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Last Updated: August 21, 2014
Overview
Colorado, richly endowed with both conventional and renewable energy resources, calls itself the "all of the above" state. Its diverse geography and geology give Colorado the headwaters of major rivers, winds that have created new wealth on the open plains, and substantial crude oil, natural gas, and coal resources.
Colorado, with vast fossil and renewable energy resources, calls itself the "all of the above" state.
Home to the tallest peaks of the Rocky Mountains, Colorado has the highest average elevation of any state. Wide plains, already more than half a mile above sea level at the Kansas border, rise to meet the mountains running north-south down the state's center. The majority of Coloradans live where the plains and mountains meet in a region called the Front Range.
Weather can move in from the west across the Rockies or from the east across the plains. Temperatures vary widely depending on elevation and have reached record highs of 114 degrees Fahrenheit in the plains and 61 degrees below zero in the mountains. With its large Front Range cities, Colorado is second only to Arizona among the Rocky Mountain States in population size and density. Six in seven residents live in the metropolitan areas, and much of Colorado's mountain and plains areas are sparsely populated. Colorado is a winter sports destination, and about 1 in 20 houses is occupied only seasonally.
Colorado's economy is highly diversified. Major industries include aerospace and defense, research and sciences, agriculture, tourism and outdoor recreation, financial services, and food and beverage manufacturing. Per capita energy consumption is below the national average. Industry is the leading energy-consuming sector, followed closely by the transportation sector.
Petroleum
Colorado's crude oil production has been rising with the increased use of horizontal drilling and hydraulic fracturing technologies, and the state is supplying about 1 of every 50 barrels of U.S. output. Two of the 100 largest U.S. oil fields are in the state, more areas are being explored, and proved reserves are increasing. Substantial new production is coming from the Niobrara Shale formation in the Denver-Julesberg Basin in northeastern Colorado. Industry estimates that approximately 2 billion barrels of oil are recoverable from the Niobrara. The Piceance Basin in the western mountains is the other primary petroleum producing area in Colorado.
Northwestern Colorado overlays part of the Green River oil shale, a kerogen-rich formation that, by some estimates, could be the world's largest oil resource. Although pilot oil shale projects have been undertaken in the area, current technology for obtaining oil from kerogen is costly, and extraction is not currently being pursued commercially.
Substantial new crude oil production is coming from the Niobrara Shale in northeastern Colorado.
Colorado has two operating petroleum refineries that are owned and operated as a single complex in Commerce City near Denver. They produce motor gasoline, diesel fuel, and asphalt. Recent upgrades enable the refineries to process more crude oil from Canada's tar sands. With oil production from the Niobrara Shale increasing, more pipelines are being built or repurposed to take Colorado crude oil to refineries out of state. Demand for petroleum products in Colorado exceeds refining capacity. Several petroleum product pipelines, including those from Wyoming, Texas, and Kansas, help supply the Colorado market.
The transportation sector accounts for more than four-fifths of all petroleum consumed in Colorado, and much of the rest is used by the industrial sector. The Denver-Boulder and Ft. Collins areas use oxygenated motor gasoline to limit smog formation. The rest of the state is allowed to use conventional motor gasoline. In 1988, Denver became the first U.S. city to require use of motor gasoline blended with ethanol. Most ethanol is produced in the Midwest, but Colorado has five small ethanol plants that mainly use corn as their feedstock. one of the smallest ethanol plants, located in Golden, uses a brewery's waste beer as its feedstock.
Natural gas
Colorado has two natural gas trading hubs, Cheyenne in the northeast and White River in the west.
Colorado is among the major natural gas-producing states in the nation, and output has doubled since 2001. Historically, the San Juan Basin, which also underlies part of New Mexico, was Colorado's largest natural gas producing region, but production has grown in the Denver-Julesberg Basin in the northeast and in the Piceance Basin in the west. As natural gas prices have declined, activity has moved from the Piceance, which produces mainly dry natural gas, to areas that also produce oil and natural gas liquids. Colorado, home to 9 of the nation's 100 largest natural gas fields, has substantial proved natural gas reserves.
Production of coalbed methane from coal seams grew rapidly in the 1990s and typically accounted for about one-third of Colorado's total natural gas production. Recent declining natural gas prices have rendered some coalbed methane wells uneconomic and production of coalbed methane fell to less than one-fourth of Colorado's gross withdrawals of natural gas in 2012. Wyoming, Colorado, and New Mexico are the leading coalbed methane producers in the United States, and Colorado has more than one-third of U.S. proved reserves, more than any other state. Most coalbed methane has come from the San Juan Basin, but some has also been produced in the Piceance and Raton Basins.
The residential sector is the largest consumer of natural gas. Nearly three-fourths of households use natural gas as their primary home heating source. Consumption of natural gas for electricity generation has risen since 2000, and electric power has become Colorado's second-largest natural gas-consuming sector. However, Colorado uses only about one-fourth of the natural gas it produces.
Colorado is crossed by major interstate pipelines shipping natural gas to markets in the West and Midwest. The state has two natural gas trading hubs at interstate pipeline interconnections. The larger Cheyenne hub is located in the Denver-Julesberg Basin, and the White River hub is located in the Piceance Basin. Colorado has had a relatively small amount of underground storage capacity. More storage is opening, mainly around the Cheyenne hub, to accommodate seasonal fluctuations in natural gas demand. The speedy rise of natural gas production in Pennsylvania's Marcellus Shale has reduced the East Coast market for natural gas from the Rockies.
Coal
Colorado has substantial estimated recoverable coal reserves, including bituminous, subbituminous, and lignite coals, and the state produces coal from both underground and surface mines. Mining is currently focused in the Green River, Uinta, and San Juan basins. Nearly one-half of coal mined for domestic consumption is typically used for power generation in Colorado. Colorado coal is burned for electric power generation in about a dozen states. Electricity generators in the state also consume coal shipped by rail from Wyoming. Historically, the state's coal was used to power railroad locomotives and to make steel, but more recently it has been used in the United States almost entirely for electricity generation. Producers have been shipping increasing amounts of the state's low-sulfur, high-heat-value bituminous coal to export markets, where it commands higher prices for making steel.
Electricity
Coal and natural gas are the primary fuels used to generate electricity in Colorado. Coal-fired plants provide about two-thirds of net generation, and natural gas provides about one-fifth. Wind turbines are producing increasing amounts of power in Colorado. The commercial and residential sectors are the largest consumers of electricity, followed by the industrial sector. Colorado uses less electricity per capita than three-fourths of the states. only one in five Colorado households uses electricity as its main home heating source. Typically, total electricity consumption slightly exceeds in-state generation, and the state is connected by high-voltage transmission lines to Wyoming, Nebraska, New Mexico, and Utah.
Colorado's largest utility has committed to replace some older coal-fired capacity with natural gas-fired and renewable energy fueled generation. The utility and state regulators are encouraging deployment of energy efficiency and distributed generation. The recent recession reduced both power demand and the arrival of new residents from other states, leading to lowered estimates of the need for new generation and transmission this decade. Much of the new capacity may come from small-scale solar installations on homes and businesses around the state, rather than utility-scale solar projects that have been proposed in desert regions. Colorado does not have any nuclear power plants, but it does have some uranium deposits. Projects for both mining and processing ore are in development in the state. A proposed uranium mill in western Colorado has recently been permitted and licensed.
Renewable energy
Clean energy is considered a key industry in Colorado. In 2004, Colorado became the first state with a voter-approved renewable portfolio standard (RPS). The legislature has increased requirements several times since, and the RPS now requires 30% of electricity sold by investor-owned utilities to come from renewable energy sources by 2020, with 3% from distributed generation. Separate requirements apply to municipal and cooperative electricity suppliers depending on their size. The RPS and other state support for efficiency and renewable energy industries have attracted private investment and have made Colorado a clean energy industry leader.
Colorado was the first state with a voter-approved renewable portfolio standard.
Colorado has significant areas of wind resources on the eastern plains and mountain crests and solar resources in the south near the New Mexico border. Wind turbines account for the largest share of the state's renewable net electricity generation, followed by hydroelectric facilities. Colorado's largest utility has led the nation for nearly a decade in wind capacity and had about 2,200 megawatts of wind capacity in 2014. Overall, the state had more than 2,300 megawatts of capacity in 2014. The federal government has identified four Colorado areas that are potentially suitable for utility-scale solar development. The state offers rebates to encourage homeowners and businesses to install solar panels, including solar gardens—collections of panels shared by several homes. Planning is under-way for transmission expansions to bring renewable electricity both to Colorado population centers and to cities in other western states. Small-scale applications of renewable technologies such as wind power, solar energy, and methane recovery are used in several industries including breweries.
There are nearly 60 small hydroelectric facilities in Colorado's mountainous western region. The state is encouraging development of small-scale hydropower projects that have minimal environmental impact, including turbines on irrigation lines. Colorado negotiated a pioneering agreement with the U.S. Federal Energy Regulatory Commission to speed the permitting process for low-impact hydropower facilities. Colorado's first commercial-scale woody biomass plant, which burns waste gathered from surrounding forests, is being built at Gypsum, Colorado. The waste consumed includes trees culled as part of efforts to fight pine beetle infestations. Colorado has a number of hot springs, and studies indicate that the state has significant geothermal potential. Some leasing of federal lands for geothermal projects in Colorado has begun.