October 13, 2026
This is the fourth installment in V2G News’ State Profile Series, following Connecticut, California, and Texas. Each state offers a different window into what it will take to move vehicle-to-grid from pilots toward scale. Colorado presents yet another model: a state beginning to connect transportation electrification, virtual power plants, and a new approach to distribution interconnection that could allow flexible resources to get onto the grid faster.
Colorado is not typically the first state that comes to mind when discussing vehicle-to-grid. California has the EVs and a decade of VGI policy development. Connecticut has created a deliberate pathway from pilots to programs. Texas offers competitive electricity markets and price signals that could make V2G economically attractive.
But Colorado is quietly putting together something different. The state is rapidly electrifying transportation while rethinking how distributed energy resources and new electric loads connect to an increasingly constrained distribution system. New flexible interconnection requirements could allow resources to connect without immediately triggering conventional grid upgrades, while Xcel Energy has launched an aggregator-based virtual power plant program that explicitly includes EVs and places a value on generation, transmission, and distribution capacity.
Taken together, these developments raise an intriguing possibility: Colorado could become an early test of whether EV flexibility can solve two problems at once, helping vehicles connect to the grid while creating an ongoing revenue stream from the flexibility they provide.
An EV Market Getting Big Enough to Matter
Colorado has emerged as one of the nation’s leading EV markets. In the third quarter of 2025, EVs accounted for 32.4% of new vehicle sales, the highest quarterly market share recorded by any state, with EVs representing 27.3% of sales through the first nine months of the year, according to the Colorado Energy Office. The state’s 2023 Electric Vehicle Plan calls for approximately 940,000 light-duty EVs on the road by 2030, with EVs reaching at least 70% of new light-duty vehicle sales by that year.
Hundreds of thousands of EVs represent substantial new electricity demand, but they also offer an enormous pool of flexible load and, as bidirectional capability becomes more widely available, dispatchable storage. Managed charging and V2G could help Colorado accommodate growing EV adoption while making more efficient use of existing distribution infrastructure and providing valuable grid services.
Colorado’s broader clean-energy transition reinforces this opportunity. State law requires qualifying utilities to reduce carbon dioxide emissions associated with electricity sales by 80% from 2005 levels by 2030 and establishes a goal of reaching 100% clean electricity by 2050. As renewable generation, storage, EVs, heat pumps, and other distributed resources expand, coordinating these resources will become increasingly important to achieving the state’s energy and climate goals.
Flexible Interconnection Changes the Equation
Most discussions about V2G focus on what an EV can do after it is connected: reduce peak demand, discharge during grid events, provide capacity, or participate in electricity markets. Colorado is beginning one step earlier by asking whether flexibility can help resources connect in the first place.
Under Senate Bill 24-218, qualifying utilities must develop flexible interconnection or energization options for distributed resources and new loads that would otherwise require grid upgrades. Rather than treating available distribution capacity as a fixed constraint, a customer may agree to operate within defined import or export limits. Consider a commercial site adding a large EV fleet. If controls can reliably manage charging within an agreed operating limit, the customer may be able to connect sooner or avoid costly distribution upgrades, while still meeting the fleet’s transportation needs.
Xcel Energy has proposed Flexible Interconnection and Flexible Energization tariffs that would put this concept into practice. The proposals include static and scheduled operating limits, as well as permanent and “bridge-to-wires” arrangements that could allow projects to operate under constraints until conventional grid upgrades are completed. Colorado regulators have also determined that utility-wide DERMS deployment is not a prerequisite for flexible interconnection. Xcel is not yet proposing real-time dynamic operating limits that respond to changing distribution-system conditions, citing limitations in its existing DERMS capabilities and operational experience.
EVs are particularly well suited to this approach because charging is inherently flexible. Managed charging can keep a site within its import limits while ensuring vehicles are ready when needed. V2G could extend that capability by allowing vehicles to discharge to offset other site loads or export electricity when grid conditions permit. At multi-DER sites, EVs could operate alongside solar, stationary storage, and flexible building loads to manage the site’s overall interaction with the grid.
Importantly, Colorado’s interconnection framework already recognizes energy storage, export-limiting controls, bidirectional storage, and EV chargers capable of V2G, V2H, or V2B operation. This creates a regulatory foundation for integrating EVs into more sophisticated grid-edge operations. Rather than simply participating in occasional grid events, EVs could become part of the control architecture that allows customer sites to connect and operate within distribution-system constraints.
Colorado’s New Virtual Power Plant
Colorado is also creating a pathway to compensate distributed energy resources for the flexibility they provide. In December 2025, the Colorado Public Utilities Commission approved Xcel Energy’s Aggregator Virtual Power Plant (AVPP), a standard-offer program allowing third-party aggregators to enroll and manage portfolios of customer-owned resources. The program targets up to 25 MW of new capacity annually, or approximately 125 MW over five years, with a budget of roughly $79 million. Eligible technologies include battery storage, smart thermostats, controllable heat pumps and water heaters, and EV chargers.
The approved tariff recognizes three sources of system value: generation capacity ($168.55/kW-year), transmission capacity ($24.08/kW-year), and qualifying distribution capacity ($71.93/kW-year). Combined, these represent up to approximately $265/kW-year at full performance for resources eligible for all three services. Payments go to the aggregator, which determines its compensation arrangement with participating customers. Importantly, distribution compensation is available only for resources on eligible feeders, recognizing that flexibility can provide additional value where local grid capacity is constrained.
The AVPP program also establishes operational requirements that matter for EV participation. Aggregations must provide at least 100 kW of controllable capacity, and year-round resources may be dispatched up to 80 times annually, with events lasting no more than four hours. Aggregators are responsible for dispatch, measurement, and performance, while customers retain the ability to participate through qualified third parties. These requirements create a potential pathway for managed charging and eventually V2G, although vehicle availability, charging schedules, and export capabilities will influence how EVs can participate.
The recognition of locational distribution value is especially significant. Many flexibility programs focus primarily on system-wide capacity, even though distributed resources can also help manage localized grid constraints. Colorado’s AVPP begins to recognize both, creating an opportunity to connect distributed flexibility with distribution-system planning and operations.
Connecting Flexible Interconnection and Virtual Power Plants
Colorado’s flexible interconnection reforms and AVPP could prove particularly complementary. Flexible interconnection allows customers to connect distributed resources or new loads under defined operating limits, potentially reducing the need for conventional grid upgrades. AVPP provides a separate mechanism for compensating those resources when they deliver measurable grid services. Together, they create an opportunity to use flexibility both to facilitate grid connections and to support ongoing grid operations.
Consider an electric fleet connecting on a constrained feeder. Managed charging could allow the fleet to operate within an agreed import limit while meeting its transportation requirements. Once connected, an aggregator could potentially use available charging flexibility to participate in AVPP events, provided the fleet can deliver additional grid services without violating its interconnection limits. Bidirectional charging could expand those capabilities by allowing vehicles to discharge to offset site loads or export electricity where permitted.
The potential synergies are compelling, but they are not automatic. An EV’s flexibility committed to maintaining an interconnection limit cannot simultaneously be counted as additional VPP capacity unless it can deliver a distinct, measurable service. Colorado’s SB 24-218 addresses this principle by allowing compensation for distinct services while prohibiting duplicate compensation for the same service. Utilities and aggregators will need to coordinate operating limits, dispatch, and measurement to ensure that both arrangements function as intended.
Recharge presents another challenge. A vehicle or battery that discharges during an event must eventually replenish its energy, potentially creating a new peak if many resources recharge simultaneously. Xcel’s AVPP enrollment documentation asks aggregators to identify expected recharge or “snapback” periods, recognizing that the grid impacts of flexible resources extend beyond the dispatch event itself.
Colorado could become an important testing ground for integrating flexible grid connections with compensated grid services. The opportunity is not simply to enroll more EVs in a VPP, but to demonstrate how managed and bidirectional charging can help customers connect more efficiently, operate within distribution constraints, and provide additional grid value when that flexibility is available.
Removing the Barriers to V2G Participation
Despite these promising developments, important regulatory and program-design questions remain. One potential obstacle is a provision in the AVPP settlement agreement restricting grid charging of storage-only resources to the hours of midnight to 6 a.m. Although intended to address distribution and bulk-system constraints, this requirement could create a significant barrier for bidirectional EVs if applied to vehicle batteries participating in the program.
Unlike stationary batteries, EVs must accommodate transportation needs, variable availability, and driver charging preferences. Restricting charging to a six-hour overnight window could limit the ability of EV owners and fleet operators to participate in V2G, particularly when vehicles need to recharge following a grid event or during other periods when electricity is abundant and grid conditions are favorable. The restriction could also undermine the flexibility that makes EVs valuable grid resources in the first place.
Importantly, the settlement recognizes that the charging restriction warrants further consideration. Xcel committed to evaluating options to expand, modify, or eliminate the window, taking into account distribution and bulk-system constraints and benefits. The settlement agreement also provides for continued stakeholder engagement if the issue remains unresolved. However, the application of this restriction to bidirectional EVs needs clarification.
Xcel and VGI stakeholders should make resolving this issue a priority. At a minimum, the program should explicitly accommodate bidirectional EVs with charging schedules that reflect transportation requirements while respecting grid constraints. Rather than imposing a rigid charging window, Xcel could consider managed-charging requirements, dynamic operating limits, or other performance-based approaches that allow aggregators to demonstrate that charging and discharging will not adversely affect the grid.
Colorado is also continuing to modernize its broader interconnection framework. Under HB 26-1225, Xcel must convene a stakeholder working group to accelerate distributed-generation interconnection, including consideration of cluster and batch studies and third-party interconnection studies and upgrades. Recommendations are due to the Colorado PUC by December 15, 2026. Although not specifically focused on V2G, this process provides another opportunity to ensure that interconnection requirements accommodate bidirectional EVs, export-limiting controls, and flexible operating arrangements.
Colorado’s Opportunity: Turning Grid Flexibility into a V2G Market
Colorado’s emerging approach offers a distinctive pathway for vehicle-grid integration. Rather than beginning with dedicated V2G programs, the state is building a broader framework around flexible interconnection, distributed resource aggregation, and compensation for grid services. These policies could allow EVs to play an increasingly important role in distribution-system operations, even before bidirectional charging becomes widespread.
The potential synergies are substantial. Managed charging could help EV owners and fleet operators connect more efficiently and operate within distribution constraints. Once connected, those resources could provide additional flexibility through Xcel’s AVPP, while bidirectional charging could expand their capabilities to include dispatchable storage. The recognition of locational distribution value is especially important, creating a pathway to compensate resources for addressing constraints where flexibility is most needed.
But translating this framework into a functioning V2G market will require deliberate action. Xcel and Colorado regulators need to ensure that program eligibility, charging restrictions, interconnection requirements, and measurement and verification rules accommodate the unique operating characteristics of EVs. Aggregators and technology providers will also need to demonstrate that flexible interconnection and VPP participation can work together without compromising grid reliability or drivers’ transportation needs.
The first three states in the V2G News State Profile Series illustrate different pathways: Connecticut’s progression from pilots toward programs, California’s extensive VGI policy development, and Texas’s market-driven opportunities. Colorado may offer a fourth model: integrating EV flexibility into the fundamental rules governing how distributed resources connect to and interact with the grid.
Colorado has not yet struck gold in the V2G market. But with strong EV adoption, emerging flexible interconnection pathways, and a new VPP program that recognizes multiple sources of grid value, the state has assembled many of the ingredients. The next step is ensuring that program rules do not inadvertently exclude the very resources they are intended to enable.
If Colorado gets those details right, it could demonstrate something important for the rest of the country: the value of EVs as grid resources begins with managed charging and grows with bidirectional capability, creating new opportunities to connect, coordinate, and compensate flexible resources across the distribution system.
