A Clean Win in Colorado
Colorado has joined the list of states requiring its utilities to tap into clean solar and wind energy. Voters in the Centennial State approved Amendment 37 on November 2, marking the first time that a ballot initiative was used to establish a renewable portfolio standard.
The measure, which was approved by 52 percent of voters, requires Colorado utilities servicing 40,000 or more customers to produce at least three percent of their electricity from renewable energy beginning in 2007, and 10 percent by 2015. It requires that four percent of the renewable energy come from solar power.
Colorado became the 17th state with a renewable portfolio standard, and the first to do so through direct citizen action. The Colorado legislature had tried to pass bills with renewable portfolio standard on three occasions, but each time concerns about increased consumer costs scuttled the legislation.
But the states that currently require the use of renewable energy have all seen costs stay the same or in many cases go down, according to Jon Wellinghoff, who helped to write the Colorado ballot language and Nevada's portfolio standard and is a partner at the law firm of Beckley Singleton.
Wellinghoff said utilities are fiscally conservative and are therefore hesitant to invest in solar and wind energy farms. "You have to create the renewable markets to get developers to risk money to build the plants," he said.
Utilities prefer the flexibility of being able to buy additional natural gas or coal to meet short term needs instead of making the long term investment in renewable projects that can take years to complete, according to Wellinghoff.
Power company Xcel Energy opposed the Colorado ballot measure because it requires a percentage of energy sales – which can substantially fluctuate – come from renewable resources, according spokesman Mark Stutz. He said the company would have preferred that the measure specify an amount of energy capacity, which would simplify investing and management.
Stutz said that the uncertainty of the continuation of the federal energy production tax credits makes it more difficult for utilities to plan for the future. In October, Congress voted to continue the 1.8 cent per kilowatt hour wind power tax credit through 2005. "You can't assume that they will always be in place," Stutz said.
Xcel currently has wind farms in Colorado with 250-megawatt production capacity, and the company had already planned on expanding its wind investment to 750 megawatts, according to Stutz. He said the company has not made any significant solar energy investments to date.
Ronald Binz, of Public Policy Consulting, studied the potential economic impact of Amendment 37 and found that it would not likely effect consumer rates much in either direction. "The bottom line is I don't think it will matter financially," said Binz. He said the measure affects seven power providers.
The report states, "The wind resources available in Colorado make it one of the better states in the country for wind power prospects." The cost of wind power in Colorado is expected to drop from five cents per kilowatt hour in 2004 to three and a half cents in 2023, according to the report.
Binz said that renewable energy is already becoming cost competitive with natural gas and coal power, which continue to become more expensive. In November, Xcel raised the price of natural gas charged to consumers by 24 percent. Binz said the company was moving from an annual Gas Cost Adjustment to a Monthly Gas Coast Adjustment to more accurately reflect the actual cost of the natural gas. Consumer and business prices will rise by 18-20 percent, Binz said, because the company includes changes in the cost of delivery and maintenance in its billing.
Wellinghoff said that tax credits for renewable energy help to put it on equal footing with other energy sources. "Fossil fuels, such as coal and natural gas, as well as nuclear energy have enjoyed subsidies for years." He said many of the recent natural gas power plants were built with the aid of defense department subsidies.
While state officials across the country and utilities have quarreled about the financial impact of using renewable energy, Wellinghoff said they have failed to consider its environmental benefits. He said that reduction of carbon dioxide and greenhouse gas emissions did not factor into Nevada's portfolio program, and the state has not studied the environmental impact of the program since it went into effect in 2001.
"The federal Environmental Protection Agency is looking into emission reduction credits, but it has not been part of any of these state laws," said Wellinghoff. He said that Idaho and Utah are also considering enacting renewable portfolio standards.