Colorado Springs Utilities (CSU) saw over 200 bids in response to two 2023 RFPs but anticipates entering into only a small handful of power purchase agreements (PPAs) due to inflated contract costs that have the utility shifting gears.

Steve Berry, spokesperson for CSU, told NPM that the municipal utility fielded RFPs for about 1500 MW in generation resources, and another for 100 MW to 200 MW of battery energy storage systems (BESS), in October 2023. This was to prepare for CSU’s 10-year planning horizon and to meet state emission mandates of being 80% carbon-free by 2030.

“We needed some kind of roadmap with real market costs attached to it,” he said, adding that as a municipal utility, CSU’s management of costs is different than larger investor-owned utilities (IOUs), and wanted to get the data to the governor’s office.

Going into the RFPs, Berry said that CSU had a preference to pursue PPAs over self-builds because – at this point – self-builds were not cost effective or timely. When bid responses came in, wind especially was higher than expected by 60% to 75% in some cases and on the solar side, it was around 50% or higher than anticipated.

Berry attributed this to a variety of reasons. The first, he said, is due to energy providers competing for the same resources, and the second was due to anticipatory tariffs.

“There’s not a lot of supply, and some of that is because raw material sourcing is much more challenging because of the demand,” he said. “You have to access a certain number of raw materials, and now you’ve got potential anticipated tariffs that a lot of these PPA providers are rolling in.”

Thirdly, the proposed timelines for the resources were years out in some cases, Berry said.

The fourth reason was transmission capacity. Access to many of the renewable resources needed new transmission.

“It is very expensive to build and permit new transmission lines,” Berry said, adding that CSU is looking to find partners in Colorado on a transmission line up to Wyoming where there are existing resources and tap into a collaborative relationship.

Finally, he pointed to both the Biden and Trump administrations as contributing to the problem, with tariffs and the threat of tariffs playing a role in contract costs.

“What was positioned as renewable becoming more cost effective, we just weren’t seeing that based on the data we were receiving, and we couldn’t commit our customers to those rate impacts,” Berry said.

As a result, CSU is entering into “one or two” smaller solar contracts, though these remain in negotiations. Berry said these might be finalized by this summer, if not sooner.

CSU is entering into a 100 MW BESS contract, which has a COD of 2027 / 2028, and is also commissioning its first 100 MW BESS project later this spring around May or June near Falcon, Colorado.

Going forward

Colorado is considering accelerating its carbon emissions reductions even more, which Berry said could result in CSU spending “billions of dollars” with profound rate impacts on customers to meet.

“We would prefer not pursing that mostly because of the cost issue, because the key is that we’re not at the point where we can rely on renewables to meet baseload demand,” he said. “Even transcending the cost, there is a big reliability component, so we need some thermal generation to meet baseload demands.”

The thermal generation that CSU is considering focuses mostly on natural gas, but CSU is also exploring nuclear, such as small nuclear reactors.

Colorado is considering legislation – in House Bill (HB) 25-1040 – to designate nuclear technology as a clean energy resource, which Berry said would help CSU meet the state’s clean energy demands. It has already passed the House and is now going before the Senate.

However, he said there would be challenges. In Colorado, those would include what permitting might look like, particularly because it is a new technology for Colorado mostly due to water scarcity.

“I think it is a new era in Colorado, and a lot of the permitting processes are not refined,” he said.

Additionally, he said there “may come a time” where it is more cost effective for CSU to do self-builds.

In the meantime, he said that “we will probably slow down on RFPs right now.”

“We have the data on this market timeframe, and the key now is what are the alternative paths we could pursue that the state would accept,” Berry said. “There’s a lot of unknowns right now on where we are going to go.”

CSU is a member of the Southwest Power Pool (SPP) and is joining the SPP regional transmission organization by 2026, which Berry said is anticipated to open access to transmission capacity and other resources both renewable and baseload to balance its portfolio.

Berry said that other utilities are feeling the impacts of the higher PPA prices, including Xcel Energy and Tri-State Generation and Transmission. However, as larger utilities, they have a different economy of scale with greater access to resources financially and transmission.

“The challenges for them is different than for us, but they have acknowledged that we are competing for the same resources which are getting tapped out and triggering cost issues,” he said. “Even on a national front, you can see some trends – reading between the lines – that energy providers are acknowledging that renewable energy costs are higher than anticipated and are concerned about the baseload demands, reliability, and making sure there is access to thermal. Even California re-fired up some nuclear facilities, so that right there is a great example of what’s going on in the market and dynamics with cost.”