Opinion: A clean energy plan for Colorado


Colorado is now in a position to make a radical transformation of our whole system of generating electricity. Wind and solar have become so cheap that we can shut down all our coal plants, shift to more renewables, and still pay less for electricity, as recent studies by the Sierra Club and Vibrant Clean Energy confirm.
The key is to dismantle our century-old model where the regulators (the Public Utilities Commission) operate in a reactive mode and so end up “captured” by for-profit investor-owned utilities. We need to replace this model with one where decisions are made independently and solely in the public interest.
We have efforts in many states to learn from. We can see that going only halfway and leaving the investor-owned utilities with a significant decision-making role is guaranteed to perpetuate the struggles that we have here in Boulder.
We will be shifting to more electric cars and heating systems, so demand for electricity will significantly increase. So we should not accept a compromise in the system design now, or we will seriously regret it later. What follows is a bare bones outline of what is needed to transform our situation in Colorado.
The first step is to shut down all coal plants in Colorado and replace them with renewable energy and gas-fired generation. According to the Vibrant Clean Energy study, this can be done as soon as 2025, with a rate reduction of around 7% and CO2 emissions reduced by half. The rate reduction can happen even if the investor-owned utilities that own the plants are paid back 100% of what they still have invested, i.e. what remains in the rate base. Because initially more gas would be used, stringent regulations should be imposed to limit fugitive emissions, since methane is a very powerful greenhouse gas.
Whether existing coal plant owners are fully paid off or not is a political choice, so this decision should be made by the Legislature. There is a strong argument that the utilities that invested in coal right in the face of global warming (like Xcel’s 2004 decision to build the 750 megawatt Comanche 3) should absorb some of the hit. Softening the blow to coal miners and power plant workers should be part of the discussion, but not the determining factor.
The new system should be managed by a new state agency, an independent system operator. The independent system operator will do the load forecasting and resource planning, run a competitive bidding process for all new wind, solar, storage, etc., set rates, and manage the cash flow, as is done in many states. All existing utility-owned gas turbines, wind farms, solar installations, and battery and hydro-pumped storage should be shifted to contract arrangements with the independent system operator. That legally guarantees payment, and so eliminates the excessive rates of return that the PUC grants on rate-based investments, which are essentially risk-free anyway.
All new generation and storage will be bid out, and done on long-term (e.g. 20-year) contracts so as to get the best prices. The independent system operator will manage the bidding to match the resource plan, which will be transparently and publicly developed. No new generation or storage resources will go into the utility’s rate base.
The only significant political choice that the independent system operator will need to address is between rates and renewables at the point where adding more renewables could cause rates to rise above otherwise expected levels. So the Legislature should set percentage targets for renewables, or e.g. require the independent system operator to assume a carbon price for least cost resource planning, so as to minimize the need for the system operator to make value-based decisions without any guidance.
After this switchover, no generation hardware will remain in the rate base. It will then consist only of the distribution system, and possibly transmission assets, depending on the Federal Energy Regulatory Commission rate-setting process. The investor-owned utilities will continue to own and operate these systems, mainly because they are experienced at doing it. But their incentive to control the energy market or require franchises will be gone, so, for example, everyone (not just franchisees) would get money to underground power lines. Alternatives to this arrangement could be addressed down the line.
Municipalities, companies, community choice aggregations, or even individuals could then ask the independent system operator to contract for as much more renewable energy and storage as they are willing to pay for. The coal plant shutdowns would create a “generation deficit” to be filled mostly by new renewables, so no existing power plants would be left without customers, eliminating “exit fees” and stranded asset claims.

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