“It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”   If Supreme Court Justice Louis Brandeis were alive today, he might add “energy and environment” experiments to his quote.  

Three different associations that focus on state-based issues around clean air and energy recently held their inaugural meeting to share information about how the states can ensure reliable electricity while complying with environmental regulations.  The participating associations were the National Association of Clean Air Agencies (NACAA), the National Association of Regulatory Utility Commissioners (NARUC), and the National Association of State Energy Officials (NASEO).  NACAA is an organization of air pollution control agencies in 53 states and territories and over 165 major metropolitan areas across the U.S.  NARUC is the association for state Public Utility Commissions (PUCs), the entities that regulate investor-owned electricity, gas, and water utilities.  NASEO represents the governor-designated energy officials from each state and territory, and is focused on improving the effectiveness of state energy programs and policies.  If these organizations achieve their objectives of sharing ideas and best practices, these could be important processes that mitigate the lack of a federal energy policy and accelerate deployment of Smart Grid technologies and services.   

The states serve as innovation incubators for policy and regulation, and there are many examples of states addressing energy and pollution challenges well in advance of federal action.  The Smart Grid sector knows that the cleanest energy is the negawatt – the energy that is not used as a result of energy efficiency.  Consider the success of the aggressive energy efficiency standards for buildings and appliances enacted in the state of California – annual electricity consumption in California has remained steady at 7,000 kWh per capita while electricity consumption has risen on average to 12,000 kWh per capita in the rest of the USA.  Other states have taken notice, and over half of them have now adopted or plan to adopt energy efficiency standards to save energy, avoid buildouts of new generation facilities, and reduce utility bills for their constituents.

While some politicians proclaim that cap and trade markets are dreadful theories (ignoring the immensely successful SO2 cap and trade program to address acid rain), the Regional Greenhouse Gas Initiative (RGGI) launched in 2009 in 10 Northeast and Mid-Atlantic states as the first mandatory, auction-based program to reduce greenhouse gas emissions in the U.S.  The participating states are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont.  Each state has an emissions budget, and allowance prices are uniform across the region, with a common objective to reduce CO2 emissions from the power sector by 10 percent by 2018.  At least 25 percent of the auction revenues must be used to promote low carbon-energy development and offer other consumer benefits.  Some states are using auction revenues to resolve budget shortfalls.   

Now that Proposition 23 has been shellacked, the California Air Resources Board is also moving forward to implement a cap-and-trade program in 2012 based on Assembly Bill 32 (AB32).  If the proceeds from this cap and trade program would be disbursed to all California citizens – an idea known as cap and dividend, that would make the program hugely popular, and a laboratory experiment that would get the attention of many other states.