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Finally, a Good Energy Policy

The next U.S. president should follow Massachusetts’s lead.

In a whirlwind legislative session ending last Thursday, July 31, 2008, Massachusetts legislative leaders have launched the most comprehensive and forward-thinking set of clean-energy policies in the nation. They will allow the state to move rapidly toward a low-cost, secure, environmentally friendly state energy industry.

Massachusetts’s suite of policies creates the nation’s first electric utility program to put efficiency first, accelerates the state’s Renewable Portfolio Standard, and puts in place strong incentives and mandates for homegrown, non-food-based biofuels for transportation and home heating. It also opens the door for clean-energy development in Massachusetts’s wind and ocean-power-rich shoreline, mandates steadily decreasing state greenhouse-gas emissions, and establishes the necessary innovation and training infrastructure for the state to use these policies as a catalyst to develop a world-leading clean-energy industry. (See further details below.)

The state that created the model for the United States’ public parks, libraries, high schools, and university system has now created the model for a comprehensive clean-energy policy for the nation. This is more critical than ever now, when both 2008 presidential candidates have made strong commitments to revamp the country’s failing energy policies when they take office in January 2009.

Politics is often called “the art of the possible.” From top to bottom, Massachusetts’s new comprehensive clean-energy policy shows what is possible when policies are developed through strong, productive public-private partnerships. Massachusetts’s new policy should serve as a beacon of what is possible for national clean-energy policy, and it should serve as a model for whichever presidential candidate enters the Oval Office come January 2009.

In line with Massachusetts’s visionary new clean-energy policy, any comprehensive national clean-energy policy must

  • emphasize energy efficiency over new fossil-fuel power;
  • provide strong, stable, and steadily growing policy support for renewable power and fuels through national Renewable Portfolio and Fuels Standards;
  • provide a transparent and fair regulatory process for the permitting, siting, and development of new forms of renewable energy;
  • create a national greenhouse-gas-emissions cap and trade regime;
  • provide the necessary financial and institutional support to our nation’s universities, entrepreneurs, and workforce in order to allow our best people to focus on clean energy; and
  • be the result of a strong public-private partnership.

Massachusetts has done it. Now it’s the nation’s turn.

Here’s a rundown of the state’s comprehensive suite of new clean-energy policies.

Energy-Efficiency First

The Green Communities Act of 2008 enacts a first-in-the nation “energy-efficiency first” policy for the state’s electric and gas utilities, requiring them to invest in all cost-effective energy-efficiency measures before turning to building new energy supply infrastructure. This policy is designed to finally enable the state to harvest its as-of-yet untapped gold mine of energy efficiency (often referred to as “the lowest hanging fruit” of clean energy) in order to eliminate the need to build new fossil-fuel power plants in Massachusetts, providing up to 25 percent of the projected 2020 state electricity load through efficiency. Massachusetts utilities will be required to identify and employ all cost-effective energy-efficiency measures, including, among others, efficient lighting, cooling, and industrial processes, and they will be overseen by a 12-member public-private Energy Efficiency Council.

Furthermore, the Massachusetts Department of Public Utilities has enacted an electric utility “decoupling” policy that goes into effect in 2012. It will decouple utility profits from the amount of energy that utilities deliver, zapping the long-present perverse incentive for utilities to overlook energy-efficiency investments in order to be able to sell more power.

Together, these policies will make the Commonwealth an energy-efficiency powerhouse and will foster the development of a world-leading cluster of new companies in the state focused on providing technology for energy efficiency.

Strong, Stable Policy Support for Renewable Energy

The Green Communities Act also offers strong, stable, steadily growing support for renewable power in the Commonwealth, doubling the growth rate of the state’s Renewable Portfolio Standard from 0.5 percent to 1.0 percent per year. This will steadily and predictably increase the required percentage of electricity supplied in the state by renewables, such as wind, solar, and biomass power, from the required 2008 level of 4 percent up to 15 percent by 2020. The act will also foster the continued rapid growth of the state’s emerging clean-energy technology industry and bring jobs and dollars into the state while increasing Massachusetts’s energy security and lowering the environmental impact of its energy use. Furthermore, the act increases the maximum net metering cap on distributed renewable-energy projects by almost a factor of 4, from 60 kilowatts to 2 megawatts, enhancing the reliability of the state’s grid through the increased development of a distributed power infrastructure. The act also provides long-term support for clean-energy power projects in the state by allowing Massachusetts utilities to, for the first time, engage in long-term power purchasing contracts from these projects, giving renewable project developers the long-term revenue certainty that is required for sustained growth of the state’s renewable-power sector.

In further support of renewable-energy development in the state, the legislature has also passed the Massachusetts Oceans Act, which provides a clear regulatory framework for the exploration and development of Massachusetts’s massive offshore wind, wave, and tidal resources. It will also foster state leadership in these highly promising new emerging clean-energy industries.

The Commonwealth’s strong, stable, long-term policy support for renewable energy will serve as a model for the U.S. federal government, which has until now significantly hampered the development of the renewable-power industry by refusing to put in place the long-term, stable renewable-energy policy support that will be required for the creation of a strong and growing domestic renewables industry. Such support will also allow the United States to catch up to and surpass Japan and Europe in this critical rapidly growing strategic industry. (The current debacle over the extension of the Federal Renewable Production Tax Credit is seriously hampering stable investment in wind and solar in the United States. Check out the erratic ups and downs of annual installed U.S. wind capacity for a case in point.)

Strong Support for Renewable Fuels to Displace Petroleum Imports

The Clean Energy Biofuels Act of 2008 provides strong and stable incentives to enable increasing displacement of expensive and insecure petroleum imports and to catalyze the creation of a market for the cellulosic biofuels currently under development by nearly a dozen leading Massachusetts-based companies. This policy will lay the foundation for the development of a state and national cellulosic-ethanol industry by exempting cellulosic biofuels from the state’s 21-cents-per-gallon gasoline tax and by creating a state renewable-fuels standard that mandates a steadily increasing biofuel content in diesel fuel and home heating oil of 2 percent by 2010, up to 5 percent by 2013.

Capping Greenhouse-Gas Emissions

The Global Warming Solutions Act of 2008 puts Massachusetts right at the head of the pack in terms of policy leadership to address the specter of greenhouse-gas-driven climate change. As an active leader in the nation’s first greenhouse-gas cap and trade regime, the Regional Greenhouse Gas Initiative, Massachusetts has mandated a 10 to 25 percent reduction in state greenhouse-gas emissions below 1990 levels by 2020, and a long-term 80 percent reduction by 2050, representing the most stringent greenhouse-gas cap in the nation. This policy not only serves as an example to the nation that the United States must take a leadership position in addressing climate change and institute a national greenhouse-gas-emissions price; it will also serve to spur the early development of a low-carbon energy technology industry sector in Massachusetts, setting it on a path to become a global leader in this rapidly growing multibillion-dollar industry.

Fostering a Clean-Energy Innovation Ecosystem

The Green Jobs Act of 2008 lays the foundation for Massachusetts to rapidly repurpose its world-class universities, technologically skilled workforce, and entrepreneurial startup culture to the task of making Massachusetts a global hub of clean-energy innovation. (The act was developed in a close collaboration between the New England Clean Energy Council and the state government.) The Green Jobs Act devotes $68 million to create the Massachusetts Clean Energy Technology Center to achieve this clean-energy innovation ecosystem transformation and accelerate the region’s clean-energy economy.

The Massachusetts Clean Energy Technology Center will administer, first, a Clean Energy Seed Grant Program; second, a Clean Energy Fellowship Program; and third, a Green Jobs Initiative. The Clean Energy Seed Grant Program will provide seed funding to stimulate clean-energy R&D. It will also create new ventures that will deploy technologies developed by leading Massachusetts universities, research institutions, and small businesses. In so doing, it will fill a critical gap in early-stage funding and will accelerate the development of technologies created by the state’s world-class technical and entrepreneurial talent. The Clean Energy Fellowship Program, the pilot of which has been successfully developed and deployed this summer, addresses the critical shortage of experienced entrepreneurs in the state’s clean-energy startup industry by transforming successful entrepreneurs in other sectors into clean-energy entrepreneurs through a three-month clean-energy entrepreneurship boot camp. (Note: This is a very exciting program. I am a cofounder and have co-led the development of the program’s curriculum and expect a number of exciting new Massachusetts-based clean-energy ventures to come out of the program in short order.)The Green Jobs Initiative will focus on designing clean-energy industry job training programs at area schools and training organizations to ensure the creation of a Massachusetts-wide workforce ready to take advantage of career opportunities in the state’s rapidly growing clean-energy industry.

Together, the Massachusetts Clean Energy Technology Center’s three core programs will ready the state’s world-class innovation ecosystem for the massive opportunity presented by the state’s rapidly emerging clean-energy sector.

Huge kudos are in order for the visionary state leaders who have worked in strong public-private partnership to make Massachusetts’s new clean-energy policy a reality. Governor Deval Patrick and State Energy and Environment secretary Ian Bowles, House Speaker Salvatore Dimasi, and Senate President Therese Murray worked tirelessly in collaboration with stakeholders in the state’s rapidly emerging clean-energy private sector, in large part through the facilitation of the nonprofit New England Clean Energy Council, which is led by my colleague at General Catalyst Partners, Hemant Taneja (cofounder and chairman of the board), and Nick d’Arbeloff (executive director). The council’s board is composed of leaders from all the state’s key clean-energy private-sector stakeholders, including leaders from academia, startups, venture capital, industry, utilities, financial institutions, unions, and environmental groups.

The fact that Massachusetts’s new clean-energy policy has been largely developed over the course of the little more than year and a half that Governor Patrick’s administration has been in office is a testament to the strength of Massachusetts leaders’ unique ability to work together in strong and efficient public-private partnership.

In concert with the ongoing mobilization of Massachusetts’s substantial innovation assets toward clean energy, embodied in MIT’s new $100M+ Energy Initiative and the exploding number of clean-energy technology firms in the state, Massachusetts’s new energy policy will drive the state to a national and global clean-energy leadership position.

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