Xcel Can Help Meet CO Climate Goals with Efficient Electric Buildings

Burning gas in Colorado’s homes and buildings is a leading cause of state greenhouse gas (GHG) emissions. To address this, Colorado adopted pathbreaking legislation in 2021 requiring the state’s gas utilities to cut emissions by 4% by 2025 and 22% by 2030 relative to 2015 levels. For Xcel Energy, Colorado’s largest electric and gas provider, this requires a 28% reduction from its current gas system emissions in the next seven years.  

Meeting these ambitious “clean heat” targets will require a rapid deployment of efficient electric appliances and energy efficiency in homes. In a new report, A Path to Pollution-Free Buildings: Meeting Xcel’s 2030 Gas Decarbonization Goals, Western Resource Advocates (WRA), Southwest Energy Efficiency Project (SWEEP), and NRDC outline the investments and policies needed to meet Xcel’s clean heat targets while providing customers with access to clean, healthy, and affordable energy. 

Electrification is Key to Clean Buildings

By August 1, 2023, Xcel will file the nation’s first clean heat plan proposing pathways to meet their gas system decarbonization targets. Research and policy action to date highlight that beneficial electrification must be central to that strategy.  

Beneficial electrification entails a transition from polluting gas appliances to efficient, all-electric appliances powered by clean energy. Numerous studies demonstrate that this is the single most cost-effective strategy for cutting emissions from buildings: In a national model, the Net Zero America project at Princeton University found that achieving net-zero emissions will require electrifying most, if not all, water heating, space heating, and cooking in the United States by 2050. 

The transition to clean, all-electric appliances is already underway in Colorado. As early as 2025, Denver’s Energize Denver ordinance will require existing commercial and multifamily buildings to electrify space- and water-heating appliances upon replacement, while statewide policies require most new buildings to be “all-electric ready,” remove incentives for new gas appliances, add incentives for electric heat pumps, and eliminate ratepayer-backed subsidies to connect new buildings to the gas system. Across the country, the Inflation Reduction Act is sweetening the deal: providing more than $4.5 billion in rebates for efficient, all-electric appliances to low- and moderate-income households on top of generous heat pump tax credits. 

An Ideal Clean Heat Pathway for Xcel 

Colorado is already on a clear path to beneficial electrification to meet statewide decarbonization targets. In A Path to Pollution-Free Buildings: Meeting Xcel’s 2030 Gas Decarbonization Goals, WRA, SWEEP and NRDC outline the additional investments and policies needed to make Xcel’s clean heat targets a reality.  

In the least-cost Policy Case, the report finds that Xcel must meet 87 percent of its required emissions reductions with beneficial electrification, while energy efficiency comprises the remaining 13 percent of reductions. To achieve these reductions, the Policy Case provides roughly $125 million in additional incentives, beyond existing programs, for efficient electric appliances and weatherization. Over time, these investments will pay off in customer savings: By 2030, the report projects annual savings of $312 to $477 million per year in avoided fuel costs.  

To cost-effectively and equitably deploy clean heat funding, the report recommends the following:  

• Prioritize replacing air conditioners, gas furnaces and boilers, and gas water heaters with efficient electric appliances when those appliances reach end of life.  

• Accelerate gas efficiency savings from building weatherization and duct efficiency measures 

• Frontload clean heat spending to stimulate the market for efficient electric appliances and promote workforce development and customer education.  

• Ensure robust incentives for low-income households. 

Xcel’s first-in-the-nation clean heat plan can position the utility – and Colorado – as a model for other utilities and states striving to address climate change. To provide an effective blueprint for cutting emissions while improving indoor air quality and energy affordability, the Colorado Public Utilities Commission should approve a clean heat plan that aligns with the recommendations in this report.  

The Colorado Public Utilities Commission will hold public hearings on Xcel’s Clean Heat Plan in late 2023 or early 2024 and is expected to rule on the filing by mid-2024.