The Colorado Energy Office commissioned an April 2025 report by Ascend Analytics titled “Pathways to Deep Decarbonization in Colorado’s Electric Sector by 2040.” The report analyzed seven different scenarios to provide the energy office with estimated costs of using various technologies to meet the state’s goal of achieving carbon-free power generation by 2040.

Ascend began with a baseline scenario costing $43.1 billion, utilizing existing state and utility plans, as well as the importation of carbon-free power from outside the state. This approach achieves a 97.7% reduction in emissions, while reaching near-zero emissions for nitrogen oxides and sulfur compounds.

Even if Colorado is unable to import carbon-free electricity from sources outside the state, the existing plans would still achieve a 94% reduction in overall carbon emissions, according to the report.

It is eliminating the last 4% to 5% of emissions above the required 2005 baseline metric that drive the significantly higher costs of all the other six scenarios.

“The results demonstrated the high cost of decarbonizing the last bit of emissions, indicating that Colorado may have more cost-effective opportunities for GHG reductions outside the power sector,” the report said.

“The Economic Deployment scenario, which uses existing regulations, has the lowest cost because it continues to use gas through 2040.

“All other scenarios have higher costs due to the full replacement of gas resources with higher-cost emerging technologies,” said the report.

The six scenarios that reach zero emissions cost 20-42% more than the least costly scenario.

“Based on resource plans submitted by electric utilities, utilities in Colorado are on track to achieve a reduction in greenhouse gas emissions of between 84% and 87% by 2030, with the last coal plant in the state set to retire by the end of 2030,” said the report.

The Options

The Optimized 100 (OT100) scenario costs $51.6 billion, or $8.3 billion more than the $43.1 billion baseline, and aims to eliminate the last 2.3% of carbon emissions. The OT100 scenario allows for selection from all types of generation and represents the least-cost path to achieving a 100% reduction in emissions, according to the report. The model projects the addition of 11,176 MW of wind, 8,890 MW of solar, 6,061 MW of hydrogen, 7,361 MW of battery storage, and 800 MW of geothermal energy by 2040 to meet demand.

Hydrogen Limited (H2lim), pegged at $54.1 billion, or $11 billion more than the cheapest option, is similar to the OT100, except that it limits the model’s use of hydrogen to evaluate which resources could potentially replace hydrogen if it were unavailable at the levels shown in the Optimized 100 scenario.

Accelerated Geothermal Adoption (Geo) would add an additional $11.6 billion to the use of geothermal energy by the late 2030s, aiming to provide at least 2% of demand in 2034, 4% in 2036, 6% in 2038, and 10% in 2040. Other resources would be used to meet zero emissions targets.

The Distribution-System Level Focus (DSF) scenario costing $56.1 billion, or $13 billion more than the baseline option, focuses on adding customer-sited grid-interconnected distributed energy resources such as vehicle-to-grid participation by EV owners, demand response, beneficial electrification, and energy efficiency requirements.

The Small Modular Reactor (SMR) scenario, at $60.8 billion, or $17.7 billion above the baseline, anticipates nuclear power reactors coming online in the late 2030s, with two 320 MW reactors being built each year from 2035 to 2040.

Relying solely on wind, solar, and battery storage is the most expensive path to decarbonization. Without firm dispatchable generation, wind, solar and storage capacity must be overbuilt to maintain reliability, which drives the cost up substantially,” said the report.