Impact of Proposed Tax Incentives on Colorado’s Renewable Energy Landscape: A Deep Dive into the Big Beautiful Bill

BIG PIVOTS: The Big, Beautiful Bill vs. Colorado Renewable Energy, Part Two

This article originally appeared on Big Pivots on June 3, 2025. We are sharing it in two parts. Read Part One.

U.S. Senator Michael Bennet recently met with Sharpe, along with representatives from Vestas, electrical utilities, and others, to discuss the potential impact of the proposed shift in tax incentives. Mark Gabriel, CEO of United Power, expressed concern, stating, “This casts a broad shadow on a lot of the progress that the state has made in terms of power supply.” He noted that if the bill passes, it will affect “virtually all of our members and virtually all of Colorado.” According to Gabriel, project developers will face greater challenges in securing financing, and those projects that do proceed will incur higher costs.

United Power serves 115,000 members across a 900-square-mile area, which spans from the oil-and-gas wells of the Wattenberg Field to the foothills west of Arvada. Over the past four years, demand in April alone has surged from 350 megawatts to 500 megawatts. Gabriel described himself as “a practical businessman” and emphasized that resource adequacy and reliability are his top concerns. With Colorado planning to close all coal plants within the next six years, coal has become less economically viable compared to renewable sources. Many Colorado utilities are planning significant investments in natural gas plants, with United Power nearing completion on one about 40 miles northeast of Denver. Gabriel also mentioned plans for new renewable generation and battery storage, which he refers to as a hyper-localization strategy. While cheaper renewables from other states could play a role in the long-term strategy, the challenge of building new transmission remains formidable.

“Replacing base-load generation takes time,” Gabriel explained. “The transmission is not coming over the hill to save us between now and 2030. We need to identify resources we can implement relatively quickly, which tend to be solar, storage, and some gas.” Ironically, the rising electricity costs could also drive up production costs for oil and gas in Colorado. Gabriel pointed out that Chevron has plans to drill 262 wells north of Denver in the Wattenberg Field, some of which is serviced by United. “Oil and gas companies are increasingly electrifying many of their fields, especially those in the midstream sector, which are subject to state regulations,” he noted.

Xcel Energy CEO Robert Kenney was also present at the meeting and informed Bennet that existing tax credits are essential for Xcel to meet its emissions reduction goals while keeping project costs down and maintaining customer bills below the national average. In a filing with state regulators last October, Xcel indicated a need for 700 megawatts of new generating capacity, primarily to accommodate a wave of new large data centers.

Tri-State Generation and Transmission, Colorado’s second-largest electrical wholesaler, announced that the House version of the bill poses challenges to its priorities of providing reliable and affordable energy for rural communities. Residents of Castle Rock and other areas served by CORE Electric Cooperative may also face higher electricity prices. CORE, which has contracts for renewable and battery projects, stated, “Any reduction in tax credits will result in increased costs for our members. These tax credits are critical for maintaining stable costs and rates.”

Holy Cross Energy, which does not have large data centers on its radar and serves only a few gas wells in Colorado’s Piceance Basin, faces a different set of challenges. Its growth in electrical demand from the resort valleys of Aspen and Vail has been modest. The utility aims to eliminate all emissions from its electrical generation by 2030. CEO Bryan Hannegan noted that achieving 85% to 90% emissions-free energy would be the easier task, and Holy Cross is well on its way to achieving this goal. For 2025, the utility expects to exceed 80% emissions-free energy, up from 50% in 2022, and has already surpassed 90% emissions-free electricity on two occasions in recent months.

This transition has been accomplished while maintaining some of Colorado’s lowest electrical rates. Holy Cross is now focused on the final 10% to 15% of its goal. After securing substantial wind and solar energy from Colorado’s eastern plains, Holy Cross is working to add local resources that provide greater flexibility and reliability during periods when renewable sources are unavailable. Geothermal energy is one of the options being considered. The Power+FLEX program encourages Holy Cross members to install batteries that benefit their homes and businesses while also allowing Holy Cross to utilize them to support the local power grid. Approximately 850 batteries have been installed through this initiative, offering a combined capacity of 4.25 megawatts, funded through a combination of upfront rebates, low-interest financing from the utility, the federal investment tax credit, and direct pay provisions in the current tax code. The loss of the tax credit would raise battery costs, dampening future demand.

On May 22, the same day the House passed its bill, Holy Cross issued a request for proposals for solar combined with battery storage and other technologies to achieve consistent 90% clean energy production in the coming years. “These resources differ significantly from what we had in the past: they are much more flexible and localized,” Hannegan noted. He emphasized that to progress further, new solutions will be necessary. However, uncertainty surrounding federal law could complicate these plans. Hannegan remarked, “These tax changes will have far-reaching effects throughout the entire energy system, and without clarity, it is challenging to determine their impact. When the cost of something increases, consumption tends to decrease.”

In summary, if solar and energy storage costs rise due to the elimination of tax credits, utilities will face higher expenses. Some might argue that the renewable sector should now be able to sustain itself. Over the past decades, prices for wind and solar have plummeted dramatically, with energy storage now following suit. However, Sharpe from Namaste believes that while the industry is approaching self-sufficiency, it has not yet reached that point. He acknowledged that fossil fuel industries have had a significant head start in subsidies over the last 200 years. Solar energy has emerged as the lowest-cost resource and the fastest to deploy, but it is not without its challenges due to variability.

“The issue with high-penetration renewables is their variability,” Sharpe explained. “That is the last hurdle.” He added that Colorado, along with the rest of the world, stands on the brink of overcoming this challenge, as new storage technologies, such as the Form Energy iron-air project in Pueblo, are being developed. For this progress to continue, innovation must persist, and such advancements have been significantly fueled by favorable tax credits. “It is misguided to abruptly end incentives at a time when we are close to achieving the innovation needed to address this issue,” he concluded.

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*Allen Best publishes the e-journal Big Pivots, which chronicles the energy transition in Colorado and beyond.*