To accelerate the shift to clean energy, Colorado Democrats plan to shower consumers with incentives

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Nathaniel Minor/CPR News
Gov. Jared Polis and state legislators present a slate of clean energy bills at the state Capitol on Wednesday, March 8, 2023.

Heat pumps, electric vehicles, e-bicycles and other forms of clean technology could become cheaper for consumers under a slate of bills Democratic legislators and Gov. Jared Polis announced on Wednesday.

The proposals also include measures to increase renewable energy generation in the state. Altogether, the bills would amount to as much as $120 million in new tax credits annually through 2032.

“We've really framed this around, of course, saving people money, making Colorado more affordable, around cutting red tape to help site clean energy projects and ensuring Colorado leads on innovative clean energy solutions,” Polis said in an interview on Wednesday.

Among the proposed tax credits:

  • Heat pumps. $3,000 for ground-source heat pumps, $1,500 for air-source heat pumps, and $500 for water heaters with electric heat pumps, with the value of the credits declining in future years.
  • E-bikes. New tax credits for retailers for providing consumers a $800 discount on every qualifying e-bike sale to a Colorado resident.
  • Light-duty EVs. An extension and expansion of the current $2,000 state tax credit, making it worth up to $5,000 through 2025. It would then ramp down to $500 in 2028. The credit would be stackable with existing federal and utility incentives. 
    • Additional $2,500 credit for EVs below $30,000
  • Medium- and heavy-duty EVs. An extension and expansion of the current $4,000 medium-duty and $8,000 heavy-duty state tax credits, raising both to $12,000 through 2025.
  • Electric lawn equipment. Provide a 30 percent tax credit off the purchase of an electric lawn mower, leaf blower or other landscaping equipment. 

The credits are meant to complement, and in some cases, fill in for federal incentives.

Federal incentives from the Inflation Reduction Act have been slow to reach consumers, Polis noted, so state leaders decided to step in.

“These are not meant to be permanent,” Polis said. “They last just a few years until the federal tax credits are usable and come online.”

The legislation will incentivize dealers to apply the tax credits at the time of sale. The full tax credits would be available to anyone, regardless of the size of their tax liability to the state, Polis said.

The incentives will be made available “as quickly as possible,” said Rep. Mike Weissman, D-Aurora, a bill sponsor.

The main tax credit bill will also be carried by Senate President Steve Fenberg, D-Boulder, and Rep. Junie Joseph, D-Boulder.

While utilities’ EV incentive programs and one from the state are limited to low- and moderate-income Coloradans, none of the new credits would be. “We want people of all income levels to drive electric vehicles,” Polis said.

However, the additional $2,500 tax credit for EVs costing less than $30,000 is meant to bring an “equity lens” to the state’s ongoing decarbonization efforts in the transportation space, Weissman said.

“I'm somebody who represents a very modest-income district,” Weissman said. “We just want to add a little bit of extra bump there for folks to get over a financial hump that may exist in the household budget.”

The new e-bike credit would greatly expand financial incentives to get all Coloradans out of their cars. Currently, the state runs a relatively small e-bike program for low-income residents. The City and County of Denver has its own rebate program that’s given away thousands of vouchers since it launched last year. 

“In urban areas, sometimes you don't need a car,” Weissman said.

The package of bills does not contain any state funding to increase public transportation service around Colorado, something for which climate and sustainable transportation advocates have repeatedly pushed. Polis touted a bill that will expand last year’s free transit program, and said he expects transit funding to be discussed in upcoming bills on housing and land use.

“I think transit is very exciting,” Polis said.

The tax credits are just one portion of the clean energy package, which includes 13 pieces of legislation. Six of those bills have already been introduced. Another seven are still being drafted by lawmakers. 

Geothermal electricity generation is a focus of multiple bills in the clean energy package. 

Geothermal generation relies on heat from below earth’s crust to generate power. Since the energy source doesn’t fluctuate with the weather, recent research suggests it could be used to stabilize the power grid as the state adds more intermittent wind and solar resources.

Weissman said the package includes new tax credits for any company willing to take a chance on the emerging technology. A company could earn an additional credit for each unit of power a project produces.

Another bill awaiting introduction aims to boost a multi-state effort to turn the Rocky Mountain region into a hub for clean hydrogen. The U.S. Department of Energy plans to award up to $7 billion to 10 hydrogen networks around the county. Colorado has joined New Mexico, Utah and Wyoming to ask for a portion of the funding. 

Hydrogen has attracted interest as a potential climate-friendly replacement for fossil fuels. Once produced, it could power ships, aircraft or electric trucks. Factories could burn it in furnaces to make steel and other industrial materials. And utilities could use it as a way to store wind and solar energy for future use. 

But those early plans have worried environmental groups, who note hydrogen is often produced from natural gas. 

Alana Miller, the Colorado director of climate policy for the Natural Resources Defense Council, said lawmakers must include “guardrails” to ensure hydrogen projects don’t prolong add further climate-warming emissions.

“Think about the doctor’s oath of ‘do no harm,’” Miller said. “We should be sticking to the clean energy future without harming specific communities impacted by pollution or continuing our reliance on fossil fuels.”

State Rep. Brianna Titone, a Democrat representing Arvada, said the legislation will establish a framework for regulating hydrogen in Colorado. After a recent trip to Alberta, Titone said she’d been convinced new techniques will allow companies to draw hydrogen from fossil fuels without further heating the atmosphere. 

“We have to use the technologies that exist now to get us to the technologies we don't have yet,” Titone said. 

Editor's Note: A previous version of this story misspelled Mike Weissman's name.