Electricity prices across the country are skyrocketing — increasing by 10% in the last year.  But in the 11 states that make up the American West, including Arizona, California, Colorado and others, bills are projected to come down, thanks to a new initiative that launched on May 1. If fully adopted across the region, the initiative is projected to save consumers west of the Rockies up to $1.2 billion a year.

Electric demand in the American West is expected to grow by 30% over the next decade and the Trump administration is blocking wind and solar energy projects, which are two of the cheapest, fastest ways to get more electricity online. So how is this possible?

Through a smart, economics-driven solution that only an energy policy nerd could love — but that consumers get to enjoy. Called a “day-ahead” market, it allows electric system authorities to make better use of abundant, already available clean electricity from wind and solar — which is often cheaper than fossil fuel electricity. 

What’s more, a day-ahead market that covers the entire Western U.S. is projected to cut as much climate pollution as 630,000 cars produce annually, by allowing cheap, clean energy to get to people where and when it’s needed most. 

How the Western electric grid works  

To understand why this Western electricity market is such a good thing, you have to wonk out for a minute about the region’s electric system.   

The 11 states west of the Rockies are physically connected in one big grid. The wires in California and New Mexico connect to the wires in Washington, Colorado and Montana. 

In other parts of the country, a physically unified grid, like the one that covers most of Texas or the one in New England, is controlled by a central manager. 

But in the West, the grid is controlled by a patchwork of 38 organizations called “balancing authorities.” They buy electricity from different producers, such as gas- or coal-fired power plants, wind and solar farms, or battery storage facilities. Their aim: to buy just the right amount of power to keep electricity flowing — avoiding blackouts and power surges — and to make these purchases at the least cost. In six states, they also work toward helping meet standards that will enable these states to run on 100% clean energy.  

These 38 balancing authorities trade electricity in real time, for example, buying from a solar farm with an abundance of daytime energy and making it available to a city seeking air-conditioned relief from a brutal heat wave. These real-time trades have saved consumers more than $8.5 billion to date, reduced pollution from power plants “and helped keep the lights on on countless occasions,” says Michael Colvin, who leads California energy policy advocacy at the global nonprofit Environmental Defense Fund.

What these authorities couldn’t do until now, though, was take a bigger-picture look at the whole Western region and plan to use cheaper clean energy ahead of time.

As a result, affordable clean energy is sometimes left waiting in the wings as more expensive fossil fuel electricity continues to course through the grid, because fossil fuel power plants take many hours to ramp their production up and down. 

At times, there’s been so much clean energy sidelined by this inefficient system that it has to be discharged into the ground. Across the West, the system wastes enough clean electricity in a year to power the city of San Francisco for two.   

• Why you’re paying more for electricity — and how clean energy could bring costs down
• 6 ways to save money on your electric bill

What does the day-ahead market mean for consumers?  

Now, with the opening of the day-ahead market in the West, things are starting to change. “Access to more options means more savings,” says Alex DeGolia, who leads EDF’s state policy work for much of the West.   

A day-ahead market lets balancing authorities not only trade electricity in real time but also based on what’s projected to happen the following day. “A day-ahead market gives a balancing authority enough of a runway to say, ‘Tomorrow’s going to be really sunny. We can turn down our gas-fired generator and buy cheap solar instead,’” Colvin explains.

Nine of the 38 authorities, including one that covers the large majority of California, have already joined the day-ahead market. With a bigger market, the benefits are expected to increase for consumers.   

In addition to the projected $1.2 billion savings and pollution reductions, power outages will be less frequent with the creation of a “West-wide” electricity market, according to research from Stanford University.

“When it comes to electric grids,” explains Colvin, “bigger is definitely better. You have more opportunities to save money, more chances to overcome extreme weather that can lead to blackouts, and more options to bring renewable energy online.”

When balancing authorities work together in a unified market, they can more cost-effectively plan and build transmission infrastructure that can move the most affordable, cleanest energy from where it’s cheapest to produce to where it’s needed most.

That means the West will need to build fewer power plants overall, which will again save consumers money and reduce pollution, all with no change in service for customers across the region. 

“You’ll still be able to charge your iPhone whenever you want to charge it,” Colvin explains.  “The difference,” he says, “is that the financial savings that comes with this market is really money back in your pocket.”