Clean Energy Federalism

States Lead, Washington Follows

Over the past decade, states have provided critical financial support to spur thousands of new, clean energy projects using a range of financial support tools, from rebates to competitive grants to loans. Complementing these tools is a set of aggressive public policies at the state level — from tax incentives, net metering, and interconnection rules to renewable portfolio standards. States also are implementing various economic development programs, including industry cluster support, incubators, workforce training and other investments.

Demonstrating Results

The most recent data show that between 1998 and 2009, states, through their own funds, have supported over 72,000 new, clean energy projects across the United States. To bring these projects to market over this eleven year period, states have invested $2.7 billion of their own public funds, almost a half a billion dollars in state funds in 2009 alone. This is separate and apart from any federal stimulus funds, a remarkable demonstration of the states’ commitment to clean energy as part of their future economic development strategies.

Why States are in the Lead

It makes sense that states have been on the cutting edge of clean energy technology deployment. In addition to financial support for clean energy, through their utility regulators, states decide what kind of power plants — coal, oil, solar, or wind — are financed and built in the U.S. While the federal government can influence state energy investment decisions through research and development funding and tax incentives, federal agencies ultimately have little control over those electric power generation decisions.

Creating a Federal-State Partnership

The question then is: what can the federal government do to follow this leadership and expand on it to grow the clean energy market—to create a new “clean energy federalism”? 

• Match state funding and support for training and workforce development programs among the states.
• Create more state-based, economic development institutions needed to marry federal funding and state implementation, leading to more venture assistance, creation of accelerator parks and related support activities like regional centers of excellence.
• Ensure regulatory coordination between states and federal agencies to overcome major permitting and siting time delays.
• Create new collaborative technology funding partnerships between DOE and the states to encourage more joint demonstration funding across all high-value low carbon technologies.
• Support greater state investment in higher risk, breakthrough clean energy projects in contrast to funding only “safe bets” without technology risk.
• Support pooling of demonstration projects among and between the federal government and the states, to overcome key commercial barriers.