Western States Unite: A Regional Energy Market Emerges with California's Landmark Law

Strategic Insights -

For years, Western leaders have debated the creation of a regional energy market, coordinating solar power in Arizona, wind in Wyoming, and hydro in Washington. The shared resources would meet the demands of 11 different states, bolstering utilities' local power plants with surplus energy from across the region. With the passage of a landmark new law in California, that market is finally on its way to becoming a reality. Proponents say it has the potential to lower energy costs, make the grid more resilient, and speed up the deployment of clean energy.

Key Takeaways:

  • The California law passed last month allows for a new organization with independent governance from across the region to oversee Western energy markets, addressing a key obstacle to creating a regional market.
  • The law sets in motion a yearslong process that will task regional leaders with establishing the organization's governance and navigating regulatory procedures, with a potential market in place by 2028.
  • State leaders across the West, including Nevada and Colorado, have sponsored legislation to join regional transmission organizations (RTOs) or conduct studies on the benefits of a market, recognizing the potential for reduced energy costs and increased clean energy deployment.
  • Backers of an RTO argue that it can incorporate states' varying energy goals, support renewable power, and reduce reliance on fossil fuels, but skeptics fear it undermines states' power to set their own energy and climate goals.
  • A 2021 study by the Utah Office of Energy Development found that an RTO would produce roughly $2 billion in gross benefits per year, largely by saving utilities from building extra capacity, while a 2022 study found that an RTO would create as many as 657,000 permanent jobs and bolster the region's economy.
  • The new market is structured to avoid the pitfalls facing other RTOs, and proponents say clean energy resources like solar power will displace dirty fuels rather than the reverse.

Statistics:

  • 37 separate private and public utilities operate portions of the grid across the 11 Western states.
  • The new market could save utilities from building extra capacity, generating $2 billion in gross benefits per year.
  • An RTO could create as many as 657,000 permanent jobs and bolster the region's economy.
  • Western leaders have long touted the benefits of a region-wide market, but the opportunity is arising at a time when energy has become a partisan issue.

Sources:

  • "California Independent System Operator"
  • "Western Grid Group"
  • "Utah Office of Energy Development" (2021 study)
  • "Oregon Public Utility Commission"
  • "Stateline" (2025)
  • "Legislative Council of California"