DOE Awards $250 Million to Upgrade Colorado-Texas Energy Grid
The U.S. Department of Energy awarded the Colorado Energy Office and Xcel Energy a $250 million investment on Sept. 24, 2026, to strengthen a key electrical transmission connection between Colorado and Texas. The funding aims to upgrade aging infrastructure, avoid power outages, and lower energy costs as regional demand climbs.
A $1.2 Billion Project to Bridge Electric Grids
The federal award forms part of a broader $1.2 billion project involving Xcel Energy to upgrade transmission lines and build out the Colorado to Texas Connection Project, known as CO2TX. Xcel Energy Colorado President Robert Kenney stated that the project will utilize mostly existing infrastructure to bridge the gap between the eastern and western electric grids.
The upgrades will increase electricity transmission from 210 megawatts to 700 megawatts, with a capability to reach 2,000 megawatts without requiring new equipment, which is enough energy to power roughly 500,000 homes. On the Colorado side, energy will move from Lamar to the high-capacity Sun Valley substation located east of Pueblo.
Targeting Grid Bottlenecks and Severe Weather Shutoffs
Assistant Secretary for the Office of Environmental Management Timothy Walsh announced the funding at the Arapahoe County Fairgrounds in Aurora, Colorado, noting that the country’s primary challenge is moving power rather than simply producing it. Walsh explained that the project will unlock a bottleneck to allow more electrons to flow through.
The project will incorporate new technologies, including real-time weather sensors, to ensure safe transmission and divert power away from congested paths. According to the Department of Energy, these tools will help address Public Safety Power Shutoffs in Colorado. In December of the prior year, Xcel preemptively cut power to tens of thousands of customers west of the Denver metro area to reduce wildfire risks during high winds, leaving some homes and small businesses without power for days.
National Push for Grid Efficiency and Electrification
The Colorado award is part of a nearly $2 billion national spending package by the Department of Energy aimed at extracting more electricity from aging power grids across 26 states under the Speed to Power through Accelerated Reconductoring and other Key Advanced Transmission Technology Upgrades program. Federal and state officials emphasized that the investments address long-standing grid revitalization needs amplified by growing demand from artificial intelligence data centers, home heating and cooling, population growth, and electric vehicles.
Colorado Energy Office Executive Director Will Toor noted that the grid was in desperate need of revitalization long before the proliferation of data centers. Meanwhile, Gov. Jared Polis clarified that the CO2TX project focuses specifically on moving energy for everyday needs rather than powering data centers. According to the CEO, Colorado ranked first in the nation for electric vehicle sales in the third quarter of 2025, noting that that’s only good if we have the electricity to plug them in.