Colorado Adopts Historic Goals for Building Electrification

This blog was co-authored with Matt Gerhart, Senior Attorney at the Sierra Club.

The Public Utilities Commission in Colorado approved a budget of over $429 million for new building electrification and energy efficiency programs for customers of Xcel Energy, Colorado’s largest utility, in a recent proceeding. This decision is a win for Coloradans and the climate.

The Colorado Public Utilities Commission (PUC) has approved ambitious building electrification goals, energy efficiency goals, and demand-side management (DSM) goals and budgets for Xcel Energy that will deliver hefty benefits to Coloradans. The goals, when implemented, will protect public health, reduce climate-warming greenhouse gas pollution, and make the energy grid more resilient, all the while helping keep Coloradans’ energy bills low. Xcel will meet these goals by adopting programs in the coming years, including incentives for clean, electric appliances and energy efficiency upgrades in buildings. 

Colorado approved SB21-246 in 2021. The law requires utilities to set greenhouse gas reduction targets and invest in building electrification. The goals and budgets approved under this proceeding will set targets for programs that Xcel sets up in future proceedings. With a total approved budget of $429 million to be used between 2024 and 2026, Xcel will be able to implement programs intended to  benefit all 3.7 million of its customers. This budget includes $81 million for beneficial electrification programs and $280 million for electric energy efficiency programs. 

While NRDC, Sierra Club, and other partners pushed for more ambitious goals, this decision still reflects a win for the climate and for protecting public health. 

Electrification and Efficiency: A Hidden Climate Solution

Building electrification and energy efficiency measures are often under-utilized but are a critical piece of the puzzle to combat further climate change. Buildings are the third-largest source of Colorado’s climate pollution. Swapping gas furnaces, both in homes in Colorado and nationally, for efficient, electric heat pumps can help keep global warming below 1.5 degrees Celsius. Even adding insulation to drafty buildings can decrease climate pollution and decrease demand for heat, while saving people money on their energy costs.

A recent report by the International Energy Agency estimates that the U.S. needs to double its implementation of energy efficiency actions by 2030 to help keep our climate stable. The PUC’s decision will impact efficiency programs from 2024 to 2026, and will greatly decrease climate-harming emissions, keeping Colorado in line with its emissions goals. 

These programs will also protect the health of Coloradans. Fossil fuel appliances lead to unhealthy air quality in buildings. Gas appliances such as water heaters and furnaces emit toxic chemicals like benzene – even when turned off – which linger inside buildings and can cause asthma and cancer. Now, Xcel will remove outdated incentives for gas appliances by 2027, allowing Xcel to re-allocate these incentives so that individual households or business owners can voluntarily replace older, less-efficient gas appliances with clean electric alternatives.

Building electrification saves customers money overall, and building electrification programs like these are expected to have minimal bill impacts to Xcel customers. Funds from the Inflation Reduction Act can also help Coloradans save money on the upfront cost of efficient electric appliances. 

Decarbonizing Equitably

People of color and low-income households face disproportionate impacts from climate change, higher energy burden, and increased health impacts from fossil fuel production and combustion. With this in mind, NRDC and partners pushed for specific, equity-centered goals.

Traditionally, when Xcel meets a certain percentage of its goal for building electrification programs, it is rewarded with an incentive. In this proceeding, NRDC and Sierra Club attempted to incorporate equity into this incentive by recommending that Xcel only collect the incentive if they meet their goal for building electrification, energy efficiency, and demand-side management programs in disproportionately impacted communities. This means that Xcel would be incentivized to provide programs to the communities that need it most. While the Commission did not adopt this recommendation, they did instruct Xcel to work with stakeholders to promote programs for low-income and disproportionately impacted communities, and to report to the Commission on progress. NRDC and Sierra Club will remain closely involved in this initiative.

Investing more in gas appliances and pipelines is a bad deal for the climate and for utility customers. In fact, Xcel customers saw record-breaking rate spikes last winter in response to gas price peaks that prompted historic legislation to tackle outdated subsidies. This proceeding will ultimately level the playing field for electric alternatives and permanently move Xcel away from gas to cleaner renewable sources of energy. 

All together, these goals and budgets reflect a historic shift in Xcel’s programs, promising deep emission reductions and benefits to Coloradans. But the work isn’t over yet – next, Xcel must design thoughtful, equitable programs to reach these goals. That should be Job #1 for this key energy provider, and we look forward to seeing those programs come to fruition.