the past.
Creation of electrical co-ops
Taos has a history of unruliness. It has a pueblo that has been continuously occupied since before Columbus. Even today, about 8 percent of Taoseños are Native American. More than half are Hispanic. The first Spanish arrived in 1540 when a contingent accompanying the explorer, Coronado, in search of seven cities of gold and gems called Quivira, traveled through the Taos Valley.
Spanish rule ensued, and the Pueblo Indians accepted it, more or less, but revolted in 1680. The mutiny lingered until 1696.
Again in 1847 significant blood was shed when the United States, after defeating Mexico, installed Charles Bent as the new territorial governor. He was scalped and killed by Pueblo warriors during another revolt. Josefa, the third and final wife of Kit Carson, the former mountain man and guide, escaped harm by hiding.
Writers and artists came in the 20th century, but they worked by gaslight or candlelight. Investor-owned utilities had been slow to extend lines to rural areas. In a New Deal program, Congress in 1936 created the model of self-governance for co-operatives and extended low-cost loans for rural electrification. Today, the nation’s 800 co-ops deliver 11 percent of the nation’s electricity but geographically serve more than 80 percent of the country.
Bigger is better. That was the mantra for power production for much of the 20th century. From the 1950s into the early 1980s, most of this new production was delivered by coal. Economic growth correlated with increased electrical production.
Amory Lovins, in a 1976 essay published in the journal “Foreign Affairs,” famously argued that it didn’t need to be that way. Pounding the drum even then for renewables, Lovins also made the case for what he called the energy soft path. Efficiency, he said, could increase productivity.
But a task force convened by Vice President Dick Cheney in 2001 came to the swift conclusion that robust growth in demand would require up to 400 new power plants. Especially coal plants.
Tri-State got that memo. In 2006, it announced it needed to build another power plant, this time in southwestern Kansas in conjunction with Sunlight Electric Power, a Kansas wholesaler. The plant along the Arkansas River was to be able to generate 900 megawatts. But Tri-State got pushback from two of its co-ops when it asked them to extend their contracts to 2050. Kit Carson and Colorado’s Delta-Montrose Electric refused.
That power plant has never been built. The administration of Kansas Gov. Kathleen Sebelius, in 2007 denied a permit. Finally, in mid-March 2017, the Kansas Supreme Court ruled that the project could go forward.
But with demand growth slowed and prices of renewables tumbling, the coal plant appears unlikely to be built. As of several years ago, Tri-State had sunk at least $70 million into the project, including water and land.
Tri-State’s existing coal fleet is also under fire. It has agreed to close two plants in Colorado—a small often-idled plant at Nucla and the other, one of its three units at Craig—because of violations of air-quality regulations. It has also been raising its rates, 4 to 5 percent a year.
Directors of Kit Carson Electric maintain that, in the relatively near term, they will deliver 100 percent renewables at lower prices. That’s a bold claim. That it’s being taken seriously suggests just how rapidly the world of energy is changing.
A different energy vision
Bob Bresnahan got to Taos in 2000 after a career that most prominently included work at the Nike headquarters in Beaverton, Ore. He had climbed mountains in the Pacific Northwest and got a degree in computer science that blossomed into a job as “chief architect” of communication standards for the new manufacturer of shoes. At Nike, he stayed on to help form a division that within six years gained $300 million in annual revenues.
Moving to Taos, he purchased a furniture business and began making chairs and tables. But in 2003, he started paying attention to the evidence emerging about the risk of climate change.
“The science was always pretty clear to me. I never had much doubt about it,” he says.
He also read a new book by Jared Diamond called “Collapse.” The chapter he found most compelling was centered on Montana’s Bitterroot Valley and the documented decline of the natural environment. “It struck me that this is Taos and the Southwest also.”
In 2010, even as much of the nation slowly emerged from recession, the world of renewables had begun to shine. With another retiree, John Gusdorf, who had done energy work for the Canadian government, he formed a non-profit advocacy group called Renewable Taos.
“Both of us were deeply alarmed by global warming, but we decided that we didn’t want to focus any of our energies on educating people about global warming, because people seemed so resistant to that.”
Instead, they wanted to cut to the chase: find solutions.
“I mean not just on the electric grid, but also on the transportation and home heating and so forth,” says Bresnahan.
A study of total energy use in Taos County found 40 percent was electricity, 40 percent gasoline, 10 percent propane, and 10 percent natural gas. Virtually all of this energy is imported into Taos County, at a cost of $80 million annually. The three adjoining three counties supplied by Kit Carson Electric pay another $20 million.
With this big picture, Renewable Taos arranged a meeting in 2010 with Luis Reyes, the general manager for Kit Carson Electric. The meeting was scheduled to last 15 to 30 minutes. It was nearly three hours before they wrapped up.
There was one key problem with their vision, Reyes explained to them. Kit Carson, if it had declined the Tri-State contract extension, still had a 30-year contract that specified it would get 95 percent of its electricity from Tri-State. In 2016, Kit Carson got its divorce, at a cost of $36 million, but believes the shift to a new energy model will ultimately save co-op members $50 million.
That exit fee would make most people get squeamish. But Bresnahan was in the computer world when Moore’s law—that the number of transistors in a dense integrated circuit doubles every two years—was being proven. Typewriters were becoming odd-looking devices of no apparent value.
“If you are locked into a business model that is structured on old technolo
gy, you can’t take advantage of those (low-priced) costs (of renewable energy),” says Bresnahan, who is now a member of the board of directors of Kit Carson. “You need a business model innovation to allow you to take advantage of the new technology.”
Bresnahan and his wife live at the end of a road at an elevation of 8,700 feet outside Taos. The last two miles of the road are unpaved, but he still has fiber-optic, courtesy of Kit Carson Electric. The co-op has a fiber-optic division, which has been controversial but one that Bresnahan insists will be highly successful. He has the same confidence about the transition to renewables.
“Our innovation may not be the model for every other coop, but it is one model for making this radical transition, and it’s already proven itself to be successful.”
He calls the Kit Carson switch a “revolution of one,” and adds this: “When all the other (co-ops) see this happening, what do you think will happen?”
In renewables, Bresnahan sees a transition no less dramatic than the shift from mainframe computers to microcomputers several decades ago. Soon, he believes, it will also happen with electric vehicles. He also foresees electricity replacing natural and propane gases for home heating. California has a similar goal.
Strengthening rural economies
The immediate goal is to develop up to 30 megawatts of solar around Taos, but also purchase wind-generated electricity from farms in eastern New Mexico. Work on installation of six to seven megawatts of solar generating capacity began with ground-breaking in April. Space at the solar farms is being allocated for energy storage.
Kit Carson’s quest for 100 percent renewables may be aided by actions in California. The California General Assembly in 2010 ordered the state’s three big investor-owned utilities to add 1.3 gigawatts of energy storage to the grid there by 2020. The answers may arrive just in time for Kit Carson to achieve its aspirational goal by 2022.
Rural America in the last presidential election overwhelming voted for Donald Trump to be president. In some areas of co-op country, such as eastern Colorado, more than 80 percent of votes went to Trump, even after his very unconservative boasts about groping women became available on every TV set and computer in the country.
Northern New Mexico didn’t fit the pattern. There, the Hispanic population, if conservative, too, votes Democratic, and this last election was no exception: it went for Clinton.
But Luis Reyes, the long-time manager of Kit Carson Electric, says get very far outside Taos and the economic profile is very similar to other rural areas.
“Taos lacks jobs,” says Reyes, who grew up in Taos, the son of a carpenter, and became an engineer before joining Kit Carson in 1983. “The unemployment rate in rural areas is high, but it’s much worse than the official rate. At some point, people give up hope and quit looking,” he says.
“The locals are living outside town because it has become too expensive. What we are trying to do with renewable energy economics is to create jobs. The economic development aspect of this project is very, very important. Coops should be creating economic development opportunities to keep jobs in our rural areas. If we don’t have people who live here, we don’t need energy.”
What Kit Carson has set out to do, he says, other co-ops must also do.
“We are on the cutting edge of what co-ops should be in the sense of having more control over their power supply and embracing the many technologies that will stabilize rates and give customers choice. Taos is not that much different than other coops in Colorado or Tennessee. (Customers) want affordable rates, they want accountability, and they want choice.”
After its exit from Tri-State, Kit Carson linked with a Florida-based aggregator of energy sources called Guzman Energy. Representing Guzman is Chris Riley, who has an ironic background for this shift to renewables. He’s from the coal country of Utah, and like his father and grandfather, he might have worked in the mines, too. Instead, after graduating from high school on a Friday night in Castle Dale, he enlisted in the U.S. Navy on Monday morning.
With that, he left those small towns of east-central Utah with their history of tragedies—including a mine fire that killed 27 people when he was growing up and, more recently, in 2007, a cave-in that resulted in 7 deaths.
Riley went on to study nuclear power in Florida, undergraduate study at the U.S. Naval Academy, then the Harvard Business School. At Harvard he learned how to identify market inefficiencies and market disruptions.
Joining with Cuban-born Leo Guzman, a financier with energy-related experience at Chase Manhattan Bank and Lazard Fréres, Riley has focused on how to disrupt the electrical market.
“This is an industry that has operated largely in the same way since the electrification of the United States—and then boom, we had the shale gas revolution, then renewable energy came out of nowhere to be a very significant part of the grid,” says Riley. “Leo saw an opportunity to take advantage of this change.”
In the deal struck with Kit Carson last year, Guzman will provide the wholesale supply to Kit Carson for up to 10 years.
Unlike rising costs for fossil fuels, Riley and Kit Carson argue that this shift to renewables can also benefit the local economy by providing price transparency. Prices won’t rise, they say. That gives businesses an incentive to invest in the local community as compared to other locations, knowing that energy costs will remain fixed for a decade or more.
“They will know what their price will be in the future,” says Riley.
Riley makes no secret of his company’s ambition to start picking up other rural electrical providers and municipalities.
“Anywhere we can come and provide lower rates, clean energy and price visibility,” says Riley. Last year, it delivered a one-megawatt solar farm to Aztec, a town of 1,000 on the edge of the San Juan oil-and-gas basin in northwestern New Mexico.
Renewable Taos sees a 100 percent renewable portfolio for Kit Carson Electric as a first step. With its higher elevation, abundant sunshine, and low humidity, it has strong solar intensity, what is called insolation. Renewable Taos foresees Taos producing 200 megawatts of electricity for export to metropolitan areas.
Accelerating changes in utility world
This may all sound faintly fairylandish and distant, like the geodesic domes and communes that sprouted in the early 1970s. Neither became common.
But other landmark changes have been swift and deep. Most vivid have been the changes in telephony. In 1985, for example, Grand County, located at the headwaters of the Colorado River, still had five separate telephone exchanges, and they were all long-distance calls from one another at 30 cents a minute. It was long-distance from Granby to Grand Lake 16 miles away, long-distance to Winter Park 16 miles in the other direction, long-distance to Hot Sulphur Springs 11 miles away.
Then, accelerated by the breakup of the Bell monopolies, the telecommunications industry changed rapidly. By 2006, just 21 years later, the first smartphones arrived. Now, all the world and all of the Internet is available in your average teenager’s hip pocket.
We’re just starting to see similarly radical changes in the world of utilities. From Marin County in California to the empire-sized experiment now underway in New York state, our energy systems are being recalculated. The utility of the past, with its business model predicated on selling electrons created in large, central power plants is most assuredly not the utility of the future. Future utilities will offer cleaner energy and focus on energy services, not raw electrons. As Lovins observed long ago from his Aspen-area base, you care only whether your beer is cold, not how much electricity you get.
Kit Carson seeks to be at the front edge of the fast-changing utility world. If it delivers answers to what bedevils the rest of rural America, it may become known at least as much for its business innovation as for its artists.
This was originally published on June 8 in Mountain Town News, a weekly e-zine delivered to subscribers. Subscriptions are $45 a year.