State policies are the force behind the surge in green energy use. But if those efforts are to be optimized they must be complemented with the appropriate federal research, tax and regulatory policies.

About 26 states have enacted renewable portfolio standards that require utilities to offer a certain percentage of green energy within a specific time period. But they face a number of issues ranging from transmission constraints to inconsistent permitting standards among the jurisdictions. The Pew Center says that federal leadership is a must, particularly when it comes to funding research and development and creating national standards for grid interconnection.

Others, meanwhile, are vocal about extending production and investment tax credits for wind and solar energy. Last year those credits helped increase installations in both sectors by 45 percent and 43 percent, respectively. But each tax break is scheduled to expire by year-end and their extension has been used as political tool in the overall energy debate. Thousands of jobs and billions of dollars are at stake.

The production tax credit benefits utilities for about 2 cents for every kilowatt of wind they produce over 10 years of operation while the investment tax credit provides residential installation credits from $2,000 to $4,000. Together, they cost the federal treasury about $1 billion annually -- a pittance when compared to the tax breaks given to the fossil fuel and nuclear industries. Wind installations, meantime, accounted for nearly a third of all new capacity last year, at more than 5,200 megawatts of new generation.

"Engagement between states and federal policymakers on (facilitating green energy use) has been surprisingly limited, and is long overdue," says Eileen Claussen, president of the Pew Center. "We need to begin thinking both about how the federal government can be most effective in this arena, and also how to enhance interstate collaboration."

With concerns over climate change dominating many political agendas, policymakers must collaborate to encourage more renewable energy development. The goal is to create demand, which in turn attracts suppliers to the field and ultimately leads to the development of newer and better products and services. It's not just good for the environment. It can also be healthy for companies' bottom lines.

Non-hydro renewable sources now make up less than 2 percent of the United States' generating portfolio of 770,000 megawatts. But the overall demand for electricity here is expected to grow by about 2 percent for the next decades, meaning green energy's role will increase. Indeed, many utilities are already factoring in such increases and using something called "integrated resource planning" that forecast generation needs and what it will take to provide power.

The states are moving quickly. For example, utilities in Illinois now produce 2 percent of their power from renewable sources but this requirement will increase to 25 percent by 2025. Large utilities in Colorado, meantime, must generate 20 percent of their power from green energy by 2020 while municipally-owned ones and rural co-ops must produce 10 percent during the same period. California's three major utilities, furthermore, must produce 20 percent of their power using renewable sources by 2010.

Oregon, still, now requires the state's largest utilities to meet a quarter of their electric load with green fuel by 2025 -- a cost that regulators will allow to be passed to consumers if underlying fuel prices go up or initial cost projections were too far afield. And the Arizona Corporation Commission introduced new renewable energy standards requiring regulated utilities to generate 15 percent of their energy from such green sources by 2025. Customers will face surcharges to offset the cost of compliance.

"Increasing renewable energy is very important to the company," says Barbara Lockwood, manager of renewable energy for Arizona Public Service. "We know it is important to customers. It also is important to our regulators, who have shown leadership in this area." All states that mandate green energy production say that they expect to cut their overall greenhouse gas emissions by millions of tons each year.

While renewable portfolio standards have gained traction at the state level, they have stalled nationally. Congress considered late last year a provision to implement a 15 percent threshold for utilities, although it lost its appeal because utility organizations argued that some regions of the country are more conducive to wind and solar generation than others. The Edison Electric Institute says that those matters ought to be left to the states and if not, it would harm reliability and add greatly to consumers' electric bills.

However, the Sierra Club counters those points, noting that the Energy Information Administration found that consumer prices would rise only slightly under such a scenario. The group also said that consumers would benefit in two ways, namely that the increased demand for green power would help cut natural gas prices and it would create thousands of new jobs and add billions in new capital investment -- steps that would nourish green American enterprises and help those entities compete in the global market.

"Although there is no single technological or policy solution to climate change and energy independence in the U.S., renewable energy is clearly destined to play an important role in the years to come -- and now is the time to lay the foundation," says the Pew Center's Claussen.

The states are leading the charge while the feds are subordinating the cause by funding research and providing tax incentives. But the national government will be compelled to leverage its power even more as air quality issues get increased attention, new technologies try to make their way to the fore and participants clamor for regulatory and tax certainties. The synchronization of state and federal policies will boost renewable energy's stock and that of the American economy.

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