The Colorado State Senate last Friday gave its final approval for a bill that stands to raise the state's renewable energy production. Awaiting final signature from Democratic Governor Bill Ritter, the new legislation will require Colorado power utilities to increase the amount of energy that they purchase from renewable sources from 20% to 30% by 2020. You will remember from SolarTown's news article, last year California raised its mandate to 33%.With its new renewable energy standard, Colorado will be able to boast the second highest renewable energy standard in the United States.
According to the Denver Business Journal, the senate bill was passed on a strict party-line vote. Democrats, along with Governor Ritter, supported the legislation, arguing that it would increase clean energy jobs in their state. Governor Ritter was quoted in the Journal as saying:
Colorado's New Energy Economy is already leading the country toward a cleaner and more secure energy future. This proposal will keep Colorado at the forefront of America's energy revolution. It will protect consumers, clean our air and protect public health, and create new jobs by increasing demand for Colorado-produced natural gas.
Republican senators opposed the legislation on concerns that it contained too many "goodies for labor." According to Republican Minority Leader Josh Penry, "There are more words, paragraphs, and pages directed toward protecting union jobs than there are to promoting renewable energy." A report released by Vote Solar and Environment Colorado disagrees with this assessment. The report claims that key provisions in the bill are expected to create 23,450 jobs in the state from both unionized and non-unionized sectors.
Similar to the state incentive programs in New York, California, and Maryland, the Colorado renewable energy standards use the large purchasing power of private utility companies to provide incentives for renewable energy production rather than direct federal grants. This allows market forces to direct investment capital toward the most cost effective renewable energy technologies available, including solar thermal plants, distributed photovoltaics, and hydro electric dams.
The new renewable energy standard in Colorado highlights the differences in approaches between paying higher rates for solar energy under so-called feed-in tariffs used most prominently in Germany and Spain (and now slowly working its way into some states in the US), and the US approach in requiring utilities to use a percentage of their power from renewable energy sources.
The New York Times provides a post-mortem on the Spanish government's approach to solar energy, under which the government provided a generous subsidy under its feed-in tariff. By paying a overly-inflated rate for electricity generated by solar energy plants regardless of the plant's efficiency, the Spanish government created a gold rush mentality. When it was announced in the summer of 2007, Spain's premium payment for solar power was the most generous anywhere - 58 cents per kilowatt-hour - with few strings attached. According to the New York Times article:
But as low-quality, poorly designed solar plants sprang up on Spain's plateaus, Spanish officials came to realize that they would have to subsidize many of them indefinitely, and that the industry they had created might never produce efficient green energy on its own.
In September the government abruptly changed course, cutting payments and capping solar construction. [The solar energy industry]'s brief boom turned bust. Factories and stores shut, thousands of workers lost jobs, foreign companies and banks abandoned contracts that had already been negotiated.
Governments interested in promoting renewable energy technologies can learn from these different incentive programs. Building unsustainable incentive structures that seem enticing in the short term can hurt the industry's long term viability.