As the U.S. Environmental Protection Agency (EPA) moves forward with standards to reduce power plant emissions—which are due to be finalized in June 2015—many states are wondering how they will comply. WRI’s fact sheet series, Power Sector Opportunities for Reducing Carbon Dioxide Emissions, examines the policies and pathways various states can use to cost-effectively meet or even exceed future power plant emissions standards. This post explores these opportunities in Colorado. Read about additional analyses in this series.
Colorado is generating more electricity than it has in the past, but it’s doing so while emitting less carbon dioxide pollution thanks to ongoing efforts to ramp down coal use. And the state has the potential to go even further. In fact, new WRI analysis finds that Colorado can reduce its CO2 emissions 29 percent below 2011 levels by 2020 just by complying with current policies and taking advantage of existing infrastructure. Achieving these reductions will allow Colorado to meet moderately ambitious EPA power plant emissions standards, which are due to be finalized in 2015.
Colorado’s Power Sector Is Getting Cleaner
Between 2005 and 2011, CO2 emissions from the power sector declined by 2 percent even though electric generation in Colorado grew by 7 percent,. This is primarily due to the fact that coal generation decreased by 4 percent while electricity from renewable sources increased more than 300 percent over the same time period.
The state plans to further reduce its reliance on coal. Colorado’s Clean Air Clean Jobs Act, passed in 2010, requires the state’s investor-owned utilities to retire aging coal plants and replace them with natural gas and renewable sources. By 2017, this plan will result in the replacement of over 1,000 megawatts (MW) of coal – 17 percent of the state’s total coal capacity in 2011 – with cleaner sources. To comply with the law, the state’s largest utility, Xcel Energy, plans to retire nearly 600 MW of coal in the state by 2017, and to switch natural gas for coal at two of its plants, eliminating an additional 460 MW of existing coal capacity.
How Colorado Can Meet Future Emissions Standards
As we discussed in a blog post in August, states may have considerable flexibility in how they comply with EPA’s forthcoming power plant emissions standards. EPA could allow states to pursue a range of CO2 reduction opportunities—including greater use of existing lower-carbon power plants, increased use of renewables, and energy efficiency, among other strategies. Our analysis found that Colorado could use the following tools to reduce its power sector CO2 emissions:
- Meeting renewable energy targets. Colorado already has a renewable energy standard in place, requiring some of the electricity from the state’s utilities to come from renewables: 30 percent for investor-owned utilities, 20 percent for the largest electric cooperatives, and 10 percent for smaller electric cooperatives and large municipalities. By meeting this requirement with new, in-state renewable generation, Colorado can reduce its CO2 emissions by 7 percent below 2011 levels by 2020.
This shouldn’t be a heavy lift for the state—so far it has met its RPS requirements almost entirely through in-state generation as opposed to purchasing credits from out of state.
Meeting energy efficiency targets. Colorado’s existing efficiency standard requires its investor-owned utilities to implement programs that help customers save energy at their homes and businesses. Meeting this standard can reduce Colorado’s CO2 emissions by 5 percent below 2011 levels by 2020.
Using more combined heat and power (CHP) at commercial and industrial sites. Businesses like universities, hospitals, industrial manufacturers, and others can save energy by installing combined heat and power (CHP) systems, which generate electricity more efficiently than the average power plant. Colorado is currently using less than half of its CHP potential of 2.5 gigawatts. Increasing the use of CHP by about 30 percent could reduce CO2 emissions by 2 percent below 2011 levels in 2020.
Increasing use of existing natural gas plants. Colorado’s most efficient natural gas plants—combined cycle (NGCC) units—generated much less electricity than they were capable of producing in 2011. Running existing NGCC plants at 75 percent capacity can reduce CO2 emissions by 15 percent below 2011 levels by 2020.
Increasing existing coal plant efficiency. Existing coal plants could save energy by upgrading their equipment and making other operations improvements. Increasing coal plant efficiency by 2.5 percent could reduce CO2 emissions 1 percent below 2011 levels by 2020.
Colorado’s Clean Energy Policies are Smart Economic Policies
Xcel Energy found that each year since 2009, the benefits of meeting its energy efficiency standard have exceeded the costs by over $200 million. In 2012, the standard’s benefits more than doubled its costs, saving Xcel’s electricity customers over $300 million.
The growing renewable industry is also boosting the local economy. According to the Colorado Solar Energy Industries Association, Colorado’s solar industry has generated over $1 billion in economic benefits to date, including government tax revenue, employee earnings, and environmental benefits from avoided pollution. Colorado ranks 6th in the nation for number of wind-related jobs, supporting an estimated 4,000-5,000 jobs in 2012. The wind industry has generated over $4 billion in local investments to date.
Colorado Can Build Off Progress Made to Date
Colorado is well-positioned to reduce its power sector emissions in the near term, but it’s important that the state continue to build on the progress it’s already made. Colorado’s experience has shown that emissions reductions are achievable and economically beneficial. This is all the more reason why the state should take additional steps to achieve even greater reductions in both the near and long term. By doing so, Colorado will not only be able to meet EPA’s power plant emissions standards, but can also help prevent the worsening impacts of climate change.