By Travas Deal, Colorado Springs Utilities CEO
Recent developments related to power purchase agreements for renewable energy and transmission line capacity are shifting Colorado Springs Utilities’ energy transition strategies moving forward.
Proposals for Additional Generation
In October 2023, proposals to explore options for an additional 1,500 megawatts (MW) of new electric generation and up to 200 MW of battery energy storage were fielded. This data is critical as the utility works to meet state emission-reduction requirements in 2030 and beyond, and maintain its industry-leading reliability.
With energy providers around the nation pursuing similar resources, it was extremely important to obtain current market prices and timelines for power purchase agreements, especially for wind and solar.
Springs Utilities received more than 200 proposals for additional generation; however, many of the prices are at least 60% higher than expected for wind and 50% higher for solar.
Customers are already facing rising energy costs as part of the utility’s five-year financial plan. Springs Utilities’ leadership does not believe these inflated agreements should be an additional hardship for its customers.
Cost Drivers, Timeline Challenges and Transmission Capacity
The inflated costs are attributable to several factors: a congested supply chain, high demand across the energy industry, raw material scarcity and potential tariffs and policy changes proposed by the current presidential administration. Although these proposed tariffs and policy changes have yet to have full effect, vendors have preemptively included the anticipated increases in their pricing models.
These factors have not only increased renewable energy project prices, but they have also pushed out project completion timelines; some completion dates are several years into the future.
Limited transmission line capacity is also adding significant cost to delivering power from these projects to Colorado Springs. Overcoming this challenge would require major investments in new transmission lines or significant upgrades to existing ones. These extended timelines and capacity issues do not align with the utility’s projected needs.
Regulatory Uncertainty
Although federal regulations are in flux due to the current presidential administration, Colorado’s regulatory requirements are more defined. As the utility navigates these diverging regulatory landscapes, the organization will continue to work proactively with state and federal policy makers to identify solutions that meet our reliability needs and protect customers’ interests.
To keep all potential solutions on the table, Springs Utilities supports HB25-1040 — a bill that would designate nuclear as a clean energy resource in Colorado. Although the utility is in the preliminary stages of examining the viability of nuclear energy, it would be irresponsible to shut the door on any solution that could allow the organization to meet the state’s climate targets and maintain service reliability.
Next Steps
- Springs Utilities is assessing alternative paths for the city’s energy transition, which will include getting customer and Utilities Board input and direction on resource options as the organization updates its Sustainable Energy Plan.
- Although many of the agreements will not be signed, a solar and battery energy storage contract will be pursued.
- The utility will continue to enhance and extend the life of existing assets to meet reliability expectations, manage costs and support the community’s economic health.
- Springs Utilities is exploring energy resources and transmission partnerships with other utilities, knowing those will take time to develop.
- Entry into the Southwest Power Pool Regional Transmission Organization in 2026 will significantly expand access to regional energy resources and transmission line capacity. This expansion will occur at a much faster pace and lower cost than if the utility were to secure these resources itself.
- Despite the status of these proposals, the utility’s five-year financial plan does not change regarding energy investments. It must continue to modernize its electric grid and resource mix to meet evolving state regulations and changing customer needs.
- Leaders will continue to work proactively with state and federal policymakers to identify solutions that meet the utility’s reliability needs and protect the community’s interests.
Springs Utilities remains steadfast in its commitment to deliver cleaner energy to its customers. However, to do what is best for the community, leaders at the utility are mindful of the timing and associated costs.
