Colorado, United States — Colorado, with its high mountains and broad plains, has expansive wind resources. With an estimated six million acres of windy lands in Colorado, most of which are located on the eastern plains, Colorado ranks 11th in the United States in wind energy potential. To take advantage of its substantial renewable energy resources, Colorado has created a regulatory environment that makes it attractive to develop wind farms and other renewable energy projects within its borders.
In the past several years, Colorado has developed and implemented numerous policies that promote the development of wind and other renewable energy resources, including an aggressive Renewable Energy Standard and an ambitious Energy Efficiency Resource Standard. Colorado House Bill 1001 was signed into law by Governor Bill Ritter in March of 2010 establishing a new Renewable Energy Standard for Colorado, obligating retail electric service providers to generate a portion of their electricity from renewable energy sources, including wind, solar, geothermal and biomass. In 2015, the Renewable Energy Standard in Colorado moves to 20 percent, and in 2020, the Renewable Energy Standard in Colorado jumps to 30 percent.
As a counterpart to the Renewable Energy Standard, the Energy Efficiency Resource Standard, implemented in 2009, sets a quantitative long-term energy savings target for utilities mandating that by 2020, investor-owned utilities increase their energy efficiency, resulting in a 11.5 percent decrease in energy use by 2020. Working in tandem, the Renewable Energy Standard and Energy Efficiency Resource Standard will certainly promote the development of wind and other renewable energy resources in Colorado over the next ten years.
To promote a clean energy economy, Colorado’s governors have demonstrated an interest in wind projects and other clean energy projects making a concerted effort to reach out to developers and manufacturers of clean energy and energy efficient technologies. These efforts have begun to reap rewards. Colorado has nearly quadrupled the amount of wind power on the grid since Governor Ritter took office in 2006, with the opening of several new large wind farms in southwest and northeast Colorado, which have the capacities of more than 800 MW.
Further, legislation passed over the last ten years has helped to create various financial benefits to wind developers and other clean energy companies. This legislation has resulted in a variety of tax credits, tax incentives, rebates, loans and grants becoming available at both the state and local level for renewable energy projects. The most significant programs for the wind industry include a state property tax incentive, a state sales tax incentive, and a state grant program.
In Colorado, property tax for utility-scale electric-generating facilities has traditionally been based on the installed cost. However, in order to provide a more competitive environment for wind energy, which has higher construction costs than other utility production facilities, Colorado has adopted a law that assesses property taxes for wind energy facilities using a calculation method based on cost, revenue generated from electricity sales and a tax factor multiplier, all of which is intended to result in property tax assessments that are competitive with other non-renewable utility production facilities.
Colorado also exempts from its state sales and use tax, sales and use of components used in the production of electricity from renewable energy sources. In addition, the legislature has established a Clean Energy Fund for the purpose of advancing energy efficiency and renewable energy throughout the state. Grants are awarded from the Clean Energy Fund on a competitive basis.
Not only has Colorado created the financial incentives discussed above, but it has done an outstanding job in attracting both venture capital and federal stimulus grants for renewable energy projects. Colorado ranked 5th among all states for venture capital invested in renewable energy projects between 2006 and 2008, and 15th in competitively awarded federal stimulus grants for renewable energy projects.
Wind farm developers in the Rocky Mountain West in need of a highly skilled work force will likely find Colorado to be an appealing location with its highly educated and skilled workforce. In particular, Colorado has more than 100,000 employees working in engineering, computing and scientific research related businesses. The state also boasts the fourth highest concentration in the nation of clean energy jobs, with 17,000 jobs in clean energy and clean energy research.
Although Colorado has worked hard to create a business environment that should continue to attract private and public investment and innovative renewable energy companies, its biggest challenge will be to commit the time, energy and resources necessary to update and improve an outdated, overstressed electrical grid, and to build the network of transmission lines that will be critical to the long term success Colorado hopes to achieve with respect to large scale wind development within the state.
Colorado is leading the way in supporting renewable energy resources by creating a regulatory and business environment that is supportive of wind development. Without the measures that Colorado has purposely put into place to facilitate the development of wind energy in Colorado, wind energy would not be as prevalent here as it is.
It takes a concerted effort by political and business leaders to implement policy and provide financial incentives to encourage the development of wind energy resources. According to an article in the Denver Post, U.S. Secretary of Commerce, Gary Locke, commented during a recent visit to Denver, that the United States could miss a key opportunity for growing the economy if it fails to take Colorado’s lead in pursuing the new-energy economy, which has helped Colorado attract thousands of jobs in renewable energy technologies.
Greg Vallin is a shareholder in the law firm of Brownstein Hyatt Farber Schreck’s Denver office and member of its Real Estate Group. He represents national, regional and local clients in real estate development, acquisitions and dispositions, leasing and financing.