State-level clean energy funds (CEFs) are a growing source of investment in nascent clean energy markets, according to a new report from the Brookings Institution Project on State and Metropolitan Innovation. The paper, co-authored by Post-Partisan Power collaborator Mark Muro and the Clean Energy Group’s Lew Milford, highlights the leading role key states have taken in America’s energy transformation:
State governments led the nation’s initial responses to the challenge of energy system transformation a decade ago and since then have developed a broad array of cleantech development tools, ranging from financial support tools and net metering to incubators, cluster supports, and workforce training.
Among the states’ initiatives, meanwhile, the nearly two dozen state-side clean energy funds (CEFs) stand as one of the most important clean energy forces at work in the nation–yet they remain little-known.
Using a variety of funding mechanisms — including tax revenues, electricity surcharges, pollution charges, bonds, and others — states have committed $2.7 billion to support renewable energy markets over the last decade. That funding, according to the report, has leveraged an additional $9.7 billion in federal and private investment in some 72,000 projects, including solar, hydro, wind, and other clean energy technologies. (Click the above map for state-level information.)
CEFs clearly constitute an important tool in the effort leverage the public and private investments necessary to transition to a low-carbon economy. That said, at an average of $270 million annually, state investment via CEFs is minor compared even to underfunded federal clean energy R&D efforts, which total $3-4 billion per year, and total federal clean energy expenditures averaging roughly $40 billion in 2009 and 2010. What’s more, as the Brookings report notes, state CEFs “have tended to engage primarily on individual project financing and deployment through the use of rebates, grants and performance-based incentives that have directly subsidized the installation of clean energy technologies.” States may be ideally suited for project finance and particularly electric power installations, but this focus still leaves a vacuum for other phases of critical clean energy investment, including applied R&D, demonstration and commercialization of next-generation technologies, and support for advanced energy manufacturing.
Ultimately, state clean clean energy investments will prove critical to decarbonization and advanced energy innovation, and Muro and Milford offer important recommendations to leverage this funding for maximum impact. As the Brookings report emphasizes, recent developments in state-funded projects show that the “next era of of state clean energy fund leadership is coming into focus thanks to existing fund experimentation.” This is a good sign, and stakeholders should work to improve the scale and effectiveness of state-level investments. Considering state government relationships with regional and local utility power purchasers, and the leverage of state public utility commissions (PUCs), state investment can add to the still much-needed federal investment in research, demonstration, innovation, and deployment of next-generation clean energy technologies.