The State-Level Climate Roadblocks Almost No One is Addressing
Millions pour into lobbying for better climate and energy policy, but what about implementing the policies we already have?
by Ted Ko, Energy Policy Design Institute
With another deadly hot summer underway and a vastly consequential election looming, it’s a good time to identify where investment gaps remain for the energy transition. Closing these will be crucial for climate-focused companies, investors, and philanthropists, especially if Washington does an about-face on climate in January. One such gap exists at the state level, where bottlenecks threaten climate tech companies and climate progress overall – and where strategic investment could be utterly transformative.
First, the good news: capital has continued to flow into the energy transition, with Bloomberg NEF reporting global record highs and a 15% increase in the Americas last year relative to 2022. This uptick is partly due to strong cleantech support in U.S. policies such as the Inflation Reduction Act (IRA), whose impacts continue to be felt. In June 2024 alone, companies announced more than $700 million in new investment for clean energy projects in six U.S. states, plus over 1,300 new jobs.
But for investments targeting the electric sector – specifically its transformation, through vastly expanded use of renewables, energy storage, and software to power a net-zero economy – state-level roadblocks routinely hamper deployment. In these cases, enacting new policy isn’t the problem, as many of the laws we need already exist. It’s the implementation process that’s broken.
Most clean energy deployment goes through state public utilities commissions, which is where roadblocks occur. For example, when New Jersey legislation set a statewide energy storage target, it fell to the commission to decide critical implementation details – a stalled process that’s taken six years and counting. In Illinois, ambitious clean energy legislation required changes in how new resources connect to the grid; two years later, the working group’s report to the commission contained zero actionable recommendations. Zero.
These delays not only hinder climate progress but also deprive cleantech innovators of vital market opportunities. And relative to spending on policy-related lobbying efforts, they get almost no attention.
What should investors do instead? Arguably the best thing that could happen for energy policy (and perhaps the habitability of our planet) would be the widespread adoption of technologies and tools to speed the policy design and implementation process, making it both more transparent and efficient.
There are reasons for optimism. Maryland recently laid crucial groundwork for its energy storage goal in only three months. The workgroup, which my organization facilitated, used design thinking to transform the traditional process into an accelerated, collaborative project. The end result was an initial roadmap with key questions for future consideration and an engaged stakeholder group eager to keep working together.
Such successes are rare, simply because the status quo is so broken. Typically, a commission solicits input and gets buried in stakeholder filings, a fraction of which are helpful. Wading through them takes weeks or months and produces a straw proposal, which is basically a patchwork of competing perspectives. Nonetheless, this document forms the basis of a lengthy process involving hearings, workshops, and written comments over many months or years.
Instead of working toward an ideal outcome, the process adjudicates a lack of consensus it encouraged in the first place. The outputs – new regulations and government programs – reflect the dysfunction that went into them.
A better approach leverages design thinking concepts to both accelerate the process and orient it toward better outcomes. From our work at EPDI, here are five concepts that could help transform energy policy around the country:
Begin with the end in mind. That means agreeing on a vision, goals, and ways to balance different objectives. In our Maryland work, for example, we asked stakeholders to envision an ideal end-state for their energy storage market so we could then work towards it together.
Establish a shared language. Everyone needs to be able to use the same terminology, and no concept is too basic. In Maryland, we began by defining “energy storage,” which brought important distinctions to light and accelerated progress.
Treat the initiative as a project answering a set of design questions, together – not a zero-sum battle of competing interests. Beyond helping the Maryland group prioritize a list of design questions, we emphasized that the new program’s success would hinge on answering them effectively.
Identify your design principles and values. The previous step identifies key design questions; what precepts will the group use to answer them? Maryland stakeholders wanted a self-sustaining energy storage market by 2033, which allowed us to evaluate various policy mechanisms in terms of their alignment with that goal.
Learn from others’ successes and failures. Our report back to the Maryland commission included best practices from around the country, helping them build from a strong foundation and avoid reinventing the wheel.
Purpose-built policy design tools (e.g., Roadmap, Dictionary, Design Playbook) help commissions put concepts into action. The last concept, learning from experience, can be especially challenging, as there’s no way to easily capture the flood of available information from countless “white papers, webinars, workshops, and workgroups” (what I call “the 4 Ws”). Simple software tools could vastly accelerate progress here.
Design thinking can help even leading states avoid missteps. In California, two recent decisions limit small-scale solar in a state pursuing ambitious climate and energy goals. In both cases, commissioners prioritized some policy objectives over others, narrowing options. A better process would have kept objectives in play and reconciled them without jeopardizing the state’s clean energy progress or damaging its solar industry. The legislation wasn’t the problem; the regulatory process was.
Many nonprofit groups perform admirable work in the state regulatory arena. They include the Regulatory Assistance Project, Interstate Renewable Energy Council, and Gridworks, to name a few. Some groups advocate for specific solutions (e.g. Rewiring America, with electrification) or target geographical areas. Philanthropies like the Energy Foundation provide crucial support for regulatory advocacy across the U.S.
But all of this work occurs within a paradigm that’s fundamentally broken – and so far, entirely too few resources have gone toward fixing it. States already struggle to keep up with policy victories like the IRA, let alone the threefold increase in energy transition investment that’s needed to reach Paris Agreement goals.
Solving these bottlenecks largely comes down to better implementation of the policies we already have, which is why investing in new approaches to policy design and implementation is so important. The future of climate tech companies – and the planet – may depend on it.
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According to Bloomberg August 15, 2024, the world's climate investments decreased by a whopping 50% in the first half of 2024 compared to the first half of 2023.
For example, investments in green hydrogen are beginning to stall worldwide