Paul Rodden • Season: 2024 • Episode: 354
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Welcome to The Hydrogen Podcast!
In episode 354, In this episode, Paul discusses Northern New Mexico’s groundbreaking green hydrogen project using reclaimed water from a Superfund site, and how investors should evaluate hydrogen opportunities. He provides insight into assessing climate impacts, supply-demand guarantees, and long-term investment returns in the evolving hydrogen market.
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Transcript:
Northern New Mexico gets into green hydrogen with a very special water source. And how should investors evaluate hydrogen opportunities? I’ll go over all of this and give my thoughts on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy, where is capital being deployed for hydrogen projects globally, and where are the best investment opportunities for early adopters who recognize the importance hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
First off today in an article in the SantaFenewmexican.com Geoffrey Plant writes Questa hydrogen project getting over $95 million in federal funds.
Kit Carson Electric Cooperative is set to receive a $95.6 million federal award for its proposed Questa Green Hydrogen Project, the utility has announced.
The hydrogen project is intended to benefit the electric co-op’s entire service territory in Northern New Mexico while repurposing reclaimed water from the closed Chevron molybdenum mine, now a Superfund site, to manufacture hydrogen.
When the mine closed, hundreds of jobs were lost, putting pressure on Questa’s economy. In addition to adding to the region’s renewable energy infrastructure, Kit Carson’s green hydrogen initiative is intended to help restore employment opportunities to the area.
The federal grant is has been offered through the Rural Utilities Service’s New ERA Program — Empowering Rural America — which was started to support energy projects that reduce carbon greenhouse emissions. The National Renewable Energy Laboratory led and conducted a project feasibility study in conjunction with Kit Carson.
Kit Carson CEO Luis Reyes said the utility has essentially won the competitive award, but the amount is 30% less than what it had initially sought, so it is now required to undergo a supplementary application process. The utility has 60 days to submit documents outlining how it will modify its proposal to accomplish its original carbon emission reduction goals using 30% less money.
“The money is ours to lose,” Reyes said, expressing confidence the utility will receive a favorable final decision on the award before the end of the year.
He said the project is designed to lead to 17% lower emissions, a 25.6% decrease in carbon intensity and an 18.3% increase in renewables.
“The overall reduction would be 874,724 tons of CO2 over a 30-year life span,” Reyes said.
Reyes said the utility’s goal would be to complete the project by 2027 or 2028.
The project would create hydrogen production and new energy infrastructure, and would promote the adoption of clean hydrogen in targeted communities in Taos County, including Questa, Taos, Picuris Pueblo and Taos Pueblo. As part of the project, each community would have custom green hydrogen facilities and corresponding renewable energy-generation technology within their borders, Kit Carson says.
Once complete, the Questa Green Hydrogen Project would signify a leap forward in actualizing green hydrogen generation, according to Kit Carson. It would use solar generation to power facilities — which makes the produced hydrogen “green” — and treated wastewater from the Superfund Site, ultimately creating up to 16 hours of “long-duration” energy storage technology.
Gov. Michelle Lujan Grisham threw her support behind the co-op’s bid to fund the green hydrogen project.
“This project’s success sends a clear message: New Mexico is, and will continue to be a national leader in clean hydrogen,” Lujan Grisham said in a news release. “Not only will this facility substantially upgrade Northern New Mexico’s energy resilience, but it will also provide hundreds of jobs to our state’s rural communities.”
Questa Mayor John Ortega said he is “grateful to KCEC for getting this award,” adding the funding is the “culmination of several years of hard work and great partnerships.”
“This is a major step in redefining Questa from an old mining community into a new green energy community,” Ortega added. “This will also start to redefine our post-mining economy and bring much needed jobs as well as potential tax revenue to the village of Questa.”
The new funding is in addition to $500,000 KCEC received from the U.S. Department of Energy earlier this year to conduct planning and safety studies for the proposed project.
Okay, so Questa and Kit Carson Electric Co Op getting into the hydrogen game. Now, most of you know that I’m from New Mexico and go back frequently, so to see this area embracing hydrogen gets me really excited. I’ve personally spoken with the governor, and can say that she, along with several others in her cabinet, are extremely pro hydrogen. But there is another big positive about this announcement. Now if you’re an avid listener to the show, you know one of my biggest concerns over green hydrogen is the water usage, and being from a desert state makes one keenly aware of how precious water resources are in these areas. So to use water from an old molybdenum mine is perfect cleaning wastewater from oil and gas or mining is the right solution when talking about green hydrogen in these areas. So great job. New Mexico, Questa and Kit Carson for getting this project kickstarted. And I will make sure to be on the lookout as this project moves forward.
Next in an article in forbes.com Beth Trask and Leslie Labruto for the Environmental Defense Fund, write how investors can help the world get hydrogen right. The hydrogen economy is rapidly emerging as a cornerstone of global decarbonization.
Hydrogen’s potential to deliver clean, versatile energy across key industries has generated significant investor interest, with over $680 billion in projects announced around the globe.
That comes to more than 1,500 projects worldwide, with Europe leading the way with 617 projects and North America following with 280. End-use applications for these projects vary from fertilizer production and steelmaking to transportation and electricity generation.
However, as this market matures, understanding the nuances of both the climate science and investment trends driving the hydrogen economy becomes increasingly crucial. It’s important for investors to be asking the right questions. Hydrogen is carbon-free, but it is not inherently climate-neutral nor environmentally friendly.
Producing hydrogen is a complex, highly energy-intensive, and potentially polluting process — even when it’s labeled as “clean.” And hydrogen itself is an indirect greenhouse gas that contributes to global warming when it leaks.
Depending on many factors, hydrogen can deliver a range of outcomes, from significantly better for the climate to even worse than the fossil fuel status quo. Environmental Defense Fund’s recent report, Hydrogen Beyond the Hype, shares the following guiding principles for decision-makers considering hydrogen projects:
We have an opportunity to get hydrogen right — before new systems are built at scale globally. Now is the time to establish the practices needed to maximize hydrogen’s benefits for the climate, ecosystems and human society, while minimizing its risks.Hydrogen should be used where it can cost-effectively reduce the most climate warming at the lowest possible risk. Deployment of hydrogen should be evaluated against non-hydrogen alternatives (such as electrification or improving energy efficiency) to guide limited resources to applications where hydrogen provides the greatest benefits (such as maritime shipping, where there is currently no solution other than hydrogen-derived fuels to achieve sector-wide decarbonization). Hydrogen must be evaluated based on a full system-level assessment.
Assessments by investors, developers and third parties should consider the climate impact of all gases emitted while producing, moving, storing and using hydrogen. This includes methane, carbon dioxide and hydrogen itself. Assessments should also examine hydrogen’s other potential risks and benefits, including air quality and ecosystem impacts, and economic and social factors on local and global levels. Hydrogen systems should be designed to minimize leaks and other emissions. Emissions of all climate-warming gases throughout the hydrogen value chain — from production to handling to use — must be minimized to avoid compromising the intended climate benefits. And these emissions need to be monitored, reported and verified.
But why is this a critical moment in hydrogens rollout? The hydrogen economy is moving fast, but there is still time to make sure new projects are evaluated according to their actual benefits and risks — rather than just the hype.
According to the Hydrogen Council, as of May 2024, just over a quarter of announced projects had progressed past what’s known as a “final investment decision,” a major milestone that marks the decision to move forward with construction.
So what does the investment landscape look like now, and how can the investors fueling the hydrogen economy incorporate the guiding principles above?
Private investors serve a key role in driving innovation, expansion and growth. Venture capital firms fund early-stage startups developing groundbreaking hydrogen technologies and business models. At this stage, investors can ask developers and startups how climate benefits — or harms — affect the business case for their projects.
Private equity firms often invest in more mature companies with established technologies and revenue streams. These firms should also evaluate projects, companies and developers with both a financial and climate lens.
More specifically, during the due diligence process, investors can ask about ways companies and projects are tracking and minimizing leaks and emissions, while also evaluating whether hydrogen is the most appropriate technology compared with other clean energy solutions.
Complementing private capital, institutional investors such as pension funds, insurance companies and sovereign wealth funds are increasingly recognizing the long-term potential of hydrogen.
Their substantial capital and risk management expertise contribute to the market’s stability and growth. So it is essential that they build their own internal knowledge, and build on the work of venture capital and private equity companies to ensure these even larger influxes of capital are guided by the principles listed above.
As governments and corporations set aggressive climate targets, the demand for clean energy solutions is escalating.
In particular, green hydrogen, produced using renewable energy, is capturing global attention because it presents a fossil-free pathway to decarbonize industries that are hard to electrify.
Improving due diligence — making sure investors take climate impacts into account — is essential for supporting the hydrogen market, achieving decarbonization goals, preventing investments with poor returns, and avoiding unintended consequences for the climate.
As the hydrogen market continues to evolve, we anticipate even greater investor interest and a wider array of investment opportunities — but these must be taken with eyes wide open, alternatives considered and critical climate risks mitigated.
Okay, so depending on the level of investor you are or represent, how should you view hydrogen investments? Now, I know I’m short of on time, but really, the overall point I’m getting from this article is to make sure the economic return is there before allocating capital to a hydrogen project or technology. Now if you’re an investor, I know that. You know this. I also know we’re talking about an incredibly capital intensive industry that’s still in its infancy and will be for decades to come. We also don’t have many historical projects to base future returns on this is why it’s critical, when investing in either technology or project development that supply and demand both have long term guarantees.
All right, that’s it for me, everyone. If you have a second, I would really appreciate it. If you could leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, YouTube, whatever it is, that would be a tremendous help to the show. And as always, if you ever have any feedback, you’re welcome to email me directly at info@thehydrogenpodcast.com. So until next time, keep your eyes up and honor one another.
Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more. I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.
