Colorado energy policy is undergoing a major overhaul with four transformative bills working their way through the legislature and the state’s Public Utilities Commission embarking on the revision of six sets of rules.
“It is an exciting time,” said Will Toor, executive director of the Colorado Energy Office. “The political leadership, the economics and the technology are all lining up.”
The centerpiece is a climate bill, House Bill 1261, that aims to cut greenhouse gas emissions in Colorado – power plants and transportation are the two biggest sources – 50% from 2005 levels by 2030 and 90% over the next 30 years.
A bill reauthorizing the PUC, Senate Bill 236, adds a “social cost of carbon” in evaluating future energy projects, and another, House Bill 1313, sets the template for Xcel Energy to move forward with its goal to reduce its greenhouse gas emissions 80% by 2030 and have zero carbon emissions by 2050.
Another bill, House Bill 1314, would help workers who lose their jobs at shuttered coal-fired power plants transition to new employment. The PUC reauthorization bill would also require utilities to file a workforce transition plan when closing a coal-fired plant.
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Meanwhile, the PUC is slated to begin hearings Monday on revisions to the rules governing how utilities plan for new resources; the state renewable standard; community solar gardens; purchasing power from local renewable energy facilities; the interconnection standards for projects; and net metering, the program that pays homeowners with solar panels for the electricity they put on the grid.
Using the power of elected office
There are a variety of reasons for the burst of activity, according to legislators, state energy officials, environmental advocates and utility executives.
First and foremost was last November’s election, which swept Democrats into the governor’s office, the state attorney general’s office and majorities in both houses of the legislature.
“This is what they campaigned on, so this is what they are doing,” said Alice Madden, executive director of the Getches-Wilkinson Center for Natural Resources, Energy, and the Environment at the University of Colorado Law School.
“It is a unique moment, when you have consensus,” said Madden, a former Democratic House majority leader. She noted that the bills have faced little opposition in hearings, though the climate bill has passed two House committees on party-line votes.
Behind the legislative majorities is a growing accord among Coloradans that climate change is happening and having adverse impacts in the state, said Kelly Nordini, executive director of Conservation Colorado.
Nordini pointed to a February poll of 400 Coloradans done by the Global Strategy Group in which 84% said they wanted federal and state action on climate change, and 79% supported a 100% renewable energy policy. The company does polling for many Democratic politicians and committees.
The poll also found that 42% of independent voters said the most important factor in their vote for governor was “energy and environment.” Gov. Jared Polis had made getting the state to 100% renewable energy by 2040 a plank in his platform.
“Voters in Colorado have consistently said we want to be out in front in clean energy,” Nordini said.
Public concern has also been driven by two reports released last fall – the IPCC Special Report on Global Warming and the National Climate Assessment – which forecast that if steps aren’t taken by 2030, it will be hard to avoid the most serious impacts.
“People read these reports, watch the devastating and increasing impacts of extreme weather events, think about the children in their own lives, and they want action,” said Erin Overturf, an attorney with Western Resource Advocates.
This didn’t start at the ballot box in 2018
While there is a surge in legislation and regulatory action, Alice Jackson, president of Xcel Energy in Colorado, the state’s largest electricity provider, said it is all part of an arc that goes back to 2004 when the state first adopted a renewable energy standard.
“For a long time we chased renewables, now we have a high percentage of renewables,” Jackson said. “When you chase renewables, you are driving carbon out of the system, now we are pursuing the remaining carbon that is the next iteration.”
Another accelerant has been President Donald Trump and his administration’s continuing discounting and denial of the impacts of climate change.
“State, local and citizen-driven action has become the norm,” said Pam Kiely, senior director of regulatory strategy for the Environmental Defense Fund. “It isn’t in spite of the Trump administration, it is because of the Trump administration.”
Indeed, the Washington state legislature is moving a 100% renewable energy bill, the Maryland legislature recently passed a 50% renewable energy by 2030 bill, New Mexico Gov. Michelle Lujan Grisham has already signed legislation for the state to reach zero carbon emissions by 2050.
On Monday, Earth Day, Democratic Nevada Gov. Steve Sisolak signed a bill raising the state’s renewable energy requirement to 50% by 2030 with the goal of zero emissions by 2050.
New York, Minnesota and Illinois are among the states that are already using a social cost of carbon assessment in evaluating projects.
The social cost of carbon is complex calculation used to measure the dollar value of long-term damage caused by a ton of carbon dioxide emissions in a year. It factors things including increased cooling costs, decreased heating costs, changes in agricultural productivity, impacts on human health and property damage caused by severe weather, such as flooding.
The shifts in public opinion and politics also come at a time when economics and technology are making such a push possible, Toor said.
In August 2018, Xcel Energy won PUC approval for its Colorado Energy Plan, which will invest $2.5 billion in more than 2,000 megawatts of wind, solar and storage, more than three times the capacity of two coal-fired units it is closing at Comanche Station in Pueblo.
When Xcel went out for bids for new projects, it was inundated with 430 proposals. By way of comparison, the company’s 2013 solicitation drew 55 bids.
The overwhelming response required the utility to reassess the process by which it evaluates projects, Jackson said.
The median price for wind projects was 1.8 cents a kilowatt-hour, and solar came in at 2.95 cents a kWh.
Xcel estimates the all-in cost of operating the two coal-fired units it plans to close at its Comanche units is about 3.1cents per kWh.
A 2018 energy cost study by the financial adviser and consultant Lazard put the cost of natural-gas turbines at 4.1 cents to 7.4 cents a kWh compared with 2.9 cents to 5.6 cents for wind.
“The evolution of renewable technology has had an impact on the cost of clean energy,” Toor said. “It is cheaper to build new utility-scale wind and solar than operate some of our legacy coal plants. They can save money.”
Xcel estimates that the Colorado Energy Plan will put the utility at 55% renewable energy by 2026, cut carbon emissions 60% and save customers about $200 million.
It is in this political, social and economic environment that the legislature and the PUC are pushing for new energy policies.
The climate bill sets the “goals” of reducing greenhouse gas emissions 26% over 2005 levels by 2026, 50% by 2030 and 90% by 2050.
How that is done in policy and regulation is left to the Air Quality Control Commission, a nine-member board appointed by the governor and confirmed by the legislature. The current board includes public-health and air-quality experts, environmentalists and members with backgrounds in the oil and gas and utility industries.
The bill’s guidance is that “all available practical methods which are technologically feasible and economically reasonable” be considered.
Among the rules AQCC has developed are ones to control for hazardous pollutants, ozone pollutants, methane and lead in the air. Rulemakings are months-long processes.
“The AQCC rulemaking process is a very transparent process,” Madden said. “This isn’t new territory. We’ve been heading in this direction, the AQCC has been heading in the direction, the utilities are heading in this direction.”
Cars are a big part of the blame
Regulations would likely focus on the main emission sources. Electricity generation accounts for 37% of all emissions, and transportation, 23%, according to an inventory done for the state Department of Public Health and Environment.
Coal-fired power plants provided just over half the state’s electricity in 2017, according to the federal Energy Information Administration. The bulk of transportation emissions, 61%, comes from burning motor gasoline.
Oil and gas drilling and coal mining are responsible for about 8% of emissions and agriculture nearly 6%.
Agriculture has been exempted from regulation and so has Xcel, because it already has a greenhouse reduction plan overseen by the PUC.
The utility worked to include that in the climate bill, Jackson said. “We don’t want our customers to be double-charged,” Jackson said. “That bill is complementary to what we are doing.”
The so-called Xcel bill, House Bill 1313, puts in the statute the approach Xcel used to create the CEP and is a one-off piece of legislation applicable to the utility’s next resource plan, Jackson said.
It sets a goal of an 80% emissions reduction, provides for a workers’ transition plan and sets up a guaranteed cost recovery mechanism through a rate adjustment clause.
While targeted on Xcel, Overturf said it also creates a model for other utilities companies in using solicitations for clean energy projects and “harnessing the power of the market.”
Since 2008, a total of 81 gigawatts of coal-fired capacity across 696 units at 360 plants have been closed as the units were no longer economical or faced pollution compliance problems.
In 2018, a record 15.3 GW were closed at 22 plants in 13 states, according to the Institute for Energy Economics and Financial Analysis, and there was a loss of 6,641 jobs at coal-fired plants based on a report by the National Association of State Energy Officials.
Training coal plant workers for new jobs
One of the big pushes in Colorado legislation, spurred by the labor unions, is to ensure coal plant jobs losses are addressed, most particularly in House Bill 1314, which creates a transition office in the division of employment and training that would offer benefits and help retrain displaced coal plant workers.
At a jobs and climate caucus last year, the unions came to the position that “climate change is real and needs to be addressed and we have to make sure fossil-fuel dependent workers are fairly treated in this transition,” said Dennis Dougherty, executive director of the Colorado AFL-CIO.
The addition of a social cost of carbon in the PUC reauthorization bill will not affect rates, but only be used as a tool in evaluating future projects for Xcel and Black Hills Energy, the state’s other investor-owned utility, which serves the Pueblo area.
“The basic idea is that the commission take into account the cost of all the effects of a project,” Toor said. The $46-a-ton price tag comes from a federal interagency evaluation of costs to public health and welfare and the environment from carbon emissions
Jackson said that the PUC and Xcel have already been evaluating projects on a range of carbon costs and that down the road when the state and the utility are trying to get to their final targets, the carbon cost may help promote new technologies.
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