Comment: 5 Reasons Why Colorado Should Increase—Not Roll Back—Its Renewable Energy Standard

Source: By Steve Clemmer, director of energy research, Clean Energy, Union of Concerned Scientists • Posted: Thursday, February 26, 2015

On February 5th, state Senate Republicans passed a bill to roll back Colorado’s renewable energy standard (RES), which has helped make the state a national leader in clean energy. Rolling back the RES is precisely the wrong direction for Colorado to go at this time. In addition to providing important benefits to Colorado’s economy, increasing renewable energy use is one of the most cost-effective strategies for complying with the EPA’s proposed power plant carbon standards.

 The current standard requires investor owned utilities (IOUs) to supply 30% of their electricity from renewables by 2020, and sets a lower standard of 20% by 2020 for large rural electric cooperatives and 10% by 2020 for smaller co-ops and municipal utilities. The Senate bill (SB 44) proposes to roll back the existing standard for IOUs and large co-ops to 15% by 2020.

Here are 5 reasons why Colorado should stop the rollback and increase its renewable standard instead:

1) Colorado’s RES has made the state a national leader in clean energy.

Colorado was the first state to pass an RES by popular vote in 2004 through a ballot initiative. Since that time, the Colorado legislature has amended the RES three times, significantly increasing the targets.

Source: EIA data.

Because of this leadership, non-hydro renewables have increased from 0.6% of Colorado’s electricity generation mix in 2004 to 15% in 2013, according to EIA data (see figure).  Wind alone provided 13.8% of Colorado’s electricity and 19% of Xcel Energy’s power in 2013. Xcel, the largest retailer provider of wind in the country, also broke a U.S. record on May 24, 2013 when wind provided more than 60% of its electricity demand in Colorado.

At the end of 2014, Colorado ranked 10th in the country for installed wind capacity, with 2,593 MW (according to AWEA), and 8th for installed solar capacity, with 376 MW (according to SEIA).  Colorado is a national leader in community solar, with 19 projects installed or under development (see map and policy details from Vote Solar). The Interstate Renewable Energy Council (IREC) also gave Colorado an “A” for its well-designed net metering policy.

The recent increases in renewables and efficiency to meet Colorado’s energy efficiency resource standard (EERS) have played a key role in replacing generation from retiring coal plants and preventing the state from becoming overly reliant on natural gas.  While Colorado is still dependent on coal to provide nearly two-thirds of its electricity (see figure above), the market share of coal has been declining over the past several years.

2) Utilities are meeting or exceeding the current standard at little to no cost.

Xcel, which serves more than half of the state, is on pace to exceed the 30% standard ahead of schedule. In 2012, Xcel procured 80% more renewable energy than it needed, because of its cost-effectiveness—just $1.44 per month for an average residential customer, according to a 2014 NREL report. Black Hills Energy has also had no difficulty meeting the targets at a modest cost of $2.04 per month for an average homeowner. According to current law, the cost of the RES cannot exceed 2% of annual customer bills.

Many co-ops are also on track. Tri-State Generation and Transmission Association, a wholesale electricity supplier serving 44 electric cooperatives in Colorado and three other states, will be on track to meet its renewable target (the non-distributed generation portion) through 2022, following the completion of the 150 MW Carousel Wind Farm in Kit Carson County.

3) The cost of renewable energy is falling.

One of the main reasons why the cost to consumers has been so low is because utilities have been able to buy wind power at lower prices than new natural gas power plants. For example, Xcel recently signed two wind power purchase agreements (PPAs) with an average “levelized” cost of $35/MWh over 25 years vs. $61-87/MWh for a new natural gas combined cycle plant, according to Lazard and EIA. In 2013, Xcel also received bids for utility scale solar PV projects that were competitive with new natural gas plants. Nationally, the cost of wind and solar has fallen by more than 60% over the past five years, according to the U.S. Department of Energy and SEIA.

By signing long-term fixed price contracts for wind and solar, Xcel also sees these resources as providing a valuable long-term hedge against rising and volatile natural gas prices (see slide 30 here). In fact, the Colorado Public Utilities Commission estimates that one of Xcel’s recent wind projects will actually save ratepayers $100 million over 25 years.

Xcel also worked with the National Center for Atmospheric Research (NCAR) in Boulder to develop a state-of-the-art wind forecasting system that has reduced forecast errors by more than 38%, saving customers more than $25 million in fuel costs at coal and natural gas plants.

4) Renewable energy is good for Colorado’s economy.

Colorado’s RES has also been successful in creating jobs and attracting new clean energy businesses to the state. A new Solar Foundation report ranks Colorado 11th in country for employing 4,200 workers in the solar industry in 2014, up from 3,600 workers at over 360 companies in 2013.

The wind industry made the following contribution to Colorado’s economy in 2013, according to AWEA:

  • 22 wind turbine component manufacturing facilities
  • 3,000-4,000 direct and indirect jobs in operations and maintenance, construction, manufacturing, and other sectors
  • $4.3 billion total cumulative capital investment in 29 wind projects
  • $7 million in annual land lease payments and additional tax revenues for local communities

Colorado is also home to one of the world’s leading renewable energy research institutions, the National Renewable Energy Laboratory (NREL), with 1,721 full-time employees and 678 visiting researchers.

5) Renewable energy is a cost-effective strategy for complying with the EPA’s carbon standards.

As my colleague Jeff Deyette has written, Colorado is well-positioned to meet and even exceed the EPA’s proposed target of reducing the state’s power plant carbon emissions rate 35% below 2012 levels by 2030.

To meet the state’s current RES targets, Lawrence Berkeley National Lab projects that renewables will provide nearly 20% of Colorado’s total electricity use by 2020. (These levels represent an average due to differences in targets for IOUs and co-ops and other provisions such as extra credit multipliers for certain projects.)

An October 2014 UCS analysis found that by continuing to increase Colorado’s RES targets after 2020 at rates slightly below the deployment levels achieved between 2008 and 2013 to reach 32% by 2030 (see figure), the state could achieve deeper emission reductions than the EPA’s proposed standard with little to no impact on electricity prices.

In addition to reducing carbon emissions, renewable energy sources like wind and solar save water and can help make the state more resilient to heat, drought, wildfires and other climate impacts.

Moving forward, not backward

It’s clear that Colorado should stop the ill-conceived effort to roll back the state RES. The effort is sponsored by several state senators with ties to the fossil fuel-funded American Legislative Exchange Council (ALEC)including the group’s state chair, who want to turn back the clock on Colorado’s progress on clean energy. ALEC has tried to roll back renewable energy standards in more than a dozen states in recent years, and failed in nearly every one because the benefits of clean energy are so compelling.

Instead, Colorado should consider increasing the RES to maintain its national leadership in developing a clean energy economy and to play a primary role in cost-effectively complying with the EPA power plant carbon standards.

About the author: Steve Clemmer is the director of energy research and an expert on the economic and environmental benefits of implementing renewable energy technologies and policies at the state and national levels. He holds a master’s degree in energy analysis and policy from the University of Wisconsin. See Steve’s full bio.