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California spent decades building one of the greenest power grids on Earth.

It ditched coal, cut fossil fuels, and built so much solar it now runs the world’s second-largest battery fleet to keep clean power flowing after dark.

Now lawmakers are poised to tie that grid to coal-burning states.

With electricity prices rising and pressure to keep the lights on, California is racing to create an expanded power market with other Western utilities to trade vast amounts of electricity. An expanded market could include climate-aligned states such as Oregon and Washington but potentially also coal-burning ones such as Wyoming, Utah and New Mexico.

Supporters said the proposal cuts costs and keeps the grid stable by letting providers trade energy more freely — particularly at peak times of need, like heat waves. They said expanded trading will help renewable energy proliferate as it competes with fossil fuels.

But the plan has split California’s environmental and consumer groups. Backers said it’s key to selling the state’s solar power to others, which would help bring bills down. Opponents said it’s too risky, leaving the state exposed as President Donald Trump pushes markets toward coal and gas.

The idea of a regional market has failed before. This latest push only gained traction after labor unions, once a major obstacle, got on board.

Senate Bill 540, which paves the way, passed the state Senate earlier this summer with bipartisan support and is now before the state Assembly. Gov. Gavin Newsom wants a deal this year.

“This is about affordability, this is about reliability, it’s about us maintaining our authority and autonomy as it relates to our low-carbon, green growth goals,” Newsom said last week, in response to a question from CalMatters. “I am supportive.”

State Sen. Josh Becker, the bill’s author, has urged lawmakers to move quickly. He said that California could lose trading partners to a competing Western market proposed by an Arkansas-based grid operator that does “not care about respecting our climate policies or energy goals or the interests of California consumers.”

“Make no mistake, if we do not act, we will be worse off,” Becker said in June, urging his colleagues to vote in favor.

Critics call the risk exaggerated. The Utility Reform Network, a consumer advocate group, has taken a neutral position on the measure and threatened to oppose it unless California retains some autonomy and a strict procedure to withdraw.

Momentum has stalled in the Assembly, where some former supporters have backed away, warning those changes could make the plan unworkable for other states. Lawmakers have until mid-September to strike a deal as they juggle a broader slate of energy and climate measures.

A seasonal excess of clean power

California already trades electricity with neighboring states but controls its own grid that covers most of the state through an independent system operator whose board is appointed by the governor.

That matters because California is legally required to run on 100% clean electricity by 2045 — while also electrifying cars, homes, and facing surging demand from energy-hungry data centers fueling the rise of artificial intelligence.

By many measures, the state’s energy transition is a success story: Eight out every 10 days so far this year saw wind, water, and solar meet all of the state’s needs for at least part of the day, according to an ongoing tally by Stanford energy researcher Mark Z. Jacobson.

Solar generation last week hit a new high: 21,750 megawatts at peak. That’s enough solar to power 4 million homes when accounting for day and night, and the fact that solar output changes with the seasons.

Still, California’s clean energy boom has contributed to the highest electricity rates in the country outside of Hawaii.

Clean energy costs just over three cents more per kilowatt-hour than fossil power for California’s major utilities — a gap driven mostly by older, more expensive contracts and other market factors. But energy bills have become a slow-burning political issue: A recent poll showed voters support clean power, but fewer are willing to pay more for it.

Environmentalists said renewables will be cheaper long-term because sun and wind are free.

California is also wasting clean energy. On sunny, mild days in spring and fall, grid operators increasingly shut down solar panels that crank out more power than the state can use. Proponents of regionalization said that energy could be sold to neighboring states.

“We need a modern grid to develop and use this much clean power quickly,” said Katelyn Roedner Sutter, state director at Environmental Defense Fund. “While California generates more clean electricity than ever, it has never wasted more.”

Not everyone agrees that building large-scale projects and expanding markets will bring costs down. Building distant plants and new transmission lines will raise costs, not lower them, said Bernadette Del Chiaro, who leads advocacy campaigns in California for the nonprofit Environmental Working Group.

Del Chiaro argues that expanding rooftop solar and cutting waste — using better insulation, smarter appliances and shifting when we use power — could curb demand without overhauling the grid.

“It makes no sense,” she said. “We have plenty of resources here.”

Another motivation for regionalization: the risk of blackouts, especially as climate-driven heat waves intensify. California experienced blackouts in 2020 and pleaded with residents to conserve power during a brutal 10-day heat wave in 2022. Michael Wara, a Stanford legal scholar who focuses on climate, backs the regional market plan. He said with renewable energy facing political pushback, it’s essential for California to keep its grid stable.

Without those moves, “I really worry about what, politically, would happen … the day after, or in the weeks after, any kind of a system blackout,” he said.

Sharing power between Western states

California’s plan to connect Western power markets would create a system unlike anything else in the U.S. Under the proposed plan, called the Pathways Initiative, energy providers would trade all their available electricity in a shared market while each state keeps its own energy policies and planning authority.

Smarter coordination means better preparation for extreme weather, proponents said. In winter, California and the Pacific Northwest could tap steady sunlight from the Southwest. On sweltering summer nights, they could rely on inland wind power to keep air conditioners humming.

A group of powerful interests that often butt heads backs the effort. Supporters of SB 540 include unions, utilities and business groups that hold significant sway with lawmakers, having poured more than $20 million into legislative races in the past decade, according to CalMatters’ Digital Democracy database.

In the past, labor unions opposed plans they feared would outsource lucrative infrastructure contracts to union-hostile red states. Now, one of the most powerful — the International Brotherhood of Electrical Workers — is all in, eager to build in-state clean energy projects.

Environmental groups once worried that creating a regional grid would flood California with out-of-state fossil power. Now, many are backing the market idea, including the Environmental Defense Fund and the Natural Resources Defense Council, betting it will help unleash more clean energy across the West.

Major industry groups — and tech giants like Google and Microsoft, scrambling to power their AI data centers — are also throwing their weight behind the plan.

PacifiCorp, a six-state Western region utility owned by Berkshire Hathaway, was the first to commit to an expanded market led by California. Portland General Electric, NV Energy in Nevada and Idaho Power are other potential participants.

Solar panels at the Kettleman City Power solar farm on July 27, 2022. Photo by Larry Valenzuela, CalMatters/CatchLight Local

To make it work, California would have to give up some of its hard-fought control. Other states won’t join a market dominated by a board handpicked in Sacramento. That’s why regional players have long pushed to replace California’s grid operator with a new, independent agency to run the West, and why California players have resisted.

The Pathways proposal, though, is more limited than past proposals for a linked grid: It would shift control only of the market to a regional board made up of other states and utilities. Under the current measure, California would still manage its own power lines and keep the authority to decide how it buys electricity, enforce its clean energy rules and could walk away if the partnership doesn’t work.

Could Trump take control?

Critics said this is the worst time to gamble with California’s clean energy future. The Trump administration is waging an all-out ideological war on climate policy and California is a prime target.

Since returning to office, Trump has moved to dismantle dozens of environmental protections, including perhaps most important for federal climate regulations: the legal foundation for climate action.

In June, he teamed up with congressional Republicans to strip California of its Clean Air Act authority to set clean car and truck emission rules. And last month Republicans gutted the Biden administration’s landmark climate law, slashing solar and wind tax breaks that were helping California power its clean energy transition.

In his first term, Trump tried to force more coal into the power market — and even his own regulators said no. This time, he’s aiming to take full control, and he will likely replace independent experts with loyalists to push fossil fuels, no matter the cost, said Tyson Slocum of the consumer advocacy group Public Citizen.

Slocum warned that, by year’s end, Trump could take control of the Federal Energy Regulatory Commission. He could use that commission — which regulates electricity and gas markets across state lines — to tilt the power market toward gas and coal, under the pretext of reliability.

“That’s why efforts to regionalize the West Coast power market right now is the stupidest thing that California could do,” Slocum said. “Is now the time to partner with the federal government? No. This is the last thing that California should be doing.”

Some environmentalists opposed to the plan argue that while a regional market might help California’s emissions fall it could prompt emissions to rise in the rest of the West.

They point to a decision by the Bonneville Power Administration — a clean energy powerhouse based in Portland, Oregon, that controls power from 31 federal hydroelectric dams — to join the Southwest Power Pool, the grid operator competing with California. That move is key because the power provider’s choices help determine how far and fast the Western U.S. can decarbonize.

“The majority of the surplus generation that would be shared is coal, gas, fossil fuels,” said Roger Lin, a senior attorney with the Center for Biological Diversity. “From a climate perspective, it is a bad move.”

Energy Commissioner Siva Gunda told CalMatters the plan wouldn’t further increase California’s exposure to federal regulators, since the state’s grid is already under federal oversight. He emphasized California would still control what power it builds in-state, and argued a larger market could actually accelerate clean energy development across the West by giving other states a stronger incentive to supply California.

“The opening of markets does not open up our ability to have our own destiny — in terms of the resources we want to build in California,” Gunda said.

Estimates of the benefits for a regional market vary, depending on how many entities join. While an expanded market could save Californians nearly $800 million a year, cut emissions by 3% across the West, and reduce natural gas use by nearly a third, that scenario assumes nearly all Western utilities join. Many experts said that is unlikely. An alternate scenario, where the West is divided between two rival markets, would deliver $294 million in savings and far smaller emissions cuts.

Where things stand

Before passing the bill, senators amended it to include more safeguards requested by skeptics.

Those include a newly proposed oversight council, composed of some California appointees and elected officials, which would have to sign off on California’s participation in the market. The council could also direct the state and its utilities to back out in the future — if, say, federal regulation or the new market operator threatens the state’s climate goals.

“It’s about creating an exit strategy,” said Matthew Freedman of The Utility Reform Network. “Given what we’re seeing at the federal level now, we cannot be too careful.”

But the changes have made some of the measure’s original backers balk. The provisions mandate under what conditions California must exit, which market supporters said could send others to the Arkansas market instead. Several environmental groups, businesses and clean energy organizations have said they now oppose the bill.

When lawmakers return from their summer recess on Aug. 18, they’ll have a little less than a month to work it out before they adjourn for the year.

Newsom, state Assembly Speaker Robert Rivas and Assembly utilities committee chair Cottie Petrie-Norris said they want a bill passed this year. But any further changes in the Assembly will have to go back to the Senate, where Senate President Pro Tem Mike McGuire insisted on the oversight council.

“It really undermines all of the benefits of joining a Western market if nobody wants to trade with us,” said Sutter, of the Environmental Defense Fund. “If I’m a utility from another state … I’m going to go with the sure thing, not something that is up to the political whims of California.”

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Alexei Koseff contributed reporting to this story.