Colorado Springs has failed to keep up with renewable-energy investment seen in Denver, Boulder and elsewhere in the state, in part because the city-owned utility has limited rebates for solar-panel projects.
Low energy costs and a statewide mandate that requires a smaller commitment to renewable energy from municipal providers such as Colorado Springs Utilities also have played a role.
Rebates coupled with federal tax credits have been the primary vehicle for renewable energy growth in Colorado. Without a rebate, solar installations are rarely profitable for the company performing the job, and even less affordable for homeowners or businesses.
CSU rebates cover 30 percent of a solar installation, and federal tax credits can pay for another 30 percent of the project. CSU budgeted $700,000 in rebates this year, an amount that will increase to $1.5 million in 2011.
But CSU’s rebate pool pales in comparison to the dollars available through privately held utilities like Xcel, which services Denver and Boulder.
“The fact that they (CSU) have a program at all is great,” said Beth Hart, owner of AC Solar in Florence. “But last year it was less than $1 million and it sold out in three weeks. The program has been wonderful; we just wish it had more money.”
Catamount Institute director Eric Cefus also believes a larger program is needed to help induce a meaningful shift into alternative energy.
“They’re doubling the rebates next year and that’s great, but it’s still such a tiny piece of the budget,” he said. “This isn’t a global-warming conversation, it’s a business conversation. We need to work to get the public to understand why these investments are important.”
More dollars for rebates are not something that CSU can simply will into existence.
A privately owned company like Xcel can pass the cost of a rebate program on to its customers, while a municipally owned utility has to seek approval of the City Council. The council acts as the board of directors for CSU.
Xcel customers pay an extra 1 percent on their bills to fund a rebate program.
Spokesman Mark Stutz said Xcel paid out more than $167 million in rebates to homeowners, businesses and solar companies since the program’s inception in 2006. The program has worked so well the company may begin to redirect rebates to other sources of green energy.
“The goal was to kick-start the solar industry and we’ve done that,” he said. “We’ve approved over 6,400 residential customers (in Denver), and between the rebates and tax incentives, consumers have recouped over 50 percent of their costs.”
Increasing the number of green energy installations in Colorado Springs presents the city with a number of politically unpalatable options. In a tough economic environment it can be difficult to justify expanding the budget for renewable energies, and equally difficult to convince ratepayers to take on the additional financial burden.
Hart believes that one of these pills must be swallowed if real progress is to be made on this front.
“Xcel has the funds at their disposal to offer these incentives and that’s why they’ve had success,” she said. “We have to go to the people and adopt an amendment if we want to change this (for Colorado Springs). We either have to get ratepayers involved or find some other way to allocate more money to the (rebate) program.”
Because it’s a private company, Xcel was able to institute its 1-percent surcharge unilaterally. Here, CSU would need city council approval.
CSU spokesman Dave Grossman said that approach is aimed at protecting customers from subsidizing a system they might choose not to take part in — although the utility has considered the Xcel model of rebate funding.
“It raises a lot of questions. Should the costs be shared by all customers, or should it only be an expense for those customers looking to take advantage of the rebates?” he asked. “We’ve debated putting a separate line-item on (customer) bills that goes specifically toward renewables and conservation. We’ve elected not to at this point.”
Though off the table for 2011, Grossman said a surcharge could be considered at some point, though not likely before next spring’s municipal election.
That means any debate on renewables will fall into the hands of a largely new city council.
Reasonable energy rates are one of Colorado Springs’ most attractive features, and this makes the CSU policy debate even stickier. It leaves the utility to reconcile its desire to provide customers with the most affordable energy today, while planning for a long-term energy solution that will require an upfront capital outlay.
“Keeping rates low has always been the mission of CSU and they’ve done a great job managing that,” said green energy activist and former councilmember Richard Skorman. “But that’s the Catch-22. Low rates are an important part of our quality of life, they make the city more affordable, help the business climate and create jobs, but it’s tough to get paid back on investments in energy savings in the short-term.”
Low energy rates are also an impediment to renewable energy investors in search of financing. When electric rates are high, more people are motivated to make that switch. That, in turn, means a lender is more likely to extend credit.
“When energy is less expensive, it’s harder for the financing side to work out. It’s a function of energy costs for the banks, who are mostly concerned with margins,” said Tom Schwing of Vibrant Solar in Denver. “It’s frustrating because Colorado Springs is such an attractive market.”
Still, many believe that the gravy-train of cheap energy for the Springs will soon come to an end. Colorado Springs for now has quick access to clean and affordable coal, but overseas demand and regulatory pressure will mean higher costs for the commodity in the near future.
“Getting paid back on a renewable energy investment takes longer right now because of cheap energy prices, but that dynamic is going to change,” Cefus said. “Coal is going to start hitting those peaks, so the time to invest in alternatives is now.”
While these policy matters require creative reasoning and careful negotiation, one area where Colorado Springs lags its Denver and Boulder counterparts is considerably more defined.
In 2004, Colorado voters passed Amendment 37, requiring privately owned utilities to obtain 30-percent of their electricity through renewable sources by 2020, but requiring municipal utilities to obtain just 10 percent of their power from renewable sources in the same time-frame.
“The regulation of investor-owned utilities is done at the state level,” said Governor’s Energy Office spokesman Tom Plant. “For CSU it’s done at the municipal level, although if they wanted to adopt more stringent guidelines they certainly could.”
CSU has pledged to do just that. Earlier this year, the utility announced an initiative to achieve 20-percent renewable efficiency by 2020.
“It’s a balancing act right now because we need to make sure we’re serving the best interests of the community,” Grossman said. “But our goal is to reduce individual electric use by 10-percent, keep our costs 20-percent lower than neighboring utilities, and be at 20-percent renewable energy by 2020. The trick is to achieve all three at the same time.”
Still, private utilities that have been budgeting for the 30-percent requirement for years now are well ahead of the curve. In planning for the change, these utilities have had to find ways to reach out to the residential market, rather than just concentrate on the individual large-scale projects that produce immediate, high-percentage renewable gains.
This has also led to economic innovations such as solar leasing, which emerged recently in Denver and Boulder. In a solar-leasing agreement, a homeowner can install solar panels for no money down and without a loan from a bank. The industry has created jobs for solar contractors while providing an alternative to standard financing for solar panel users.
“We take the rebate and incorporate it into lower lease payments, and we can take the tax credit and incorporate it into the cost,” said Jonathan Bass, a spokesman for California-based SolarCity. “The system isn’t owned by the host, but the host gets the benefit of the lower energy costs.”
Grossman said CSU is open to any kind of creative solutions that would increase the Springs’ green energy footprint.
“We encourage businesses to come to us with their ideas for solar projects,” he said. “With investments from both utilities and interested customers, we can make large and small-scale projects a reality. We want to do everything we can to work with the community on this.”
Green energy activists in Colorado Springs are also busy searching for new innovations that might help the region catch up.
Skorman has proposed a municipal bond sale as a means of financing alternative energy investment.
“(CSU) would make back the money they are paying in interest through utility savings,” he said. “Customers would pay the same rate they pay now, CSU wouldn’t have to pay out any extra money up front, and over time they’d realize a savings.”
Skorman, however, said he understands the utility might be hesitant to take on what it perceives to be the role of a bank, and CSU confirmed his suspicion.
“Our expertise is utility services, so we’re leaving the loan business to local financial institutions,” Grossman said.
Cefus hinted a bigger change might be best. “There are a lot of creative things we could do, but in a lot of ways CSU’s hands are tied,” he said. “We ask our City Council to make multimillion-dollar decisions based on a 30-minute presentation. It’s almost unfair to expect that of CSU’s board of directors.”
In fact, some have suggested the city council should no longer oversee CSU and that an independent board of directors should be appointed to do the job instead.
Despite obstacles facing the city on renewable energy growth, there appears to be unanimous consensus the benefits to the community would be significant, and that progress begins with an educated consumer.
“There is no advertising and no education on this issue,” Hart said. “People don’t have their heads around it and they think it’s a gimmick. Even an educated customer might balk at the prospect of going through a solar leasing program.”
Colorado Springs-based McDonald Solar and Wind owner John McDonald said people need to understand that green energy can promote economic growth.
“When the general public becomes more educated about these systems, it rubs off. The average person in Boulder has a greater degree of knowledge simply because of the environment up there,” he said. “That generates more commercial and residential opportunities. (McDonald Solar and Wind) would definitely see an increase in sales from more of these projects going on.”
Gregor Huesgen, who owns a number of green energy companies here and elsewhere in Colorado, argues the benefits of a sustained push into renewables would reach beyond individual companies.
“If we could change some of the blockages we could create jobs in mostly small and mid-size companies, and attract new companies to set up shop here,” he said. “We’re very successful in Denver and Boulder, but there are too many roadblocks in the Springs. The more business we can get down here, the more local tax revenue we’ll see.”
Skorman agrees. “(Colorado Springs) has been fortunate to be near a large, low-sulfur coal mine … and we’ve been lucky to have a good team at CSU as an effective steward of our energy rates,” he said. “But the price of coal power is only going up. It might be a big investment in infrastructure, but the investment will pay for itself through savings.
“It’s like putting in a new highway; it’s valuable once it’s in place.”