Environmental Power’s Microgy unit expects to begin construction on its first Colorado facility in the first half of 2010 to produce the biogas.

The Colorado project is expected to produce 915,000 million British Thermal Units of the low-emission gas, which is derived from animal waste. That’s enough to generate 125,000 Megawatt-hours of electricity on a yearly basis.

The new 10-year supply arrangement – which fixes a price premium to the low carbon fuel when compared to current market prices for traditional natural gas – is subject to approval by the Colorado Public Utilities Commission.

Xcel