On July 13, in the first federal appellate court decision to address the constitutionality of a state renewable energy mandate, the Tenth Circuit Court of Appeals squarely rejected an industry-group challenge to Colorado’s renewable energy law. The case is important because it signals that such renewable energy standards, which have been enacted in more than half of the states, are likely to survive constitutional challenge, although the case left open the possibility of other potential challenges.

The Colorado law requires electricity suppliers in Colorado to ensure that 20% of energy sold to Colorado consumers comes from renewable sources such as wind and solar. The Energy and Environment Legal Institute (EELI) argued that the law violates the U.S. Constitution. According to EELI, the Colorado law illegally interferes with interstate commerce because out-of-state coal producers will lose business from the utilities that supply energy to Colorado, since those suppliers would be forced to rely on renewable energy sources to comply with the state law.

EELI challenged the law on the basis that the Constitution and prior case law invalidate state laws that impose price controls on out-of-state conduct. That decision proved fatal because the court determined that Colorado’s mandate had nothing to do with price controls and did not link prices paid for energy in Colorado with prices paid in other states.

Nearly 30 states now have renewable energy mandates of some kind. This is the first federal appellate court decision to assess the constitutionality of those laws. While the court rejected a narrow constitutional challenge to renewable energy mandates, it signaled that such laws may be susceptible to Commerce Clause challenges on other grounds, which may pave the way for further litigation.