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The Colorado Renewable Energy Standard Ballot Initiative: Impacts on Jobs and the Economy

A growing number of states have enacted policies to increase the use of renewable electricity sources. Seventeen states have enacted renewable energy standards that require electric companies to increase their use of renewable energy sources. Fifteen states have enacted renewable energy funds, which provide financial resources for renewable energy development.

Colorado's Amendment 37 will be the first opportunity for citizens in any state to vote on these policies directly. Amendment 37 would establish a renewable energy standard requiring the state's largest electric companies to increase their use of renewable sources from less than two percent today to 10 percent of electricity sales by 2015. The Amendment would also establish a funding mechanism for solar, using a rebate to building owners who install solar systems, similar to funding mechanisms established in many of the state renewable energy funds.

Colorado's proposed renewable energy standard is in the middle of what the other 17 states have already adopted. The proposed minimum rebate for solar systems is among the lowest of rebates currently available in 16 other states.

The Union of Concerned Scientists (UCS) analyzed the costs and benefits of the renewable energy standard as written in Amendment 37, using a modified version of the Energy Information Administration's (EIA) National Energy Modeling System (NEMS). Under the most likely scenario that primarily utilizes renewable energy technology cost projections from the Department of Energy's national labs, we found that by 2025 Amendment 37 would result in the following economic benefits for Colorado:

  • $236 million in savings on consumer electricity and natural gas bills.
  • 2,000 new jobs in manufacturing, construction, operation, maintenance, and other industries.
  • $70 million in additional income and $50 million increase in gross state product.
  • $709 million in new capital investment.
  • $15 million in income to rural landowners from wind power land leases.
  • $107 million in new property tax revenues for local communities.1

The Impact on Electricity Generation

Under the renewable energy ballot initiative, Colorado would increase its total homegrown renewable power by nearly 1,300 megawatts (MW) by 2025. Colorado's strong wind resources would power the vast majority of this development, with the remaining power coming from solar resources. This level of development would produce enough electricity to meet the needs of 620,000 typical homes. Early on in the forecast, renewable energy helps to displace natural gas generation. In the later years, renewable energy tends to displace more coal generation. Coal powered electric generation would still increase by nearly two-thirds compared to today's levels under the proposed renewable energy standard.

The Impact on Energy Consumers

Average consumer electricity prices would be virtually unchanged under the renewable energy standard proposal compared to business as usual. The impact on average monthly residential electricity bills between 2005 and 2025 would range from a savings of 4 cents for customers of municipal utilities and rural electric cooperatives that opt out of the solar energy requirement to an additional cost of about 10 cents for Xcel Energy customers. Commercial and industrial customers of all utilities would see savings on their electric bills, even with the costs of the solar requirement included. The total impact on all consumers for electricity would be an additional cost of just $4.5 million, or one-hundredth of one percent increase, over two decades. This result is very consistent with the $12.6 million dollar impact on electricity bills for the most likely scenario presented in a recent analysis of Amendment 37.

Our analysis also found that the increased use of renewable energy under the standard would create competition with natural gas power plants, leading to reduced gas demand and lower prices. As a result, residential consumers who use natural gas to heat their homes would see gradually increasing savings on their natural gas bills under the standard. Savings on a typical winter gas bill for customers of Xcel Energy and other utilities would reach an average of $2.00 per month, or about 1.5 percent, from 2015 to 2025. Savings on an average monthly gas bill over the course of a year would reach $1.00 per month.

By 2025, consumers would save a total of $236 million as a result of the renewable energy standard. All sectors of the economy would benefit, with residential, commercial, and industrial customers' total savings reaching $97 million, $72 million, and $67 million, respectively (Figure ES1).

Natural gas costs continue to rise in Colorado. Xcel Energy recently informed its residential customers to expect to pay up to 26 percent more to heat their homes with natural gas this December compared to a year ago.Compared to December 2002, typical residential gas bills will be more than twice as high. Reducing dependence on natural gas for electricity by increasing renewable energy supplies can also provide a hedge against these volatile natural gas prices in the near term. For example, the Lamar wind facility is saving its consumers $4.6 million on their power bills, primarily as a result of hedging against higher natural gas prices, according to Xcel Energy's testimony before the Federal Energy Regulatory Commission in June 2003.

If natural gas prices exhibit either short-term price spikes or long-term sustained increases beyond those currently projected by the EIA, or if the federal production tax credit for wind and other renewable resources is extended beyond 2005, consumer savings would be greater than reported here.

The Impact on Jobs and Economic Development

By 2020, the 10 percent standard would create 2,000 new jobs in manufacturing, construction, operation, maintenance, and other industries. In fact, the amount of renewable energy need to meet the requirement would create 2.8 times more jobs than fossil fuels—a net increase of nearly 1,300 jobs by 2020 (Figure ES2). It would also generate an additional $70 million in income and $50 million in gross state product in Colorado's economy.

Rural economies across Colorado would also receive a tremendous boost from the renewable energy standard. Many of the jobs identified above would be created in rural areas where the most of the facilities would be located. By 2025, the 10 percent standard would provide:

  • $709 million in new capital investment.
  • $107 million in new property tax revenues for local communities.
  • $15 million in income to rural landowners from wind power land leases.

Renewable energy development has already demonstrated that it can create new high-paying jobs and other economic benefits in Colorado. During its construction phase, the Lamar wind facility employed nearly 400 people, and provided an economic boost to Prowers County. Today, the project provides 15-20 permanent jobs and nearly $2 million each year in funding for the county, local school district, and medical center. The farmers and ranchers leasing the land where the 108 turbines are located earn between $3,000 and $6,000 per turbine per year.

The Impact on the Environment

Increasing renewable energy use will reduce the amount of air pollution from power plants that threaten the people of Colorado's health by burning coal, oil, and natural gas. Carbon dioxide (CO2) emissions, which trap heat in the atmosphere and cause global warming, would also be reduced. The 10 percent renewable energy standard will reduce about 3 million metric tons (MMT) of power plant CO2 emissions per year by 2025—a reduction of 4.5 percent below business-as-usual levels. The renewable energy standard will also reduce harmful water and land impacts from extracting, transporting, and using fossil fuels and conserve resources for future generations.

Results From the Less Likely Scenario

Even with more pessimistic assumptions for renewable energy technology costs, the renewable energy standard would provide important benefits for Colorado's citizens and environment. This scenario would result in a similar amount of renewable energy development and economic development benefits, 1,550 new jobs, and greater reductions in CO2 emissions. Consumers would experience a small increase in costs. The impact on average monthly residential electricity bills over the 2005-2025 period would range from an additional cost of about 30 cents (or six-tenths of a percent) for customers of municipal utilities and rural electric cooperative to 50 cents (or about one percent) for Xcel Energy customers. However, residential consumers would also save an average of 63 cents (0.6 percent) per month on their typical winter natural gas bills from 2015 to 2025. Savings on an average monthly gas bill over the course of a year would reach 31 cents per month. The total impact of the standard on all energy consumers would be an additional cost of $139 million, or one quarter of one percent increase, over two decades.

Notes:

1. Results are in cumulative net present value 2002$ using a 7% real discount rate. Job results are for the year 2020.

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