In 2004, Colorado became the first state to establish a renewable portfolio standard (RPS), requiring utility companies to generate or purchase a percentage of their energy from renewable, distributed sources. From 2007 – 2010, the RPS requirement was increased from 10% to 30% by 2020. In future years, this percentage is likely to increase due to environmental benefits of green energy, which means Colorado utilities will continuously support residential and commercial solar. With Colorado’s high RPS requirements and the rising trend of electricity rates (which are likely to increase as fossil fuels become less cost-effective), solar energy is becoming more and more intuitive.
Utility companies meet RPS requirements by purchasing renewable energy credits, or RECs, from distributed sources. Each utility company must generate a certain amount of REC’s per year, but the cost per REC is different for each utility company.
Customers generate renewable energy credits for the amount of power their solar panels produce. 1 REC is equal to 1000 kWh produced. If your utility company has a solar incentive program, they will purchase the RECs that you generate at a contracted price. This incentive is above and beyond the benefits of net metering, and is in addition to the 30% Federal Tax Credit.