In Part 1 of this blog series, I outlined the market choices facing Colorado utilities and concluded that  “Colorado can be an afterthought in an Eastern-utility-dominated grid, or a leader and lynchpin in a modern and clean western grid.”

In Part 2, I want to further highlight this leadership opportunity, and how high the stakes are for reaching Colorado’s goals. Colorado can either lead the clean energy transformation in the West or be handcuffed to a small market based outside the region entirely. 

Colorado's Clean Energy Leadership

Colorado wants to be 100% clean, very badly. During the administration of Governor Polis, Colorado has taken a leadership role in numerous climate and clean energy initiatives, including statewide greenhouse gas reduction goals, electrification of buildings and transportation, and a bold commitment to a just transition that ensures no community or industry workforce is left behind in the shift to a clean energy future.

Back in 2019, Governor Polis’ original “Roadmap to 100% Renewable Energy by 2040 and Bold Climate Action” called out the importance of regional energy markets to reducing costs and boosting reliability while integrating higher amounts of renewable energy.  

That vision has become even more clear today. In 2024, the Colorado Energy Office released an updated study on what it would take to achieve nearly 100% clean energy by 2040. The report found that, by far, the most cost-effective option depends on access to a regional energy market. Trading and selling excess renewable power and buying low-cost power from elsewhere would save up to 20% compared to other options.  

But here lies the irony: Colorado’s own model assumed that the state would join a market run by the Southwest Power Pool (SPP), a coal-dominated market run out of Arkansas. Because of that assumption, Colorado believed that energy imports from the market would be more carbon-intensive than its own mix, and the results showed that by tying itself to an Eastern market, Colorado could achieve at most a 94% clean outcome.  

However, trading with Western partners is likely to be significantly less carbon-intensive than trading with partners in the East. The U.S. EPA’s eGrid database shows that Colorado’s likely trading partners in other parts of the West already have significantly lower average emission rates than in the SPP.

Trading only strengthens our advantage. Simple geography is one reason – Colorado can share its excess renewable energy as the utilities farther west are just ramping up, and as the sun sets in Colorado and families are cooking dinner, solar generators farther west are still pumping out low-cost power. Regional resource diversity helps as well, as eastern plains wind powers the night, southwest solar powers the day, intermountain geothermal provides baseload, and hydro resources that are the backbone of the Northwest and dotted across the West act as giant batteries.

The Bigger the Market, the Bigger the Benefits

Right now, Xcel is asking the Colorado Public Utilities Commission for permission to join Markets+, which is run by SPP and is a small, limited trading market that would only include a few utilities west of the Rockies. Xcel’s own benefits study shows that this market provides almost zero benefits for ratepayers until at least the 2040s. The differences between this minimalist market and a truly West-wide market are stark.

A new study from Aurora Energy Research shows that joining a larger, broader energy market, the Extended Day-Ahead Market (EDAM), would produce much greater economic benefits for Colorado. EDAM is already poised to stretch from the Pacific coast to Wyoming and New Mexico and include over half the demand in the West. The report studied the potential outcomes that could result from Xcel Energy making different day-ahead market choices and found that joining the larger market, which includes a wide range of diversity in loads and resources, would produce greater benefits.

The study modeled different scenarios and showed that even under conservative assumptions, such as relaxed market seams between Markets+ and SPP’s full RTO (RTO West) and restricted transmission linkages to the rest of the West, the larger Western market (EDAM) still outperformed SPP’s market. When those assumptions are addressed with future transmission expansion to the rest of the West, the simple economics of Colorado leadership in clean energy are even more compelling. A larger, more connected market in the West could generate up to $14 million in additional savings per year for Xcel customers.

Colorado Can Be a Powerhouse for the West, But Not on Its Own

Colorado is uniquely positioned to lead the West. The state has an abundance of renewable energy that can power Colorado and the region. A truism of renewable energy is that it is abundant and cheap when the sun shines and the wind blows, but if we’re not connected,  then we end up throwing away our excess clean energy, and it becomes harder and more expensive to get to 100% clean. This is why Colorado needs to connect to the other great renewable resources across the West.  

This isn’t a new idea. Colorado governors have looked to develop and connect these resources for decades. In 2009, I worked on the Western Renewable Energy Zones project that identified the excellent potential of the wind on the eastern plains and the solar resources of the San Luis Valley, and planned transmission connections to diverse supply and demand across the region. More recently, in 2023, Governor Polis led the Western Governors Association in the Heat Beneath our Feet initiative, which recognizes the vast geothermal resources of the Western Slope.

What’s different now is new opportunity for markets and transmission. Colorado now has the tools, the policy momentum, and the regional moment to make good on that promise—because even with all of its resources, Colorado can’t go it alone. One of the most important tools the state has put in place was the creation of the Colorado Electric Transmission Authority (CETA), which has the unique authority to plan, finance, and build the infrastructure needed to connect clean energy within and outside Colorado. A clean, reliable, and affordable energy future requires stronger transmission connections with the rest of the West, and a market that enables the state to make good use of these stronger connections through better coordination and efficiently shared resources.

The Western Grid Is a Political Leadership Window of Opportunity to Lead the West  

The Western grid is undergoing a seismic shift. For the first time, Western stakeholders have come together in an effort called the Pathways Initiative to design an independent governance organization for the EDAM, the West-wide energy market. This effort includes representation for states; ratepayer, environmental, and labor advocates; and other stakeholders from across the region. Under this new regional organization, states will retain their rights to plan for their own resources and strengthen their ability to pursue energy policy goals, while also gaining the economic and reliability benefits of a shared market that is designed to reflect the priorities of all participating Western states.  

This Western-based governance, built for the West by the West, is a critical innovation that would provide Colorado a leadership role in shaping a clean energy future not just for the state, but the region. In contrast, under Markets+ governance, Western interests ultimately must go hat-in-hand to Arkansas-based SPP and hope their interests will be respected.  

The choice is clear: Colorado should lead the West in building a renewable-rich energy market and not hand over control of its clean energy future to outside the region.