September 13, 2011

State Support for Clean Energy Jobs: A Way to Avoid Congressional Gridlock and Unlock the Job Creation Engine

By Lewis Milford

The President’s speech to Congress on September 8th did not say anything explicitly about clean energy. But the provisions mentioned that might promote clean energy jobs were the federal infrastructure bank idea and the project to fix up our nation’s schools with energy efficient equipment, along with some others.

These projects are good starts, but there may be some ways to accomplish the same results without Congressional approval. I suggest a few here: all propose “leading from behind” the states, which have proven the consistent leaders and job creators on clean energy for the last decade.

First, while the national infrastructure bank is a good idea, it may have rough sledding in Congress. The Administration might consider an alternative: fund existing or new state-level infrastructure banks that finance conventional projects like roads but also new clean energy technologies.

  • According to FHA, 32 states and Puerto Rico have state-run infrastructure banks, which have distributed over $6.2 billion to 609 projects as of 2008. Most cover transportation but some include energy and water. If a new federal institution can’t work, fund state-level banks with more capital to expand their lending and job creating capacity.
  • Taking up on this theme, Connecticut was the first state to create a state-level green energy bank (modeled after the first national-level Green Investment Bank in the UK). The Connecticut green bank, managed by the Clean Energy Finance and Investment Authority (CEFIA), will start with an initial $50 million for state investment, which is expected to leverage multiples of private capital. Instead of creating a new federal institution, a federal program could send capital to state green banks that have more projects than they can finance, immediately creating new jobs.

Second, many states have created new economic development programs and policies for clean energy – the Administration could direct funds (reprogrammed or repurposed rather than new funds) to these states to expand their job creating programs without creating a new federal bureaucracy.

  • To date, over 20 states have created a varied array of these public investment vehicles to invest in clean energy pursuits with revenues often derived from small public-benefit surcharges on electric utility bills. Over the last decade, state clean energy funds have invested over $2.7 billion in state dollars to support renewable energy markets while leveraging another $9.7 billion in additional federal and private sector investment, with the resulting $12 billion flowing to the deployment of over 72,000 projects in the United States ranging from solar installations on homes and businesses to wind turbines in communities.
  • Many states have now moved beyond project finance to support active economic development programs, including cluster development, supply chain analysis, workforce training, and various forms of company investments. But this work is underfunded and they could do more to create jobs with additional support. This kind of local job creation for smaller companies is the typical engine of economic growth in the United States.
  • As part of any federal jobs program, the Administration should consider some form of matching state fund program to extend the reach of these state economic development programs in clean energy. This could be millions, not billions of dollars, again in repurposed or reprogrammed funds, which could perhaps be done without new congressional legislation.

For jobs creation, especially in clean energy where there is little federal bipartisan support, creating new federal agencies and programs may not be the answer.

In addition, relying on state experts who are closer to their markets and their companies might avoid some of the Solyndra controversies in the future. For decades, state officials have created policies and made or approved investments in energy technology and companies to build out the fossil fuel and nuclear energy infrastructure we now have. For a hundred years, through our heavily regulated, monopoly electric generation system, trillions of dollars of government directed support has gone to our network of energy technologies, utilities and companies.

Now that system is slowly moving toward clean energy. Unless electric generation becomes deregulated, a good experiment that largely stalled in the 1990s, state government will remain a big investor in that transition from a fossil fuel economy to cleaner energy technologies.

Future job creation in clean energy should respect, not ignore, these state level historical trends and institutional frameworks. The Administration might pay closer attention to this issue as well. For in conservative federalist fashion, additional Administration support for these states might avoid federal controversies and jump start the clean energy segments of the local economies with minimal delay.

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