Renewable Energy Standard
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Notes: In July 2015, the Tenth Circuit Court of Appeals upheld the constitutionality Colorado's renewable energy standard (Energy & Environment Legal, et al v. Epel, et al, case number 14-1216).
Enacted May 2015, S.B. 15-254 extends the 3.0 credit multiplier for municipal utilities to systems under contract for development by August 1, 2015, and producing electricity before December 31, 2015.
Colorado became the first state in the U.S. to enact a renewable portfolio standard (RPS) by ballot initiative (i.e., via an initiated state statute) when voters approved the Colorado Renewable Energy Requirement Initiative, also known as Amendment 37, in November 2004. Each qualifying retail utility is required to generate or cause to be generated electricity from eligible energy resources in the following proportions of its retail electricity sales for 2020 and each year thereafter: 30% for each investor-owned utility (IOU), 20% for each electric cooperative serving 100,000 meters or more, and 10% for each electric cooperative serving less than 100,000 meters and each municipal utility serving more than 40,000 meters.
Eligible energy resources include recycled energy, renewable energy resources, or greenhouse gas neutral electricity generated using coal mine methane or synthetic gas (conditional on a determination from the Colorado Public Utilities Commission (PUC), done on a case-by-case basis). Synthetic gas is defined as “gas fuel produced through the pyrolysis of municipal solid waste.”
Recycled energy is defined as "energy produced by a generation unit with a nameplate capacity of not more than 15 megawatts (MW) that converts the otherwise lost energy from the heat from exhaust stacks or pipes to electricity and that does not combust additional fossil fuel,” and excludes energy produced by any system whose primary purpose is the generation of electricity.
Renewable energy resources include solar, wind, geothermal, biomass (nontoxic plant matter consisting of agricultural crops or their byproducts, urban wood waste, mill residue, slash, or brush; animal wastes and products of animal wastes; and methane produced at landfills or as a by-product of the treatment of wastewater residuals), new hydroelectricity with a nameplate rating of 10 MW or less, hydroelectricity in existence on January 1, 2005, with a nameplate capacity of 30 MW or less, and fuel cells using hydrogen derived from eligible renewables.
Colorado’s RPS requires each IOU to generate or cause to be generated specific percentages of eligible energy resources according to the following schedule:
- 3% of its retail electricity sales in Colorado for the year 2007;
- 5% of its retail electricity sales in Colorado for the years 2008-2010;
- 12% of its retail electricity sales in Colorado for the years 2011-2014;
- 20% of its retail electricity sales in Colorado for the years 2015-2019; and
- 30% of its retail electricity sales in Colorado for the year 2020 and each following year.
Electric Cooperatives and Municipal Utilities
Colorado's RPS also requires all electric cooperatives and each municipal utility serving more than 40,000 customers to provide specific percentages of renewable energy or recycled energy.
The following schedule applies to municipal utilities serving more than 40,000 customers and cooperative utilities that provide service to fewer than 100,000 meters:
- 1% of its retail electricity sales in Colorado for the years 2008-2010;
- 3% of its retail electricity sales in Colorado for the years 2011-2014;
- 6% of its retail electricity sales in Colorado for the years 2015-2019; and
- 10% of its retail electricity sales in Colorado for the year 2020 and each following year.
Electric cooperatives serving 100,000 or more meters are subject to a higher requirement of 20% of its retail electricity sales for 2020 and each year thereafter.
Generation and Transmission Cooperatives
Generation and transmission cooperatives provide wholesale electric service directly to Colorado electric associations that are its members. At least 20% of the energy a generation and transmission cooperative provides its Colorado members at wholesale must be generated from renewable energy in 2020 and each following year. For the purposes of this law, generation and transmission cooperatives may count the renewable energy generated or caused to be generated by their member utilities towards their requirement.
IOUs must have a certain percentage of their retail sales come from either wholesale distributed generation (DG) or retail DG,* regardless of technology type, according to the following schedule:
- 1% of its retail electricity sales in 2011 and 2012;
- 1.25% of its retail electricity sales in 2013 and 2014;
- 1.75% of its retail electricity sales in 2015 and 2016;
- 2% of its retail electricity sales in 2017-2019; and
- 3% of its retail electricity sales in 2020 and each following year.
Beginning in 2011, at least 50% of an IOU's or electric cooperative's DG requirement must be generated by retail DG systems located on-site at customers’ facilities. Beginning January 1, 2015, the PUC may reduce the DG requirement if a utility submits an application to them and the PUC finds the requirement is no longer in the public interest.
A cooperative utility must meet a distributed generation requirement, which depends on the number of customers it serves:
- For cooperative utilities that provide service to 10,000 or more meters, 1% of its retail electricity sales (excluding industrial retail sales) must come from distributed generation in 2020 and each following year.
- For cooperative utilities that provide service to less than 10,000 meters, 0.75% of its retail electricity sales (excluding industrial retail sales) must come from distributed generation in 2020 and each following year.
Cooperative utilities may count community solar gardens (see section below) as retail DG.
The Colorado RPS includes credit multipliers for four types of projects. A project can only receive one multiplier. These multipliers cannot be combined:
- Each kilowatt-hour (kWh) generated from eligible energy resources—excluding retail DG and electricity generated from eligible energy resources beginning operation on or after January 1, 2015—counts as 1.25 kWh for RPS compliance purposes.
- Each kWh generated at a “community-based project”—a project not greater than 30 megawatts (MW) in capacity that is owned by individual residents of a community or by an organization or cooperative that is controlled by individual residents, or by a local government entity or tribal council—counts as 1.50 kWh for RPS compliance purposes.
- Each kWh generated from solar electric generation located in the territory of a cooperative or municipal utility counts as 3.00 kWh for RPS compliance purposes. To be eligible for this credit, the solar technology must begin producing electricity by July 1, 2015, for cooperative electric associations and by December 31, 2016, for municipal utilities (see S.B. 15-254).
- Each kWh generated by projects up to 30 MW that are interconnected to electrical transmission or distribution lines owned by a cooperative or municipal utility that are installed prior to December 31, 2014, counts as 2.00 kWh for RPS compliance purposes. This multiplier is only applies to the first 100 MW of projects statewide by qualifying retail utilities other than IOUs.
The retirement of renewable energy credits (RECs) is used to demonstrate RPS compliance. One REC is issued for each megawatt-hour (MWh) of renewable energy generated. A utility may buy, sell, and trade RECs at any time as long as it obtains and retires sufficient levels of RECs to comply with RPS requirements. RECs expire at the end of the fifth calendar year following the calendar year in which it was generated.
All renewable energy resources located in the region covered by the Western Electricity Coordinating Council (WECC) that generate RECs used for RPS compliance must register with the Western Renewable Energy Generation Information System (WREGIS) and record their RECs in WREGIS after August 11, 2010, with the exception of retail renewable distributed generation facilities less than 1 MW.
Each municipally-owned electric utility must submit a statement to the PUC to demonstrate it has an RPS in place. Investor-owned utilities and electric cooperatives must submit to the PUC an annual RPS compliance report by June 1 each year.
Cost Mitigation Measures
For investor-owned utilities and electric cooperatives, the net retail rate impact of RPS compliance cannot exceed 2% of the total electric bill annually for each customer. The net retail rate impact includes “the prudently incurred direct and indirect costs of all actions by a QRU to meet the renewable energy standard, including, but not limited to, program administration, rebates and performance-based incentives, payments under renewable energy supply contracts, payments under renewable energy credit contracts, payments made for RECs purchased through brokers or exchanges, computer modeling and analysis time, [qualifying retail utility] investment in and return on investment for eligible energy resources, and expenditures made to purchase unsubscribed energy and RECs from [community solar gardens].” A qualifying retail utility’s administrative costs to implement these rules are capped at 10% per year of the total annual collection.
If the retail rate impact does not exceed the cap, a qualifying retail utility is allowed to acquire eligible energy resources and RECs that exceed its RPS requirement.
* “Retail Distributed Generation” is defined as a “resource that is located on the site of a customer’s facilities and is interconnected to the customer’s side of the meter.” Presumably, this would include all renewable energy systems that participate in net metering. “Wholesale distributed generation” is defined as a “resource with a nameplate capacity rating of 30 MW or less and that does not qualify as retail distributed generation.” DG systems with a nameplate capacity of 1 MW or greater must be registered with a REC tracking system which will be selected by the PUC.