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Colorado Community Solar Policy Guide for Asset Owners & Developers

Everything you need to know about Colorado’s current community solar legislation, eligibility rules, crediting mechanisms and other important market details, created by Perch’s internal policy team. We help asset owners navigate the growth of community solar in markets across the country, and as new laws are considered and passed, Perch will provide updates and perspective on how it impacts your business.

5 min read • Last updated: Sep 25, 2024

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Topics Covered

Colorado's Community Solar Program
Program & Project Specifications
Low- to Moderate-Income Rules
Compensation Rate, Incentives, & Credit Mechanism
Market Analysis
Utility Map & Resources

Colorado's Community Solar Program

A trailblazer in many policy firsts, Colorado was the leading state in where community solar appeared in its current form. Colorado passed the Community Solar Gardens Act in 2010 which directed the major utilities in that state to connect the first third party-owned community solar gardens, or CSGs in the local vernacular, to their grid. Though it was a relatively measly 6 MW mandate per year compared to the several gigawatts that are online today nationally, they were nonetheless pivotal for the industry’s progress.

The program was expanded in 2016 as the result of a settlement with Xcel Energy to avoid a fight over a reduction in volumetric charges and an increase in fixed rates. This led to a compromise that introduced time of use (TOU) rates and an additional 117 MW of community solar with a 15% capacity carveout to serve low-to moderate-income (LMI), amongst other solar development requirements for the utility.

Since then, Colorado’s community solar footprint grew slightly and slowly over a decade to just less than 200 MW until 2024 when the state passed SB 24-207, a long-awaited modernization update. The program will now require both investor-owned utilities (IOU), Xcel Energy and Black Hills Energy, to make at least 53.5 MW of community solar available in both 2026 and 2027 with the highest minimum guaranteed discount of 25% for LMI participants, with even higher minimum discounts for projects receiving bonus credits via the Inflation Reduction Act (IRA).

Though the new capacity seems relatively modest compared to other state programs, Colorado has gone just as far in meeting industry best practices through its new legislation, including a utility consolidated bill (UCB) mandate, self-attestation as an LMI verification method, and a minimum capacity reserve of 51% for LMI subscribers on all projects. Colorado has arguably gone further to make its program more inclusive by mandating that customer agreements be available in Spanish as well as English as a matter of course, and indigenous languages as appropriate. It is also one of the few states to incorporate agrivoltaics and community solar together rather than standalone programs.

While the Public Utility Commission (PUC) still must implement regulations and the utilities their system updates, the state’s sunny disposition and now first-rate program rules are a good sign of brighter days for Colorado’s community solar industry.

Program & Project Specifications

Project requirements

5 MW AC maximum project size for projects sited on non-preferred locations
10 MW AC for projects utilizing agrivoltaics or sited on preferred locations
20-year credit term length
Project development must comply with applicable requirements of the Colorado Energy Sector Public Works Project Craft Labor Requirements Act which requires generation projects abide by the state’s apprenticeship utilization and prevailing wage laws

Subscriber requirements

No single subscriber can take up more than 40% of project capacity
Projects must reserve at least 51% of its capacity for income-qualified, or LMI, subscribers
Subscriptions cannot exceed 120% of a subscriber’s annual kWh usage
Total subscriptions for an LMI subscriber cannot exceed more than 200% of that subscriber's annual kWh usage
Subscriptions are portable within utility areas
Oversubscribed customers credits carryover to the next month
Credit scores, customer scores, or utility deposits are prohibited in qualifying residential customers
Sign-up or termination fees are prohibited

Program Details & Project Selection

While the PUC has regulatory authority over community solar and the utilities, it’s the IOUs that administer and accept CSGs into their programs. Projects have been accepted into Xcel’s and Black Hills’ programs through either a competitive Request for Proposal (RFP) process with scoring criteria or by utilizing a “Standard Offer” program. This system will be in use through the end of 2025.

But under the new law, Xcel and Black Hills are directed to acquire at least 50 MW and 3.5 MW of community solar, respectively, in both 2026 and 2027. Xcel calls their community solar program the Solar*Rewards Community (SRC) Program while Black Hills’ is simply called the Community Solar Program.

Projects will instead be allocated capacity in the community solar program on a first-come, first-served basis depending on the day the application was received, starting in 2026. To be accepted to the program, projects must demonstrate site control, hold all applicable non-ministerial permits, and have an executed interconnection agreement.

Additionally, CSGs sited on a “preferred location” are to be prioritized over other projects. A preferred location is defined as a rooftop, a parking lot, another impervious surface, brownfield site, a body of water, a municipal property, a state property, or another disturbed area as established by the PUC.

Unsubscribed electricity may be rolled forward on the host account for up to one year after it is generated and may be allocated to subscribers at the subscription manager’s discretion in that year. If credits are undistributed after one year, the utility will purchase that unsubscribed energy at their average hourly incremental cost of electricity supply of the previous calendar year. Allocation schedules are to be submitted monthly.

Low- to Moderate-Income Rules

Like other state’s community solar programs that have been established or updated since the passage of the IRA, Colorado’s has reequipped its own to capitalize on the Low-Income Bonus Credit Program (LIBCP). The most notable place where Colorado goes further than the federal requirements, and past any other existing state program, is the minimum discount for LMI subscribers and tying higher discount rates to projects that receive tax credits from the LIBCP.

Subscriber organizations must provide an LMI participant of a new CSG with a minimum discount of at least 25% of the value of the community solar bill credit. This discount increases to:

30% of the value of the bill credit if the new facility receives federal tax credits from the IRA for the specific purpose of being in an energy community
50% of the value of the bill credit if the new facility receives federal tax credits from the IRA specifically for providing income-qualified households with utility bill assistance (Category 4)
55% discount for projects for both located in an energy community and serving income-qualified households

LMI Definitions

Colorado uses the terminology “income-qualified” or IQ to refer to what the broader industry knows as LMI. An income-qualified subscriber is defined as a residential utility customer who:

has a household income at or below 200% of the federal poverty level,
has an annual household income at or below 80% of the area median income (AMI) as defined by the Department of Housing and Urban Development (HUD),
meets income eligibility requirements determined by the Colorado Department of Human Services, or
participates in an income-qualified program

Income qualification charts showing what the 80% AMI is by county and household size can be found at Energy Outreach Colorado, a nonprofit established by the state to assist low-income households with home energy costs.

Income Verification Methods

Participation in income-qualified programs:
- Weatherization Assistance Program in the Colorado Energy Office
- SNAP
- Medicaid
- Head Start Program in the Department of Early Childhood
- Free and Reduced-Price School Meals Program
- LIHEAP
- Any other governmental or local assistance program as determined by the Commission
Self-attestation of income level
Proof of residence in an affordable housing community

For an interactive map of census tracts that are served by Xcel and indicates disproportionately impacted communities, use the EnviroScreen Mapping Tool. Note that the map shows the combined territories of both electric and gas. Use this list of Colorado communities served by Xcel’s electric service in tandem for more accuracy.

Compensation Rate, Incentives, & Credit Mechanism

The purchase of a CSGs output by a utility must take the form of a net metering credit. It can be calculated by multiplying the subscriber's share of the electricity production from the CSG by the utility's total aggregate retail rate as charged to the subscriber. See the statute for greater detail.

For a subscriber organization that directs the utility to provide its subscribers with a bill credit that changes annually:

The net metering credit is calculated by multiplying the subscriber's share of the electricity production from the CSG by the utility's total aggregate retail rate minus a charge that will be used to cover the utility's administrative costs

For a subscriber organization that directs the utility to provide its subscribers with a fixed bill credit:

The net metering credit is calculated by multiplying the subscriber's share of the electricity production from the CSG by the utility's total aggregate retail rate as charged to the subscriber at the time the subscriber organization applies for capacity in a CSG program, minus a charge that will be used to cover the utility's administrative costs

If a subscriber's net metering credit exceeds the subscriber's electric bill in any billing period, the net metering credit will be applied against future bills.

Under the current program, Xcel is offering a small incentive of less than $0.02/kWh for serving income qualified subscribers under their Standard Offer Pricing. Find Xcel Energy’s total aggregate retail rate at their Rate Books page under “Electric Rate Book”.

Find Black Hills Energy’s total aggregate retail rate at their Colorado rates and regulatory information page under “Colorado electric tariff”.

Market Analysis

Colorado is a state of nearly 6 million people with over 80% of the population being found along the Front Range, the urban corridor where the mountains meet the plains. Though the majority of the state’s utility territory by square milage is managed by electric cooperatives, municipal power, or other smaller associations, it’s Xcel Energy that supplies electricity to most of the state’s residents. The Denver metro is the most populous part of the state and the heart of Xcel’s territory where most of the new capacity will be serving subscribers.

For both utilities, the new legislation directs them to implement cost-sharing mechanisms such that community solar facilities connecting to their grid are not saddled with the full cost of distribution system upgrades. While the commission and utilities have yet to promulgate rules and tariffs for the new program, this signals an intention to prevent potentially prohibitive interconnection costs or distribution grid upgrades from being placed wholly on the shoulders of community solar developer—a phenomena that has stifled development in other markets.

SB 24-207 aims high on minimum guaranteed discounts for subscribers but includes a curious insurance phrasing that hints at flexibility if there is unclaimed capacity in the program. The bill says the stakeholders may petition the commission to alter the discount in this event.

Unlike other states’ community solar legislation, Colorado explicitly requires servicers to provide customer disclosure forms in both English and Spanish. Just as well because almost 11% of the population speaks Spanish at home.

The high minimum LMI threshold required for CSGs means there will likely be significant competition for enrollments in the state. Colorado has the oldest community solar program in the country and has apportioned a modest amount of capacity for LMI households in the past. And with the new mandate for UCB and self-attestation as an LMI verification method, the state set itself is off on much better footing than dual-bill markets to meet those subscriber participation goals. Colorado has about 1.26 million people, or over 22% of the state at or below 200% of the federal poverty level, though this rate is often higher in the more rural plains and remote mountain areas and lower in the urban areas.

It is also worth mentioning that Colorado is one of the states involved in the development of the Clean Energy Connector tool which would make community solar more accessible by connecting LIHEAP beneficiaries to community solar offers. and is supposed to help reduce costs associated with serving LMI households. This tool is being tested in 2024 and 2025, which may mean it could be in use for the next phase of Colorado’s community solar program in 2026.

Xcel Energy

Also known as the Public Service Company of Colorado, Xcel has about 1.5 million electric customers. Its service area serves the greater Denver metro area and Boulder along the Front range and extends west jaggedly along the I-70 corridor, with other northern and southern exclaves.

Black Hills Energy

Black Hills Energy only serves about 100,000 electric customers in a limited area along the Front Range. Their territory starts south of Colorado Springs and runs along the Arkansas River from Cañon City in the west, through Pueblo—the largest city in its territory—and ending in the eastern plains counties. Their 3.5 MW community solar requirement reflects the smaller population they serve compared to Xcel.