Taking stock of Colorado’s energy transition

 

Will Toor and others talk about the big picture at the Colorado Solar and Storage Association’s annual conference

 

by Allen Best

Will Toor, the chief executive of the Colorado Energy Office, and two other panelists answered questions during the final session of this year’s Colorado Solar and Storage Association annual conference. A few abridged  excerpts.

 

Roadmap 2.0

The Polis administration the prior day had released the updated 2.0 roadmap for greenhouse gas reduction.

The first roadmap for how Colorado hoped to achieve the economy greenhouse gas reduction goals of 50% by 2030 was adopted in 2021. That roadmap, Toor said, specified near-term actions looking out to 2030 but not far beyond. Much of those tasks are underway if not fully executed.

The largest and most immediate task was to decarbonize electricity, and the state’s utilities have now adopted plans that will achieve about 85% emissions reduction by 2040, he said.

Reducing emissions from the oil-and-gas sector is also well underway, largely through a combination of voluntary actions by industry and regulatory requirements imposed by the Colorado Air Quality Commission. Vehicle electrification is moving toward 20% of all sales “and we’re going to get probably to 80% by the early 2030s.”

Roadmap 2.0 delineates 49 actions. For electrical production to go even deeper, a study by Ascend Analytics found that 95% emissions reduction can be done by 2040 at relatively low cost. This includes a component for natural gas.

“We’re looking at tripling wind and quintupling solar by 2040 and adding a substantial amount of batteries and then maintaining essentially the existing fleet of natural gas generation units for the deep capacity resource that goes along with all of the wind, solar and batteries. It is very important to have when you need it. The modeling suggests gas generators would be operating less than 5% of the time.”

(A note: Tri-State Generation & Transmission proposes to build a new natural gas plant with carbon capture and sequestration, Platte River Power Authority may propose to do the same, and Xcel Energy has not yet announced what it will do to replace Comanche 3, but natural gas must surely remain an option. The Public Utilities Commission in December verbally approved about 600 megawatts of natural gas for Xcel).

Another major focus will be in updating how Colorado’s electric utilities integrate both solar and things like building and transportation electrification into the distribution grid. He cited interconnection problems experienced by people wanting to do heat pumps instead of natural gas for new housing developments.

“So we’re looking at significant policy that would be focused on the investor-owned utilities and really making sure that we’ve got proactive distribution system planning to be able to interconnect those loads and to make sure that we’ve got approaches to cost-recovery that will make sense.”

See: Rethinking electricity (and energy) at the very local level. Big Pivots, Jan. 24, 2024.

“If we’re going to triple wind and quintuple solar between now and 2040, there’s an awful lot of stuff that needs to get built. Some of that will be distributed generation, some of it will be utility-scale generation. And we need to make sure that our approaches to permitting and approving utility-scale generation and the needed transmission can accommodate the scale of building that’s going to be required to meet our climate goals.”

Toor may also have been referring to a bill that Sen. Chris Hansen has in the works that would create more uniform standards across Colorado counties for evaluating renewable generation and transmission. See: “Should Colorado tell counties how to review renewable projects,” Big Pivots, Feb. 23, 2024.

 

Just Transition: What can we say at

this point about this noble ambition?

Questions from the audience were invited. Laura Getts asked about Colorado’s strategy for exploring the potential wealth and jobs to places like Colorado and other rural areas.

Her background informed the question. She was in the economic development office at Pueblo County before joining the staff at San Isabel Electric. She’s now on the staff at Tri-State Generation and Transmission.

Colorado, Toor noted, was the first state to establish an Office of Just Transition. That was in early 2020, a result of legislation in 2019, the same year the emission reductions goals were adopted. Coal-burning units have or will be closing at Craig, Hayden and Pueblo. Nucla and Naturita want help to replace the lost tax base and jobs from the coal plant that closed there in 2017. Pawnee, located in Morgan County, will transition from coal to natural gas.

The Inflation Reduction Act has added what Toor described as new tools. “In particular, there are variety of arenas where tax credits have been substantially enhanced in what they define as energy communities such as those Just Transition communities,” said Toor.

Toor credited Gov. Jared Polis with being focused on improving rail connections to rural communities. One would revive the old Yampa Valley Express between Denver and Craig. Another idea that will likely get a legislative push this year is the idea of a Front Range rail between Fort Collins and Pueblo.

 

“The other thing that I think has been really interesting has been the incorporation of just transition into utility planning,” he said. Xcel Energy in June will deliver its plans for how it might be able to generate tax base and jobs to replace those lost with the closing of Comanche 3 in 2031.

As for oil and gas communities, the roadmap identifies clean hydrogen, geothermal and carbon capture and sequestration. These emerging technologies will require some of the same skills as are now used in oil and gas drilling, he said. “We think there could be a lot of opportunities for relatively seamless economic transitions in a number of these communities.”

Tim Jones, chief operating officer of the new CO-WY Climate Resilience Engine that was announced in late January, talked about creating partnerships, such as with community colleges, to build workforces. He also spoke about creating what he called a co-production framework, one that includes a broad array of stakeholders that will help drive what the technology roadmap is ultimately for the CO-WY Engine.

The “engine,” as he referred to it, was named by the National Science Foundation as one of several such hubs around the country.. it is to get $15 million for the first two years and could get up to $160 million over the next decade.

It has three focuses: inspired research, mostly done at universities, and commercialization of technology and workforce development.

It sounded warm and fuzzy but very abstract, as was the case with the initial announcement. Maybe this picture will take shape as details emerge in the next year.

Ned Harvey, co-founder and chief executive of Digital Gaia, the “leading developer of artificial infrastructure for planetary intelligence,”  according to the company’s website, and chair of the Colorado Clean Tech Industry Association, spoke about the need to “make sure everybody understands the innovation opportunities here and where the markets exist.” Connections within the state and beyond Colorado could produce “real economic benefits with every corner in the state,” said Harvey, a graduate of the Harvard Business School. He had previously led the Rocky Mountain Institute’s Carbon War Room.

Successes so far in Colorado’s journey

to economy wide decarbonization?

What has been key to Colorado’s successes in decreasing emissions? “Is there something unique about our work with industry or innovation that’s given us a leg up?” asked the moderator, Laura Hickernell of the Colorado Cleantech Industries Association.

“Great question,” Toor replied, no doubt happy for what was likely a pre-arranged softball.

“One is the all-of-government approach that Gov Polis has taken,” he went on. Some see the decarbonization challenge as “just another air pollution challenge that you can address simply through regulatory approaches. Fundamentally, we believe that’s not an approach that will work because this isn’t just about some little technical change. It’s fundamentally about how do we change the entire energy system that operates our entire economy and essentially our entire lives. This requires not only regulatory elements, but real market transformation across virtually every major sector of the economy,” he said.

“Colorado has taken an approach that has combined regulation where appropriate, with partnerships with the private sector, public infrastructure investment, and incentives for both private sector and individuals in order to achieve this change.”

An example. “Industrial emissions are one of our five largest sources of greenhouse gas emissions and a source of many other pollutants that are a real problem. The state’s approach has involved a combination of strategies. We have a regulatory element. We were the first state (in October 2023) in the nation to adopt direct regulation of greenhouse gas emissions from our 22 largest manufacturing facilities. It’s a very diverse bunch, ranging from the Suncor Refinery to a baking soda factory in Western Colorado to the largest mozzarella cheese factory in the nation, Leprino.

(Leprino, a Denver-based company, has a factory in Greeley that employs 500 people and a factory in Fort Morgan that employs 350 people).

Colorado also uses incentives to induce change. That includes a new industrial clean-air grant program and a competitive industrial decarbonization tax credit program.

“We just opened the first round of the clean air grant program a few months ago. It was super interesting what came through. We were kind of imagining that the first thing we would see would be important but sort of boring, like small efficiency improvements or tuning their processes. What actually came through were proposals to eliminate natural gas boilers an replace them with industrial heat pumps.”

Because contracts for those grants are still being negotiated, added Toor, he couldn’t divulge details. He said that within a couple of months the energy office hopes to announce “a couple of places where we’re looking at really, really deep greenhouse gas emission reductions.”

The third piece in Colorado’s major success that Toor identified falls under the heading of innovation.

That includes monitoring emissions.

The Air Quality Control Commission adopted the nation’s first greenhouse gas intensity requirements for oil and gas. “In order for that to actually work, you need to be able to measure  emissions, which is really hard to do because this isn’t carbon dioxide emissions. It’s largely methane emission, and there are literally thousands of places where methane can leak. You need the technologies that allow you to do something approaching real-time monitoring of emissions.

“We are now in a place where the industry is partnering with academic and technology partners to implement the regulations that we have adopted.”

 

What does Roadmap 2.0 have

to say about abating methane?

About Roadmap 2.0, how does it propose to continue the abatement of methane emissions?

Toor said the existing regulatory structure requires a net reduction of 60%T in methane emissions from oil and gas by 2030 below the baseline.

“We seem  to be on track for more like 65% reduction by the end of the decade, but the roadmap has a focus on net-zero oil-and-gas development, so as to drive toward much lower methane emissions and near-zero methane emissions from the oil-and-gas industry.

But Colorado has other major sources of methane emissions. Historically, the largest source was from coal mining. Some existing emissions from abandoned mines have been difficult to address because of existing regulatory structure. (See story about Holy Cross Energy and emissions from the mine above Redstone).

The roadmap’s 49 action items include several focused on creating regulatory requirements for landfills and sewage treatment plants, to reduce their methane emission.

The other major sources are in the agricultural arena, “ and there’s definitely a lot of work to do there,” says Toor. “It’s not easy to address that from a regulatory perspective. That’s one of the frontiers, figuring out how we can further reduce methane emissions in the agriculture sector.”

Jones mentioned several companies — including Boulder-based LongPath Technologies and Denver-based The Canary Way – that focus on providing continuous monitoring of emissions, “which is really a significant and advantage from the point-monitoring that has historically been done.”

Bio methane is a unique problem without an apparent solution. “I think that one’s going to be a significant challenge,” said Jones.

 

Technology alone is not the answer.

Innovation crucial in business models

Ned Harvey said that during his time at the Rocky Mountain Institute he worked hard on a  financial and market innovations. “If you think about what made a difference between 2007 and 2012, the fundamental innovation was in solar financing for residential applications, “the way some companies started bringing business development technologies from other industries into solar.”

“And the next thing you know, you knew exactly where the next zip code was going to be, which houses (could afford solar) and exactly what to say to that person.  And that kind of innovation, which had nothing to do with solar technology, blew open the residential solar industry.”

I really think we also need to put our eye toward what are the non-technical innovations that are needed to go from very small markets to massive markets. And if we have technologies here that work, how can we spread  them around the world as fast as possible?”

 

Replacing a few coal plants is relatively easy. Ahead lie the hard challenges

An audience member wanted to know what the panel members thought were the greatest challenges to decarbonization.

Toor identified buildings.

“When I think about where it is really hard to get the transitions that we need, it’s the places that require millions of individuals to make decisions about how they’re investing their money and what they’re doing to their own property. “

The sector with major successes are those with just a handful of operators. Think coal plants or even just major utilities. This piece has just a few slices. The oil-and-gas industry has more players but just a few big ones.

Financial and market innovations are most needed in “how do we actually spark the billions and billions of dollars of investments that we’re going to need to upgrade our buildings through energy efficiency and electrification in order to make them more resilient and to allow us to meet our climate goals? There are huge opportunities because no one’s figured it out yet.”

Jones said Colorado’s greatest challenge will be access to venture capital  needed to drive some of these innovations.

“Shockingly, just a few days ago, we saw one of the biggest venture capital firms and accelerators in the world leave Colorado for New York. It’s going to leave a huge gap here. We were already I think a little short on capital, but now I think we’re going to be extremely short. How do we fill that gap?”

He did not identify the firm.

Harvey answered in a different way. Instead of thinking locally, he sees the tech industry in Colorado figuring out what the global market wants. He had a specific example in mind:

“One of the most successful companies I know in Colorado makes air compressors,” he said. “It’s not hydrogen fuel-cell technology —what some hope is the future. But these air compressors go onto into every single forklift that’s going in to every single new warehouse built by Amazon and Walmart. And they’re growing at 95% a month.”

 

Hydrogen: What role in a state with lots of land and curtailed renewables

Continuing the theme of opportunities for innovation, Harvey talked about reclaimed mining sites – places that are already connected to the grid.

“Why not have big fields of PV making hydrogen and exporting it to the world? We have lots of sun and lots of land.”

Colorado applied to be the center of a Western Interstate Hydrogen Hub along with New Mexico, Wyoming and Utah. The proposal fell short.

Toro said the work that went into that application produced useful information that will be used for one of the 49 to-do’s in the Roadmap 2.0 report, i.e. facilitate a hydrogen market in Colorado.

“We’re actually a great place for it,” he said. Based on the draft guidance for what projects will qualify for production tax credits, places that have a lot of  both wind and solar and the ability to use what would otherwise be curtailed wind and solar will be the most competitive in the United States for clean hydrogen production. “That sounds an awful lot like Colorado to me.”

Harvey had similar thoughts: Take excess electricity – because renewables don’t correlate perfectly with demand – to make hydrogen, which can be used to meet demand. Finding the right spot to do it, however, can be difficult. He again cited reclaimed mine sites as a place for testing of the commercial viability of this and other technologies.

“Guts” was the word that Harvey used several times. Regulators might need to take some risks. Businesses will need to take risks. “And obviously it takes capital and entrepreneurs and a lot of guts to fight through what needs to get done. If we can create an ecosystem where that happens, we could be one of the few places in the world that can do that.”

Jones also cited the need for an open ecosystem that stimulates innovation – and then transfers it from the laboratory and into the broader world.

“In my mind, as we think about all of these different connections and partnerships, we need to really understand what is driving people to do what they do in the ecosystem, meet them there, and be able to make those handoffs and make it work. Easier said than done, right?”

Water and the implications of Colorado’s energy transition

Big Pivots asked what the implications to water will be from this energy transition. “Will there be a water dividend or is too soon to know?”

Toor took the first shot. Retiring coal plants will free up water. But the water allocated to coal and gas plants for cooling is pretty small relative to overall water use. That’s still likely to add up to several hundred thousand acre-feet per year.

Green hydrogen needs water. At least in the first years, that would be a very small amount.

“If you look comprehensively across all of the technologies, I don’t know that anyone’s really done that analysis of the net impact on water,” he concluded.

 

Utilities as partners in the big pivot

in Colorado and elsewhere?

“We see the utilities as enormously important to achieving the clean energy and pollution reduction agenda, and that means both the electricity and gas utilities.”

The pathway for utilities to achieve 95% clean energy by 2040 is emerging. “To get to 100% we will need innovate. We must essentially replace natural gas as the reliability resource for clean-firm generation.”

Deep geothermal could be an answer. Clean hydrogen, too. Others, too.

“That’s a place where I think we need to figure out how can we allow utilities to start investing in that before it’s totally ripe so we can get some experience with it — the same way that we got experience with renewables 20 years ago before they were the most cost-effective resources that they are today.

“As for gas utilities, only one also sells electricity in mostly the same areas: Xcel Energy. Black Hills sells both but not necessarily in the same areas. Atmos and Colorado Natural Gas sell only methane.

The near-term focus that Toor sees will be working with Xcel and perhaps Black Hills to realize their “opportunities for transforming the business models.

How about the gas-only utilities? Toor said he sees “really exciting opportunities” for them to become transformed into thermal utilities that provide things like district geothermal energy to customers as opposed to just providing gas to customers.

Said Harvey: “Business models have to evolve and they have to evolve rapidly.” He suggested support by Colorado in this “experimentation.”

 

Advances in carbon sequestration, but ultimately we need something more

Final wishes?  “I would not shy away from some sort of carbon sequestration.” He reported significant advances in direct air capture. “But ultimately, if we’re going to decarbonize, I think it has to involve some sort of ground crop cover type of solution that is just massive in nature.”

Toor mentioned again the wish for 100% clean electricity but also innovations in the business models and financing to allow large-scale transformation in the building sector.

Harvey said he hopes for openness in science, innovation, and learning. “How can we learn how to do this stuff out in the open vs. promoting a proprietary IP-driven innovation ecosystem, because it just doesn’t work when you’re trying to deal with public good and public systems.”