BIG PIVOTS: Bumps Ahead in Colorado’s Road to Decarbonization?

This story appeared on BigPivots.com on March 12, 2025.

The Ray Nixon Power Plant south of Colorado Springs burns both natural gas and coal, and the coal component was scheduled several years ago to close by 2030. That would have allowed the operator, Colorado Springs Utilities, to meet Colorado’s 2030 emissions reduction goals for the electric sector.

Now, CSU – as the utility is known – has initiated talks with state officials about keeping the coal portion of the Nixon plant open for a few more years.

Colorado Springs closed its aging Martin Drake coal plant in 2021 and replaced it with gas generation. The remaining Nixon plant has a capacity of 260 megawatts of generation, of which 46 MW comes from gas.

Xcel Energy, the state’s largest electrical provider, has also delivered a warning to state regulators that the decarbonization path has hit some bumpy spots.

“Resource adequacy is a paramount concern for PSCo (Public Service Co., Xcel’s subsidiary in Colorado),” said a letter from Alice Jackson, a senior vice president for system strategy & chief planning officer at Xcel.

The letter signed by Jackson and two other corporate officers in the utility’s long-range planning division warns of threats to electrical reliability as utilities across the West add ever-increasing amounts of weather-dependent energy generation.”

Xcel has signaled its wish to add more gas-fired power generation.

An overlapping problem for the two utilities but also others has been the escalating cost of wind, solar and other renewables. Prices have been rising, the result of tangled supply chains as well as transmission constraints and other issues.

Unlike CSU, Xcel has not said it will be unable to reduce its emissions 80% by 2030 as compared to 2005. It has, however, dropped its expectations just a bit. Xcel at one point had said it expected to reduce emissions 86%

Tri-Sate Generation and Transmission Association, the wholesale supplier for 17 electrical cooperatives across Colorado, has said it expects to achieve its 2030 goals. Other electrical providers so far have not reported problems in meeting the goals.

One utility, Holy Cross Energy, was at 80% renewables in January after achieving a high mark of 90% in October. Holy Cross has 46,000 members, as customers of electrical cooperatives are called. Colorado Springs has 263,000 customers.

Travas Deal, the chief executive of CSU, described the predicament he sees in a February 20 posting on the utility’s website. He reported that average costs for wind projects in the last two years escalated 60% and solar projects rose 50%.

CSU has reached out to Colorado Governor Jared Polis and his staff as well as other policymakers to see if a compromise can be reached. Steve Berry, a spokesperson for CSU, says the utility is talking about different “pathways.”

“We can’t pursue these expensive power-purchase agreements,” he explained in an interview. “It’s just not possible. It wasn’t just cost, although cost was a big factor. It was also timelines and transmission capacity.”

The transmission lines needed to deliver electricity from renewable sources have become congested, he said.

CSU has not projected the emissions it expects to a have reduced by 2030 compared to 2005 levels. That will depend upon what agreement can be reached with state officials.

Colorado Springs, Berry emphasized, does not disagree with the goal of the emission reduction adopted by state legislators in 2019. “I think they want from their perspective what is best for the state, and I think it’s really a question for us as a municipal utility as to the timing and the amount of money we would saddle our customers with. That and reliability.”

Deal said that CSU in February 2023 issued a request for proposals asking for bids for 1,500 megawatts of new electric generation and up to 200 megawatts of battery energy storage.

The utility has received more than 200 proposals for power purchase agreements, or PPAs. “Many of the PPA prices are at least 60% higher than expected for wind and 50% higher for solar.”

He attributed the higher prices to several factors:

• A congested supply chain;
• High demand;
• Raw material scarcity; and
• Potential tariffs and policy changes proposed by the Trump administration.

“Although these proposed tariffs and policy changes have yet to have full effect, vendors have preemptively included the anticipated increase in their pricing models,” he wrote.

“These factors have not only increased renewable energy project prices, but they have also pushed out project completion timelines, with some completion dates several years into the future,” he wrote.

Deal also said cited limited transmission line capacity as a significant cost in delivering power from the renewable new projects to the electric grid in Colorado Springs.

He said Colorado Springs Utilities is exploring energy resources and transmission partnership with other utilities. “But those will take time to develop.”

In an interview with the Colorado Springs Gazette, which first reported the news about the local utility, Deal said he has given state officials “a lot of options, and a la carte of options, for alternative timelines or approaches. He said he hoped to receive some direction from the office of Colorado Gov. Jared Polis about what the alternative approaches to renewable energy goals would look like.

“We want a preferred direction from them, so we know what our purviews and our parameters are, what they would be comfortable with and what they would not be comfortable with,” said CSU’s Berry.

Ari Rosenblum, the spokesperson for the Colorado Energy Office, said Colorado utilities “are on track to collectively exceed an 80% reduction in emissions from electricity generation by 2030.”

As for Xcel Energy, it filed its letter with the state’s PUC in February. “We wrote to express our concerns about the continued skepticism around the level of resources we have identified as necessary to maintain the reliability of the current system and address the growing demand in Colorado,” said the letter.

Similarly, we are concerned about the pace of our existing regulatory processes and how that intersects with the reality of meeting customer and system needs.”

After about 20 years of modest growth in demand caused in large part by Colorado’s growing population, Xcel in the last 18 months has begun projecting large – even massive – increases, a majority of that from the needs of new data centers.

Xcel’s letter to the three PUC commissioners said the electric system is losing firm generation that is available 24 hours per day, 7 days per week. “And we must take actions to secure replacement for the retiring generation over the medium- and long-term. Short-term actions and patches are not solutions for the long run.”

“In recent summers, PSCO has been looking to the market for firm energy purchases and solutions. This is not an option we can continue to rely on as western power markets get tighter and other energy providers experience the same demand growth we are forecasting in the PSCo territory.

Xcel said that for the period from 2018 through 2022, approximately 75% of the proposed resources additions came on -in in the year scheduled. In 2023, though, only 53% of the scheduled resources actually went online. “The rest were delayed or cancelled.”

In a later filing with the PUC, Xcel asked for delayed deadlines of a few weeks for executing contacts for resources approved in the 2021 Electric Resource Plan.