Deutschland Über Alles - Why German Regulations Need To Conquer The Divided U.S. Renewable-Energy Framework To Save Clean Tech (And The World)

COMMENT
DEUTSCHLAND ÜBER ALLES:

WHY GERMAN REGULATIONS NEED TO
CONQUER THE DIVIDED U.S. RENEWABLE-
ENERGY FRAMEWORK TO SAVE CLEAN TECH
(AND THE WORLD)
∗
BRAD A. KOPETSKY
The current U.S. renewable-energy regulatory framework

does not adequately incentivize the clean-technology
development needed to address global energy concerns. The
United States’ fragmented, state-by-state approach creates
an unacceptable level of uncertainty for clean-tech investors
and innovators. This uncertainty has stifled U.S. clean-tech
capital formation, a useful barometer for overall innovation,
relative to nations with more progressive frameworks. This
Comment proposes a comprehensive overhaul of the U.S.
renewable-energy framework that includes elements of the
the highly successful German Renewable Energy Act, along
with pieces of various state programs, in a unified, demand-
pull approach. The proposed framework would encourage
widespread adoption of clean tech in the United States,
reduce investment risk to clean-tech investors, and foster the
clean-tech innovation needed to address current and future
energy concerns.
INTRODUCTION
Global warming, threats to energy security, and rising

energy costs have become unavoidable in today’s world
of political turmoil and eco-awareness.1 Each day the

∗ JD, University of Wisconsin Law School, 2009. This
Comment originally appeared in Issue 5, Volume 2008 of the Wisconsin
Law Review. All citations should appear as 2008 WIS. L. REVIEW XXX
(original pagination not retained by Scribd formatting).
1
. See, e.g., Chip Cummins et al., Over a Barrel: The
Global Scramble for Energy Security, WALL ST. J., Jan. 25, 2007, at A12
(discussing energy security); Price Index Soars on Spike in Energy
Costs, ST. PETERSBURG TIMES, Apr. 18, 2007, at 2D (discussing rising energy
costs); Andrew C. Revkin, In Stark Shift, U.S. Warns of Global Warming;
Drastic Impact Inevitable, It Says, CHI. TRIB., June 3, 2002, at 7
(discussing global warming). Admittedly, the cause (and even
existence) of global warming is still hotly debated. See, e.g., Timothy
Ball, Global Warming: The Cold, Hard Facts?, CANADAFREEPRESS.COM, Feb. 5,
2007, http://www.canadafree
press.com/2007/global-warming020507.htm; Derek Cheng, Scientists
Agree Global Warming is Killing the World, N.Z. HERALD, Nov. 19, 2007,
available at http://www.nzherald.co.nz/category/story.cfm?
c_id=68&objectid=10476904. The merits of this debate are beyond the
scope of this Comment. Rather, this Comment presumes (1) that global
174
world’s reliance on carbon-based fuels and waning natural
resources causes further environmental damage and
brings us closer to the day the (oil) wells literally run dry. 2
Frighteningly, the situation is only set to get worse as
world energy demand grows rapidly into the foreseeable
future, fueled by population increases and economic
growth.3
While conservation was the tool of choice in dealing
with past energy crises,4 the newfound demand explosion
indicates a need for new solutions.5 As a result,
technophiles and investors are increasingly teaming to
solve today’s energy crisis through innovations in clean
technologies (“clean tech”).6 Clean tech represents a
warming exists, and (2) that it is caused at least in part by carbon
emissions stemming from fossil-fuel consumption. As such, this
Comment further presumes renewable energy sources must be
identified and propagated for a variety of reasons, not the least of
which are the reduction of carbon emissions and the mitigation of
global warming trends.
2
. Forty thousand gallons of oil are consumed every
second worldwide. Geoff Colvin, The Price of Oil, FORTUNE, Dec. 10, 2007,
at 163, 164. This means that by the time you finish reading this
footnote, approximately a half-million gallons of oil will have been
consumed.
3
. Calculations show worldwide energy use will rise 57
percent by 2030. ENERGY INFO. ADMIN., U.S. DEP’T OF ENERGY, DOE/EIA-0484,
INTERNATIONAL ENERGY OUTLOOK 5 (2007), available at
http://www.eia.doe.gov/oiaf/ieo/pdf/0484
(2007).pdf.
4
. See President Jimmy Carter, Presidential Address, Crisis
of Confidence (July 15, 1979) (urging Americans to turn down the
thermostat and obey the speed limit), available at
http://millercenter.org/scripps/archive/speeches/detail/3402.
5
. See Mona Hymel, The United States’ Experience with
Energy-Based Tax Incentives: The Evidence Supporting Tax Incentives
for Renewable Energy, 38 LOY. U. CHI. L.J. 43, 45–46 (2006).
Realistically, emerging countries are less likely to practice conservation
to address energy concerns, as they are still on the upswing of their
energy demand. See Mai Tian, Energy Conservation, Efficiency
Highlighted, CHINA DAILY, Dec. 29, 2004, at 9, available at
http://www.chinadaily.com.cn/
english/doc/2004-12/28/content_404062.htm (“It is not reasonable to
require developing countries to share the responsibilities of developed
countries.”).
6
. Loosely speaking, clean tech encompasses methods
that “harness renewable materials and energy sources, dramatically
reduce the use of natural resources, and significantly cut or eliminate
emissions and wastes.” JOEL MAKOWER, GLOBAL BUS. NETWORK, THE CLEAN
REVOLUTION: TECHNOLOGIES FROM THE LEADING EDGE 3 (2001), available at
http://www.cleanedge.com/reports/gbn.pdf. While the term clean tech
is therefore a bit broader than renewable energy, this Comment
generally uses the terms interchangeably unless noted otherwise. The
2008:941 Deutschland Über Alles 175
critical factor in solving the current crisis, as it alone can
meet increasing energy demand without further
environmental repercussions.7
Despite compelling evidence of their need, many
clean technologies have not yet reached commercial
viability to attract traditional financing.8 Venture capital9
has thus played a vital role in the industry’s inherently
risky infancy.10 In fact, venture capital dollars have
recently flowed heavily into clean tech as investors have
been excited at its prospects.11 However, periods of
focus of this Comment tends to invoke renewable energy more

frequently by virtue of its context, since energy-related investments
make up the largest individual portion of venture capital deals in clean
tech—about 44 percent. NICHOLAS PARKER & ANASTASIA O’ROURKE, CLEANTECH
VENTURE NETWORK, THE CLEANTECH VENTURE CAPITAL REPORT 8 (2006). Renewable
energy, of course, typically includes wind, solar, biomass, and
geothermal energy. See, e.g., infra note 246 and accompanying text.
7
. See Energy for Development: Local Projects, Large
Impacts, SUSTAIN, July 2007, at 4, available at
http://www.wbcsd.org/DocRoot/gTxcmH87CXJNTR1
Nitxd/Sustain28.pdf.
8
. See Cleantechpartners.org, About Clean Tech Partners,
http://www.cleantechpartners.org (last visited Nov. 4, 2008)
(suggesting emerging clean-tech companies face barriers to financing
when “making the leap from technological viability to commercial
viability”). Funding for early-stage, inherently risky investments, such
as clean tech, is often not available via traditional bank financing. See
generally NAT’L VENTURE CAPITAL ASS’N, VENTURE IMPACT: THE ECONOMIC IMPORTANCE OF
VENTURE CAPITAL BACKED COMPANIES TO THE U.S. ECONOMY 8–9 (4th ed. 2007); see
also infra Part I.B.
9
. Venture capital is capital invested by sophisticated
investors in early-stage, risky corporations. Nvca.org, The Venture
Capital Industry—An Overview, http://www.nvca.org/def.html (last
visited Oct. 26, 2008). Venture capital firms typically structure “funds”
as limited partnerships, where they serve as the general partner and
assume investment management duties, while passive investors, who
serve as limited partners, put up most of the actual funding (venture
capital firms typically supply only 1 percent of funding). Ronald J.
Gilson, Engineering a Venture Capital Market: Lessons from the
American Experience, 55 STAN. L. REV. 1067, 1070–71 (2003). The
venture capitalist also charges an annual fee and retains a portion of
investment returns—typically 2 percent of capital invested and 20
percent of returns. Adam Lashinsky, The Battle over Two and Twenty,
FORTUNE, May 28, 2007, at 22, 22.
10
. Venture capital firms typically have a higher risk
tolerance, allowing them to play a significant role in fledgling
companies, which are inherently more risky than more established
companies. See NAT’L VENTURE CAPITAL ASS’N, supra note 8, at 8–9; see also
infra Part I.B.
11
. Clean tech brought in $883.6 million in venture capital
financing in the second quarter of 2008 alone. Press Release, Nat’l
Venture Capital Ass’n, Venture Capital Investment Holds Steady at
176
widely accessible investment capital cannot last ad
infinitum,12 and the capital flow faces an invisible
headwind from the piecemeal U.S. renewable-energy
framework.
While governments across the globe have begun in
earnest to create progressive energy policies,13 U.S. law in
this area has generally been impractical, inefficient, and
inconsistent. In fact, the Energy Policy Act of 2005 (“2005
Energy Act” or “the Act”) created the first true U.S.
energy policy in more than a decade.14 A substantial part
of the Act addressed the use and development of
renewable energy through clean tech,15 but it stopped
short of any strict, national requirements for alternative-
energy usage.16 As a result, states are left to make the
majority of these decisions, and a Frankensteinian
amalgamation of regulations now governs an increasingly
national (and even global) energy market.17
This state-by-state framework significantly hampers
innovation in the U.S. clean-tech space.18 Differing
renewable-energy laws in each state fragment the market
$7.4 Billion in Q2 2008 According to the Moneytree Report (July 19,

2008), available at http://www.nvca.org/pdf/08Q2_
VCinvestMTReport.pdf.
12
. See generally Shawn Tully, Wall Street’s Money
Machine Breaks Down, FORTUNE, Nov. 26, 2007, at 65.
13
. For example, the European Union has a goal to meet 20
percent of energy demand with renewable energy by 2020. EUR.
PHOTOVOLTAIC INDUS. ASS’N, THE ANNOUNCED EUROPEAN FRAMEWORK DIRECTIVE ON
RENEWABLE ENERGY SOURCES (2007), available at
http://www.epia.org/fileadmin/EPIA_docs/publications/epia/EPIA_
PP_070521.pdf. India has also taken strides to provide for renewable
energy, becoming the first country with an unconventional energy
ministry. Kaushik Ray, Energy Secures a Sustainable Future, FIN. TIMES
(London), Nov. 15, 2006, at 12. Perhaps most notably, even countries
in the oil-rich Middle East have acted, as evidenced by the United Arab
Emirates aspiring to produce 50 percent of its electricity through
renewable means by 2050. In Oil-rich Gulf States, Governments Take
Initial Steps to Develop Renewable Resources, PLATTS RENEWABLE ENERGY
REP., Nov. 27, 2006, at 10.
14
. Brad Sherman, A Time to Act Anew: A Historical
Perspective on the Energy Policy Act of 2005 and the Changing
Electrical Energy Market, 31 WM. & MARY ENVTL. L. & POL’Y REV. 211, 211
(2006).
15
. See Energy Policy Act of 2005, Pub. L. No. 109-58, §§
201–52, 1701–04, 119 Stat. 594, 650–83, 1117–22.
16
. See id.
17
. See infra Part IV.
18
. See Daniel C. Esty, Revitalizing Environmental
Federalism, 95 MICH. L. REV. 570, 619–20 (1996).
and create an undesirable level of uncertainty for
investors and entrepreneurs.19 Furthermore, while the
objectives of many states’ renewable-energy laws are
admirable, their means oftentimes do not optimize the
clean-tech capital development required to accomplish
those goals. This Comment argues that the United States
must follow the lead of other progressive nations by
enacting a national, demand-pull,20 renewable-energy
scheme to foster clean-tech capital formation and
innovation. Without this stimulation, the prospects are
dim for advancing clean tech to sufficiently meet the
current energy concerns.21
Part I examines clean tech’s contributions to solving
these issues and outlines venture capital’s role as a
barometer of investment and innovation in such
technologies. Part II illustrates the constraint on U.S.
capital formation in the clean-tech area. Part III reviews
federal regulatory responses to the energy crisis, and
critiques their failure to incentivize clean-tech investment
and innovation. Similarly, Part IV examines various state
responses and the flaws of state autonomy in this area.
Next, Part V provides a case study of two recently
enacted Illinois statutes, which are timely examples of the
problems present in many state laws. Finally, Part VI
discusses the cohesive renewable-energy framework the
United States should adopt. The proposal mirrors the
German Renewable Energy Sources Act,22 which has been
very successful and used as a model in many developing
nations.23
19
. Id. All else being equal, investors prefer certainty, as
uncertainty means greater risk. See Tully, supra note 12, at 69–70.
20
. A demand-pull strategy is one that creates end-user
demand, thereby “pulling” product development, innovation, and
market development through the system. See Bernadette Del Chiaro &
Rachel Gibson, Government’s Role in Creating a Vibrant Solar Power
Market in California, 36 GOLDEN GATE U. L. REV. 347, 371–72 (2006).
21
. See infra text accompanying notes 49–50.
22
. Gesetz für den Vorrang Erneuerbarer Energien
[Erneuerbare-Energien-Gesetz] [Renewable Energy Sources Act], Mar.
29, 2000, BGBI. I at 305, last amended by Gesetz, July 21, 2004, BGBI.
I at 1918, translated at Renewable Energy Sources Act,
http://www.erneuerbare-
energien.de/files/pdfs/allgemein/application/pdf/
eeg_en.pdf (last visited Oct. 26, 2008) (outlining Renewable Energy
Sources Act).
23
. See, e.g., Morocco to Fund Renewable Energy,
EARTHTIMES.ORG, May 25, 2007,
http://www.earthtimes.org/articles/show/66345.html (noting that
178
I. TWO AMERICAN INSTITUTIONS REQUIRED FOR A RESCUE
The problems with traditional energy production are

substantial. The world’s expanding population demands
energy at exponentially increasing rates.24 In many
countries, increasing populations create economic growth
and higher living standards, requiring even more
energy.25 The magnitude of this increasing demand
precludes any single solution—be it conservation,
hydrogen power, or the addition of Soylent Green26 to the
menu—from being sufficient. Thankfully, two historic
American staples—innovation and investment—provide an
opportunity to develop a variety of solutions.
A. Innovation
Time and again American innovations have broken

into unchartered territories to solve critical problems.27
Fittingly, much of today’s innovation is taking the form of
greater efficiencies in clean tech, bringing it closer to
broad-scale commercial viability.28 For example, while the
first solar cell was only 1 percent efficient,29 energy-
conversion efficiencies for commercially available solar
cells are now around 15 percent,30 and have reached
more than 40 percent using experimental technologies.31
Innovations like this have also allowed for ever-increasing
energy production from fewer and fewer raw-material
Morocco’s renewable-energy-sources law follows Germany’s model).

24
. See ENERGY INFO. ADMIN, supra note 3, at 5–6.
25
. See id. at 5.
26
. Soylent Green is a fictional food source used to feed
the overpopulated Earth due to humanity’s failure to achieve
sustainable development. See SOYLENT GREEN (Metro-Goldwyn-Mayer
1973).
27
. See generally MICHAEL BLOW, MEN OF SCIENCE AND INVENTION
(1960).
28
. See, e.g., Ineke Malsch, Thin Films Seek a Solar Future,
THE INDUS. PHYSICIST, Apr./May 2003, at 16, available at
http://www.aip.org/tip/INPHFA/vol-9/iss-2/p16.html; Press Release, U.S.
Dept. of Energy, New World Record Achieved in Solar Cell Technology
(Dec. 5, 2006), available at http://www.energy.gov/
news/4503.htm. Efficiency in these terms is the actual amount of
energy transferred relative to the maximum theoretically possible.
DICTIONARY OF ENERGY 82–83 (Malcom Slesser ed., 1982).
29
. Wikipedia.org, Solar cell,
http://en.wikipedia.org/wiki/Solar_cell (last visited Nov. 4, 2008).
30
. See Malsch, supra note 28.
31
. See Press Release, U.S. Dept. of Energy, supra note 28.
inputs.32 These developments are encouraging, as further
innovation in clean tech represents the most realistic way
to solve today’s brewing energy crisis.33
Despite this promise, however, further innovation is
needed to remedy today’s crisis. Solar costs have
generally declined, but rising material costs actually
caused a price increase of 20 percent between 2004 and
2006—jeopardizing solar technology’s adoption.34
Additionally, renewable energy sources still account for a
mere 2 percent of the world’s energy supply.35 The
demand for resources from developing economies, the
desire for cleaner products in developed nations, and the
growing support of businesses have all created additional
need for clean tech.36 Innovation must now supply it.
Finally, stimulating clean-tech innovation in the United
States is of particular concern. Statistics show that “[t]he
United States is in a unique and powerful position to
shape the energy market from both sides.”37 Although the
United States comprises only 4.6 percent of the world’s
population,38 it produces 15.2 percent of the world’s
32
. For example, thin-film solar cells use little-to-no
expensive materials, leading to a significant drop in price per quantity
of energy produced. Michael Moyer, The New Dawn of Solar, POP. SCI.,
Dec. 2007, at 101, available at
http://www.popsci.com/popsci/flat/bown/2007/green/item_59.html.
33
. See Energy for Development: Local Projects, Large
Impacts, supra note 7, at 4. The advances made are also critical
because many contend the driving force in clean tech’s adoption will
be relative cost—that is, as fossil fuels’ costs rise, and clean tech’s
costs fall, clean tech will become more prevalent. See The Next Big
Thing; It’s Here Now, INSIDE GREEN BUS., June 27, 2007. This theory is
supported by data showing advances in wind-energy technology have
led to a fifteen-fold increase in its use over the past decade, see id.,
due to lower production costs and greater geographic versatility. More
Efficient Wind Turbine Blade Designed, SCIENCEDAILY.COM, Mar. 20, 2007,
http://www.sciencedaily.com/releases/2007/03/070319180042.htm.
34
. JOEL MAKOWER ET AL., CLEAN EDGE, CLEAN ENERGY TRENDS 2007, at
4 (2007), available at
http://www.cleanedge.com/reports/Trends2007.pdf.
35
. UN Sees Clean Energy Growth, INT’L OIL DAILY, June 21,
2007.
36
. See The Next Big Thing: It’s Here Now, supra note 33.
37
. Kate Sims, Incentives and Regulation to Promote the
Generation of Renewable Energy in Wisconsin 2 (Aug. 6, 2007)
(unpublished comment) (on file with Professor Peter Carstensen,
University of Wisconsin Law School). In this context, “both sides” refers
to both the production and consumption of energy. See id.
38
. ENERGY INFO. ADMIN., U.S. DEP’T OF ENERGY, DOE/EIA-0384,
ANNUAL ENERGY REVIEW 2007, at 377 tbl.D.1 (2008), available at
180
energy,39 while devouring 21.8 percent of it.40 Moreover,
the average U.S. citizen uses more than twice as much
energy as the average European citizen.41 Since U.S.
public opinion strongly favors solving energy problems
with increased production rather than conservation, 42
there can be no doubt the country must drive innovation
in clean tech.
B. Investment
Investment in clean tech is as important as

innovation. In fact, American culture has traditionally
encouraged entrepreneurship and investment, helping to
nurture innovative products through their infancy to
commercial practicality.43 Today, America’s
entrepreneurial spirit is represented particularly well by
the venture capital industry, which plays a unique role at
the nexus of finance and innovation by supporting small
innovators with both great potential and great risk.44
http://www.eia.doe.gov/aer/
pdf/pages/aer.pdf.
39
. See Energy Info. Admin., U.S Dept. of Energy, United
States Energy Profile, TONTO.EIA.DOE.GOV, Oct. 14, 2008,
http://tonto.eia.doe.gov/country/country_
energy_data.cfm?fips=US.
40
. Id. In the process, the United States also produces 21.1
percent of global carbon emissions. ENERGY INFO. ADMIN., U.S. DEP’T OF
ENERGY, INTERNATIONAL ENERGY ANNUAL 2005, tbl.H.1co2 (2005). The bulk of
these emissions come from electricity generation. See ENERGY INFO.
ADMIN., U.S. DEP’T OF ENERGY, U.S. EMISSIONS DATA, tbl.2, available at
http://www.eia.doe.gov/oiaf/1605/ggrpt/excel/tbl_
statesector.xls.
41
. ENERGY INFO. ADMIN., U.S. DEP’T OF ENERGY, INTERNATIONAL ENERGY
ANNUAL 2005, supra note 40, at tbl.E.1c. The average U.S. citizen uses
340.5 million BTU annually, while the average European uses 146.4
million. Id.
42
. Valerie J. Faden, Comment, Net Metering of Renewable
Energy: How Traditional Electricity Suppliers Fight to Keep You in the
Dark, 10 WIDENER J. PUB. L. 109, 111 (2000).
43
. See REED HUNDT, IN CHINA’S SHADOW: THE CRISIS OF AMERICAN
ENTREPRENEURSHIP 27–33 (2006).
44
. Gilson, supra note 9, at 1068, 1076–77. Venture
capitalists are willing to take on added risk in exchange for a measure
of control, which they hope to leverage into successful innovations
through the use of various financial motivators. See id. passim. This
arrangement has financed many recent, innovative breakthroughs,
ranging from biotech blockbusters to the explosion of the Internet. Id.
at 1068. In fact, some credit the technological, innovation, and
economic booms of the late twentieth and early twenty-first centuries
almost solely to venture capital. Michael Mandel, Remarks Regarding
Fortunately, venture capital has recently started to
play a larger role in clean tech.45 U.S. venture capital
investments in energy technologies nearly tripled from
just over $1 billion in 2005 to $2.7 billion in 2007,46 and
over the last eight years have increased from less than 1
percent of total venture capital to nearly 10 percent.47 In
fact, the majority of disclosed financing deals in clean
tech are now made by professional venture capital firms.48
This type of growth must be sustained to further
commercialize clean tech. The technology is not yet
commercially viable on a broad scale, and additional
investment is required to make a breakthrough.
Government funding alone will likely not stimulate the
necessary innovation, as renewable-energy programs are
more attractive when implemented without public
funding.49 Today economists, business leaders, and policy
makers widely agree that “a vibrant venture capital
industry is a cornerstone of America’s leadership in the
commercialization of technological innovation.”50 As such,
venture capital serves not only as a useful proxy for
overall capital formation in clean tech, but also as a
barometer of innovation itself.
the E-Economy (Mar. 1, 2001), available at

http://ec.europa.eu/enterprise/
events/e-economy/doc/speech_mandel.pdf. Others even go so far as to
proclaim it “among the crown jewels of the American economy.”
Gilson, supra note 9, at 1068.
45
. See JOEL MAKOWER ET AL., CLEAN EDGE, CLEAN ENERGY TRENDS
2008, at 6 (2008), available at
http://www.cleanedge.com/reports/pdf/Trends2008.pdf; PARKER &
O’ROURKE, supra note 6, at 7.
46
. MAKOWER, supra note 45, at 6.
47
. Id.
48
. See PARKER & O’ROURKE, supra note 6, at 8.
49
. Faden, supra note 42, at 123. From a policy standpoint,
a program is presumably more favorable without public funding
because the public does not perceive an additional cost to bear; they
feel as though they are paying for a publicly financed project, yet do
not feel a direct burden when it is privately financed. See generally YIH-
HUEI WAN & H. JAMES GREEN, CURRENT EXPERIENCE WITH NET METERING PROGRAMS 2
(1998), available at http://www.osti.gov/bridge/servlets/purl/654082-
EwC08R/web
viewable/654082.pdf.
50
. Laura Bottazzi & Marco Da Rin, Venture Capital in
Europe and the Financing of Innovative Companies, 34 ECON. POL’Y 231,
231 (2002).
182
II. THE CONSTRAINT OF U.S. CLEAN-TECH DEVELOPMENT
Despite the deep need for further commercialization

of clean-tech innovation in the United States, ample
evidence shows the requisite capital formation is currently
underwhelming.51 In dollar terms, U.S. clean-tech
investments appear healthy relative to other nations.52
However, these measurements are skewed, as the ratio of
venture capital to gross domestic product has historically
been much higher in the United States than in other
countries.53 The United States is also a late entrant to the
clean-tech space, further skewing measurements since
clean tech is more mature in other countries.54 Lastly,
while the $2.7 billion flowing into U.S. clean tech in 2007
may appear impressive, it is less inspiring when
juxtaposed with the staggering $148.4 billion in total
global renewable-energy investment that year.55
In truth, clean tech is a relatively low priority for the
U.S. investment community when compared to other
countries. Investments in clean tech are approximately 9
percent of total U.S. venture capital—the highest ever and
51
. See MAKOWER, supra note 45, at 6; NAT’L SCI. BD., 1 SCIENCE
AND ENGINEERING INDICATORS 2006, at 6-39 (2006) [hereinafter SEI 1],
available at http://www.nsf.gov/statistics/seind06/pdf/volume1.pdf;
NAT’L SCI. BD., 2 SCIENCE AND ENGINEERING INDICATORS 2006, at A6-62 tbl.6-18
(2006) [hereinafter SEI 2], available at
http://www.nsf.gov/statistics/seind06/pdf/volume2.pdf; Industry Offers
Clean-Energy Agenda Beyond Production Tax Credits, INSIDE GREEN BUS.,
Apr. 18, 2007; UK Dominates European Investment in Clean Energy,
EUR. DAILY ELEC. MKTS., June 4, 2007.
52
. For instance, in 2006, $2.4 billion of clean-tech venture
capital was raised in the United States. MAKOWER, supra note 34, at 4. In
comparison, China raised only $420 million for the year, Michael
Burnham, Clean-Tech Investments in China Approach $1B, E&E NEWS
PM, July 19, 2007, and Europe raised only €2 billion over the entire
2003–06 period. See UK Dominates European Investment in Clean
Energy, supra note 51.
53
. See LARISA V. SHAVININA, THE INTERNATIONAL HANDBOOK ON
INNOVATION 643 (2003) (referencing a study showing the ratio of venture
capital to gross domestic product was 8.7 times higher in the United
States than in Asia, and 8.0 times higher than in continental Europe).
54
. Global Venture Capital Investments in Clean
Technology Surge, AM. VENTURE MAG., Sept. 27, 2007 (suggesting the
reason European clean-tech venture capital has not kept pace with the
United States is because many European nations already have wind
and solar bases installed that far surpass the United States’).
55
. NEW ENERGY FIN. LTD., GLOBAL TRENDS IN SUSTAINABLE ENERGY
INVESTMENT 2008, at 1 (2008), available at
http://sefi.unep.org/fileadmin/media/sefi/
docs/publications/Exec_summary.pdf.
up from just 1 percent a handful of years ago. 56 However,
investments in clean tech represented 10 percent of all
European venture funds for the 2003 to 2006 period—a
period when such investment was receiving virtually no
attention in the United States.57 Further, clean tech drew
19 percent of total Chinese venture capital in 2006,58 with
approximately 40 percent growth in 2007.59 Clearly,
investors in other nations see clean tech as a much higher
priority than their U.S. counterparts.60
Not only does U.S. interest in clean-tech investing
pale in comparison to foreign levels, it suffers in domestic
comparisons as well. Historically the biotech,
semiconductor, communications, medical, Internet, and
software industries have all commanded commitments far
in excess of the 9 percent of venture capital that clean
tech has attracted.61 For example, software,
communications, and healthcare companies each drew up
to 21 percent of total capital in the 1990s.62 Further, when
the Internet emerged as the “it” investment of the late
nineties, it drew more than 40 percent of all venture
capital.63 These figures indicate something is precluding
56
. MAKOWER, supra note 45, at 6.
57
. UK Dominates European Investment in Clean Energy,
supra note 51; see also MAKOWER, supra note 45, at 6.
58
. Burnham, supra note 52.
59
. Li Huayu, China Has World’s Largest Cleantech Market,
CHINADAILY.COM, Jan. 10, 2008, http://www.chinadaily.com.cn/energy/2008-
01/10/
content_6384761.htm.
60
. The statistics are buttressed by congressional concern
that renewable generation in the United States has become
disconnected with job growth and manufacturing in the field—
unmistakable signs of underinvestment. See Industry Offers Clean-
Energy Agenda Beyond Production Tax Credits, supra note 51. In fact,
while the largest U.S. clean-tech IPO in the first half of 2007 was a
mere $92.6 million (EnerNOC, an energy management solutions
provider), Europe produced history’s largest venture-backed clean-tech
IPO (the $428.7 million offering of solar company Q-Cells in 2005), and
a Chinese company earned the highest ever initial valuation for a
clean-tech start-up (LDK Solar Hi-Tech was valued at $2.8 billion after
its 2007 listing on the NYSE). See Global Venture Capital Investments
in Clean Technology Surge, supra note 54.
61
. See SEI 2, supra note 51, at A6-62 tbl.6-18.
62
. See id.
63
. See SEI 1, supra note 51, at 6-39. In fact, even after the
tech bubble popped in 2001 and 2002, Internet companies continued
to receive up to 28 percent of funds. Id.
184
investors from embracing clean-tech innovation with the
same enthusiasm that accompanied past revolutions.64
III. THE FEDERAL FRAMEWORK AS A HURDLE
One factor precluding clean-tech development is the

current federal renewable-energy framework. Clean
techies and investment professionals do not exist in a
vacuum, left to solve the nation’s problems on their own.
Rather, the federal government has taken various
measures in this regard as well.65 The following Sections
provide an overview of selected federal responses to the
energy crisis, followed by a critical analysis of the
uninspiring approach taken to stimulate clean-tech
innovation.
A. The Energy Policy Act of 2005
After many years of wrangling, Congress passed the

Energy Policy Act of 2005.66 While the Act covers a
sweeping breadth of topics ranging from daylight savings
time adjustments,67 to raising the ethanol content of
gasoline,68 to a broad spectrum of tax implications for all
energy producers,69 it also spends ample space
addressing ways to diversify energy sources and develop
clean tech.70
As one method of development, the Act makes clean-
tech financing less costly. In this vein, the Act created
Clean Renewable Energy Bonds.71 These bonds provide
64
. A counter theory may be that investments in other
areas have led to advancements applicable to clean tech, thereby
reducing the need for extensive clean-tech investment. While clearly
advancements in one field may have application in another, to claim
this reduces investment in clean tech is contradicted by the fact that
investment levels have remained high in many traditional
technological fields. See supra text accompanying notes 62–63.
65
. See, e.g., Energy Policy Act of 2005, Pub. L. No. 109-58,
119 Stat. 594.
66
. Donna Block, Senate Passes Energy Bill, DAILY DEAL, Aug.
1, 2005.
67
. Energy Policy Act of 2005, Pub. L. No. 109-58, § 110,
119 Stat. at 615.
68
. Id. § 1501, 119 Stat. at 1067–76.
69
. See id. passim.
70
. See, e.g., id. §§ 201–52, 1701–04, 119 Stat. at 650–83,
1117–22.
71
. Id. § 1303, 119 Stat. at 992–97.
interest-free financing for renewable-energy projects by
paying the holder with an accrual against his or her
federal income tax.72 The Act also aids in financing clean
tech through loan guarantees for projects using new
technologies to avoid or reduce environmental impacts.73
The government may guarantee up to the entire value of
a loan,74 with repayment due within thirty years.75
Another provision in the Act established a Renewable
Energy Production Incentive (“production incentive”) to
provide renewable-energy generators with incentive
payments for electricity produced.76 Qualifying producers
are eligible for incentives of 1.5 cents per kilowatt-hour in
their first ten years of operation.77 These incentives have
been successful in the past, leading to substantial growth
in the targeted industries.78 However, Congress let them
lapse many times, causing sharp declines in investment
and a lag in U.S. clean-tech development.79
Finally, the Act also put flat subsidies80 and research
grants in place.81 Flat subsidies granted by the Act include
a 30 percent rebate on solar-energy equipment
purchases82 and a 25 percent rebate to consumers for the
installation of renewable-energy systems at home.83
Research funds are allocated to provisions such as Title IX
72
. Id.
73
. Id. §§ 1701–04, 119 Stat. at 1117–22.
74
. See id. The guarantee is capped at 80 percent of an
eligible project’s total cost, however. Id. § 1702(c), 119 Stat. at 1118.
75
. Id. § 1702(f), 119 Stat. at 1118. Alternatively, the time
limit for repayment is 90 percent of the project’s useful life, if this
results in earlier repayment. Id.
76
. Id. § 202, 119 Stat. at 651–52. The provision was
initially enacted in the Energy Policy Act of 1992, Pub. L. No. 102-486, §
1212, 106 Stat. 2776, 2969–70, was reaffirmed in the Energy Policy Act
of 2005, and ultimately received $2.7 billion in funding. Sims, supra
note 37, at 10.
77
. Energy Policy Act of 1992, § 1212, 106 Stat. at 2969–
70; Energy Policy Act of 2005, § 202, 119 Stat. at 651–52. This figure is
inflation indexed, and was actually 1.9 cents in 2005. Hymel, supra
note 5, at 56.
78
. Hymel, supra note 5, at 75–76.
79
. Id. Encouragingly, some estimate a five-year extension
would grant enough certainty to spur innovation capable of cutting
renewable-energy production costs by 25 percent. Id. at 76.
80
. The term flat subsidy will be used to refer to subsidies
of a fixed or formulaic amount tied to a single action rather than being
contingent on continued performance.
81
. See, e.g., Energy Policy Act of 2005, § 902(a), 119 Stat.
at 856.
82
. Id. § 1337, 119 Stat. at 1038.
186
of the Act, which seeks to stimulate research in diversity
of the energy supply, reduce dependence on foreign
supply, improve energy security, and reduce
84
environmental impact. The Office of Energy Efficiency
and Renewable Energy also issues various forms of
financial assistance for research through a competitive
process.85
B. Flaws in the Federal Response Inhibit Clean-Tech

Development
While the federal government’s approach toward

renewable energy provides some incentive for investors,
it is also a large factor in discouraging clean-tech
development. The government generally relied on
uninspiring means of financing and the stale tax-and-
spend solutions of flat subsidies and research grants.86
The approach failed to include any cohesive, national
incentive for innovation or investment.87
83
. Id. § 206(c), 119 Stat. at 655–56. The amount is capped
at $3,000, however. Id. Congress also allocated only $1 billion for this
incentive through 2010. See id. This is roughly equal to a single
quarter’s worth of clean-tech venture capital! See Press Release, Nat’l
Venture Capital Ass’n, supra note 11.
84
. Energy Policy Act of 2005, § 902(a), 119 Stat. at 856.
Congress appropriated $2.2 billion for fiscal years 2007–09 for projects
in this regard. Id. § 931(b), 119 Stat. at 869.
85
. See Eere.energy.gov, EERE Financial Opportunities,
http://www1
.eere.energy.gov/financing (last visited Oct. 27, 2008). In 2007, the
Office dispensed $574 million in grants. Id.
86
. See supra Part III.A. They are “stale” because these
measures have been used for ninety years to support the U.S. energy
industry with arguable ineffectiveness. See Hymel, supra note 5, at 43.
Flat grants are also potentially ineffective, as they tend to be
susceptible to pork-barrel provisions that increase the benefits
bestowed upon politically favorable groups without meaningfully
addressing the legislation’s goals. See Bernard S. Friedman, Subsidies,
in THE MCGRAW-HILL ENCYCLOPEDIA OF ECONOMICS 964, 966 (Douglas Greenwald
ed., 2d ed. 1994).
87
. Some argue market investment—without any subsidies
—could support the development of renewable energy if the
government would only take action to reduce existing uncertainties.
See Renewable Energy to Be a Priority for Nation, CHINAGATE.COM.CN, Sept.
15, 2007, http://en.chinagate.com.cn/news/2007-09/15/
content_8888744.htm.
1. FLAWS IN FEDERAL FINANCING ASSISTANCE
Two notable flaws exist in the Clean Renewable

Energy Bond and guaranteed loan provisions of the 2005
Energy Act. First, the $800 million earmarked for tax-
credit bonds is only for state and local governments or
cooperative companies.88 These entities tend to purchase
capital equipment—helping establish a clean-tech market
and attract investment—but they are not innovators.89 As
a result, the bonds create no direct stimulus to innovate.
Second, the lengthy payback period for federally
guaranteed loans90 raises motivational concerns, as it
fosters no sense of urgency in the debtor. 91 Consequently,
projects may limp along over unnecessarily long
development cycles.92 While these provisions are unlikely
to significantly hurt clean-tech capital formation, they also
offer little in the way of help.93
88
. See IRS Tech. Info. Rel. 2006-181 (Nov. 20, 2006),
available at
http://www.irs.gov/newsroom/article/0,,id=164423,00.html.
89
. Compare with supra note 44 and accompanying text.
90
. See supra text accompanying notes 73–75.
91
. This potential for innovative lethargy is even more
apparent when juxtaposed with the urgency inherent in a typical
venture capital arrangement. See Gilson, supra note 9, at 1074–83. For
example, venture capital investments are usually made in stages,
leaving the investor to decide if a project will continue. Id. at 1074,
1079. This feature makes the entrepreneur perform quickly if he
wishes to receive successive cash inflows. Investors also typically
retain the power to remove ineffective entrepreneurs, keeping them in
line, and potentially saving successful innovations from ineffective
champions. Id. at 1082–83. Another temporal incentive in the
arrangement is that funds ordinarily have a limited duration—typically
ten years. Id. at 1074–75. Given that venture capitalism is a business,
if a firm wishes to attract capital for its next fund, it must produce
quick results in its current funds. Id. This pressure to succeed trickles
down to the underlying investment. Id.
92
. An additional criticism of the loan guarantees is that
the Department of Energy sought a mere $9 billion in funding for the
program. DOE Issues Final Loan Guarantee Rule, Invites 16 Project
Applications, FOSTER ELEC. REP., Oct. 10, 2007, at 9. When considering the
scale of the problem, and the fact that the Department received
requests for $27 billion in guarantees during August 2006 alone, the
amount appears marginal at best. See id.
93
. In actuality, these provisions could do some harm to
capital formation if capable entrepreneurs are discouraged from
developing a new concept because a federally supported entrepreneur
of marginal skill is already occupying the space. Despite the many
flaws of federal financing measures, however, it should be noted there
may be room for federal programs in specific instances. For example,
the availability of venture funding can sometimes be extremely
188
2. FLAWS IN FLAT FEDERAL SUBSIDIES
Federal subsidies have long been used to incentivize

activities with the assumption that money alone will be
sufficient to solve a problem.94 Direct subsidies are the
opposite of a tax, providing funds to encourage
transactions that might not otherwise occur and keeping
industries afloat when their economics would not
otherwise sustain them.95 However, history has shown
more than unconditional subsidies are required.96 Most
studies show previous subsidies in energy were not cost
effective and had little-to-no impact on production.97
A common flaw of direct subsidies is that they create
no sustainable demand, and instead create interest only
to the maximum subsidized level.98 In granting a flat
subsidy for clean-tech equipment there is no continuing
motivation for future innovation.99 This flaw is evidenced
in the significant lags in clean-tech development caused
by the uncertainty and risk of past subsidy expirations.100
Another flaw of flat subsidies is that politically made
energy policy rarely follows economic theory.101 Thus, past
flat subsidies have often compounded existing distortions
sensitive to external market forces and consumer sentiment,

potentially limiting available capital unnecessarily. See Rebecca
Buckman, Venture Activity Hit by U.S. Slowdown, WALL ST. J., Apr. 2,
2008, at C5. In specific instances such as this, government programs
may play a valuable role in providing liquidity in an otherwise
constrained market.
94
. See Hymel, supra note 5.
95
. See Friedman, supra note 86, at 964–65.
96
. See, e.g., More Heat than Light, ECONOMIST, May 26,
2007, at 60, 60 (discussing Britian’s difficulties in effectively
implementing subsidies in its energy policy to achieve desired results).
97
. Hymel, supra note 5, at 53. For example, since 1978,
the United States has spent over $30 billion on alternative-fuel
subsidies, yet today has little to show for it. Id. at 73.
98
. Cf. Friedman, supra note 86, at 965 (discussing how
only “matching” subsidies (similar to production-oriented subsidies in
this Comment’s context), and not flat grants, can encourage long-term
changes to the market for a good).
99
. Compare with infra Part VI. Further, these incentives
discourage the purchase of larger systems to produce and sell excess
generation since there is no incentive to actually generate renewable
energy. This dampens the overall market for clean tech, reducing
investment potential. See infra Part IV.A.1.
100
. See Barry Rabe, Race to the Top: The Expanding Role
of U.S. State Renewable Portfolio Standards, 7 SUSTAINABLE DEV. L. & POL’Y
10, 15–16 (2007).
101
. Hymel, supra note 5, at 67.
rather than reduce them.102 Subsidies frequently promote
a broad goal through overly narrow means, not
accounting for unintended consequences.103 Notably, the
research grants and production tax credits in the 2005
Energy Act are for a narrow selection of industries104 with
no guarantee they will be the best means to promote the
Act’s goals. A better approach is to encourage a broad
scope of activities and let the market decide—through
investment decisions and natural selection—which will
work and which will not.105
A final flaw of flat subsidies is that they inject no
commercial expertise into the development process.106
With a subsidy there is little incentive to monitor an
investment directly, and those that do are subject to
political pressure.107 Subsidies also leave innovators to
struggle without guidance because subsidies fail to
provide the noncapital inputs that other funding
arrangements can provide.108 Most frightening in this vein,
flat-subsidy programs may altogether conflict with
innovation under other forms of investment. Since there is
less oversight with a subsidy, innovators may be drawn to
102
. See David Crump, Game Theory, Legislation, and the
Multiple Meanings of Equality, 38 HARV. J. ON LEGIS. 331, 342–43 (2001).
Many argue that the granting of subsidies encourages posturing by
those hoping to receive them. See id. This situation is doubly
dangerous as not only is the subsidy then misplaced, but the
subsidized group has expended resources that could have been used
to solve the problem, merely to secure the benefit. See Friedman,
supra note 86, at 966.
103
. See Crump, supra note 102, at 339–44.
104
. See Energy Policy Act of 2005, Pub. L. No. 109-58, §§
202, 902(a), 119 Stat. 594, 651, 856.
105
. See Del Chiaro & Gibson, supra note 20, at 371–72.
106
. Cf. Gilson, supra note 9, at 1100 (discussing the flaws
of various government programs designed to foster developmental
capital when they, among other things, fail to incorporate the skills of
experienced industry executives like venture capital does).
107
. Id.
108
. Id. For example, venture capitalists tend to facilitate
innovation by providing noncash contributions, most notably the
expertise of the venture capitalist himself. See id. at 1088. Venture
capitalists typically have a great deal of industry experience and a
broad network of talent to draw on, which greatly aids in bringing
technology to market. Id. As a result, venture-funded firms tend to be
more innovative and successful than firms financed by other means.
See Mandel, supra note 44. Research indicates a dollar of venture
capital produces three to five times as many patents as a dollar of
research-and-development spending. Id.
190
those funds rather than to other forms of financing that
are more conducive to innovation.109 Without expert
assistance, the innovator is more likely to fail, stifling
innovation both through the technology’s failure and the
dilution of subsequent investment opportunities.110
IV. STATE RESPONSES: ALL OVER THE MAP

IN MORE WAYS THAN ONE
The relatively hands-off approach of the 2005 Energy

Act has allowed individual states to legislate on
renewable-energy use as well. Not surprisingly, states
have taken a wide variety of approaches in drafting this
legislation, with the priorities of each particular state
giving shape to the framework enacted. The following
Sections analyze various state measures and the
consequences inherent in state autonomy.
A. Two Common State Approaches Described
While individual state measures vary considerably,

two methods have become prevalent and stand out as
departures from traditional tax-and-spend measures. The
method currently receiving the most attention is the
renewable portfolio standard,111 as it tends to be easy to
administrate, flexible, and relatively predictable.112 The
other significant state measure gaining traction of late—
albeit with somewhat less fanfare—is net-metering.113
1. RENEWABLE PORTFOLIO STANDARDS
Several states have recently enacted renewable

portfolio standards (“portfolio standards”).114 Portfolio
109
. Mandel, supra note 44.
110
. Id. Here again, however, it should be noted that while
federal subsidies may have several flaws relative to private
investment, they may prove beneficial in specific instances where
normal capital markets are constrained. See supra note 93.
111
. See infra note 141. But compare infra note 114, with
infra note 142.
112
. R. Wiser et al., Evaluating Experience with Renewables
Portfolio Standards in the United States, in FRED BOSSELMAN ET AL., ENERGY,
ECONOMICS, AND THE ENVIRONMENT 1078, 1079 (2d ed. 2006).
113
. See infra note 142.
114
. There are currently twenty-four states (and the District
of Columbia) with binding portfolio standards in place, and an
additional four with voluntary standards. Eere.energy.gov, States with
standards are supply-side mechanisms115 that ensure
inclusion of renewable energy sources in a state’s energy
portfolio.116 Under a portfolio standard, electric utilities
must derive a specific portion of their energy sales from
renewable energy.117 The requirement oftentimes starts
low and escalates gradually over time, causing a steady
increase in the renewable-energy supply.118
Many jurisdictions develop a renewable-energy credit
program to provide flexibility in complying with the
standard.119 Under these programs, a power generator
earns a credit for each unit of renewable energy
generated.120 Then, at the end of a regulatory period,
each utility must provide the state with enough energy
credits to demonstrate it complied with the standard. 121
Under an energy-credit system, a utility may opt to either
produce renewable energy itself, or—if it is more cost
effective—to simply purchase the credit from another
generator who has produced in excess of its
requirement.122
Renewable Portfolio Standards, http://apps1.eere.en

ergy.gov/states/maps/renewable_portfolio_states.cfm (last visited Oct.
27, 2008).
115
. “Supply-side” tactics seek to create markets by
fostering demand indirectly. Traditionally, the government takes action
to lower a product’s costs and increase its availability, thus fostering a
self-perpetuating demand cycle. See generally Paul Craig Roberts,
Supply-Side Economics, in THE MCGRAW-HILL ENCYCLOPEDIA OF ECONOMICS, supra
note 86, at 969–72.
116
. Sims, supra note 37, at 17.
117
. BOSSELMAN ET AL., supra note 112, at 1078.
118
. Wiser et al., supra note 112, at 1078. As an example,
assume that state X enacts a portfolio standard requiring each utility to
generate 1 percent of its energy sales from renewable energy this
year, increasing 1 percent each year for the next ten years. Utilicorp is
an electric utility that supplies 10,000 mwh of energy in state X each
year. Therefore, Utilicorp must sell 100 mwh of renewable energy to
comply with the standard this year. This amount will rise to 200 mwh in
the following year, 300 mwh in the year after that, and so on.
119
. Id.
120
. Id.
121
. Id. at 1078–79.
122
. Id. at 1078. For example, suppose Utility A and Utility B
are both required to produce 100 mwh of renewable energy. As the
year comes to an end, Utility A realizes it has produced only 50 mwh of
renewable energy, while Utility B has already produced 150 mwh.
Under an energy-credit system, Utility A now has the choice of
producing 50 mwh of renewable energy before year end or simply
purchasing enough of Utility B’s extra energy credits to bring it into
compliance.
192
Portfolio standards are popular among the states,
often receiving bipartisan support despite their stark
break from past regulatory measures.123 This support
comes from the fact that portfolio standards are easy to
administrate, provide a known quantity of renewable-
energy output, allow for flexibility, and encourage the
least-cost method of renewable-energy production.124
Portfolio standards are also popular as a means of
economic development, with economic factors often
eclipsing the environmental rationale.125
One theoretical criticism of portfolio standards,
however, is that the precise costs of the required
production cannot be known upfront.126 Additionally, since
there is an incentive to produce at the lowest cost
possible, portfolio standards do not encourage production-
method diversity or widely disbursed generation.127
Finally, energy-credit systems can actually jeopardize
compliance with the standard, as utilities may rely on
their peers’ nonexistent excess generation to compensate
for their own underinvestment in clean tech.128
123
. Rabe, supra note 100, at 10.
124
. Wiser et al., supra note 112, at 1079.
125
. See Rabe, supra note 100, at 10–11.
126
. See Wiser et al., supra note 112, at 1079. Cost
uncertainty may hinder portfolio-standard acceptance if decision
makers fear overruns. Additionally, outsized initial goals may force
officials to choose between crushing the regulated community with
unexpected costs or granting leniency and failing to meet their goals.
127
. Id.
128
. See Rabe, supra note 100, at 12. Of course in an
efficient market, rational actors would produce excess energy to the
point where the energy-credit supply met total demand and no risk of
noncompliance existed. See generally James M. Henderson,
Microeconomics, in THE MCGRAW-HILL ENCYCLOPEDIA OF ECONOMICS, supra note
86, at 689 (suggesting a rational producer will continue to increase
supply so long as there is a profit to be had). There is some evidence
the existing energy-credit market is not rational, however, and
underinvestment is a threat. See Rabe, supra note 100, at 12. For
example, the fears of underinvestment have come to fruition in
Massachusetts where a portfolio standard has not triggered an
explosion of renewable-energy growth. Id. In fact, the vast majority of
Massachusetts utilities had to rely on energy credits purchased from
other states, and a shortage ensued. Id. This situation illustrates
another flaw of portfolio standards—the loophole created due to the
requirement that a certain proportion of a utility’s energy sales be
related to renewable energy, but not that the utility actually generate
any renewable energy. This focus means a utility (or even an entire
state) could purchase energy credits and meet its portfolio standard
without generating any of its own renewable energy. See Sims, supra
note 37, at 19. In a state-by-state framework, this means the economic
Regardless, states must see the benefits of portfolio
standards outweighing the costs, as standards are now
quite prevalent.129
In fact, portfolio standards appear to have been fairly
successful to date.130 The Union of Concerned Scientists
projects that state standards will support 46,270
megawatts of new (nonhydroelectric) renewable power by
2020—an increase of 340 percent over total 1997 U.S.
levels.131 This increase is enough to meet the electricity
needs of 28.5 million homes.132 Additionally, new
renewable-energy production from state standards will
reduce annual carbon dioxide emissions by 108 million
metric tons over the same period133—equivalent to taking
17.7 million cars off the road or planting 25.9 million
acres of trees.134
Despite their growing prevalence and success,
portfolio standards across the country hardly reflect a
unified approach, as states often alter various provisions
of the model.135 One factor often varying from state to
state is the definition of renewable energy source,136
benefits of the standard may actually be exported to another state.

See infra text accompanying notes 229–32. From a national
standpoint, it creates the potential for a very concentrated clean-tech
equipment market, precluding the benefits of a broad market. Cf. infra
Part VI.
129
. See supra note 114.
130
. See UNION OF CONCERNED SCIENTISTS , RENEWABLE ELECTRICITY
STANDARDS AT WORK IN THE STATES 1 (2007), available at
http://www.ucsusa.org/
assets/documents/clean_energy/RES_in_the_States_Update.pdf.
131
. Id.
132
. Id.
133
. Id.
134
. Id.
135
. See Wiser et al., supra note 112, at 1080.
136
. See, e.g., infra text accompanying notes 163–68
(discussing Pennsylvania’s definition and problems therewith). This
variance may appear trite, as each state presumably defines
renewable energy to include those sources most likely to be practically
used in the state. On deeper analysis, however, the variance is
significant for two reasons. First, an overly broad definition of
renewable energy by a state may include “unvirtuous” technologies
that do not offer the same benefits as “true” clean energy. See, e.g.,
id. Energy producers may then take advantage of these unvirtuous
technologies in a particular state at the expense of using true clean
energy, hindering clean tech’s adoption rate. See id. Conversely, an
overly narrow state definition may discourage use of certain clean
technologies that are currently impractical in the state, but which may
become practical with future technological advances. See More
194
including where the power generation may come from.137
Another factor is what level of renewable-energy
production is initially required, how quickly it rises, and
where the final level lies.138 Still another is who, exactly,
the standards even apply to.139 As a result of these “X
factors,” innovators and investors are discouraged by a
fragmented national market.140
2. NET-METERING
Net-metering, while not nearly as well-publicized as

portfolio standards,141 is another widespread state
measure aimed at increasing investment in renewable-
energy infrastructure.142 In net-metering, utilities allow
Efficient Wind Turbine Blade Designed, supra note 33. Consequently,

the optimal solution would be a broad national standard including all
legitimate clean technologies, while excluding the faux clean-tech
methods inserted into some states’ definitions. See, e.g., infra notes
163–68 and accompanying text (discussing Pennsylvania’s overly
broad definition of what qualifies as clean technology).
137
. See, e.g., infra notes 183–86, 229–32 and
accompanying text (discussing Pennsylvania’s and Illinois’s provisions,
respectively, on where renewable energy must be generated in order
to qualify for each state’s portfolio standard).
138
. For example, of the states with portfolio standards in
place, Wisconsin is on one end of the spectrum, merely requiring that
utilities not decrease their renewable energy through 2009, and then
requiring a modest 2 percentage point increase in 2010. WIS. STAT. §
196.378(2)(a) (2005–06). On the other end of the spectrum is
California, which requires a 1 percent annual increase in renewable
energy to meet a standard of 20 percent by 2010. CAL. PUB. UTIL. CODE §
399.15(b)(1) (West Supp. 2008).
139
. See, e.g., infra text accompanying notes 222–28
(explaining that in Illinois the portfolio standard in place applies only to
investor-owned utilities).
140
. See Faden, supra note 42, at 129. Market
fragmentation discourages investors indirectly, as the equipment
producers they support face higher costs from their inability to produce
a single, standardized product to comply with disparate states’
requirements. Id.
141
. For example, a Lexis search of the “News, Most Recent
90 Days” database conducted using each of the respective terms
provided 289 hits for “net-metering” and 543 for “renewable portfolio
standards” on September 1, 2008.
142
. Currently thirty-eight states have legislative net-
metering policies in place. NETWORK FOR NEW ENERGY CHOICES, FREEING THE GRID,
NO. 02-07, at 12 (Sept. 2007), available at
http://www.newenergychoices.org/uploads/FreeingTheGrid2007
_report.pdf. Additionally, four states have utilities that offer it
voluntarily. Dsireusa.org, Rules, Regulations, and Policies for
Renewable Energy,
customers to connect a renewable-energy system to their
grid, drawing on the utility only when necessary and
feeding any excess electricity generation into the grid.143
Net-metering helps defray renewable-energy equipment
costs through lower utility bills, thus making renewable
energy more economically feasible.144 Conceptually, this is
a great mechanism to induce private investment in clean
tech,145 as it creates opportunities for manufacturers and
ultimately piques the interest of investors.146
Unfortunately, while governments have welcomed
net-metering,147 customer-generators have not.148 As of
2006, only 34,469 customers had taken advantage of net-
metering.149 While this figure may appear substantial, it is
practically insignificant given that there were
150
139,095,636 registered electric-utility customers. One
reason for this disconnect may be a lack of marketing, as
utilities do not promote programs that dilute their retail
market.151 Another reason may be that the net-metering
http://www.dsireusa.org/summarytables/financial.cfm?
&CurrentPageID=7&EE=1&RE=1 (last visited Oct. 27, 2008). It will also
surely continue to be implemented as utilities comply with the 2005
Energy Act, which requires each utility to consider offering some form
of net-metering. Energy Policy Act of 2005, Pub. L. No. 109-58, § 1251,
119 Stat. 594, 962–63.
143
. See NETWORK FOR NEW ENERGY CHOICES, supra note 142, at 2.
The concept presented is actually the fusion of two subcomponents.
The first is interconnection, which is merely an independent customer-
generator connecting to the utility’s grid. See id. The second is net-
metering, whereby a customer-generator’s electricity used is offset by
the electricity generated—netting out on the customer’s bill. See id.
Since interconnection is a necessary component of net-metering, this
Comment treats the two as one concept.
144
. Faden, supra note 42, at 109.
145
. Id. at 111.
146
. Id.
147
. See id. at 123; see also supra note 142.
148
. See
ENERGY INFO. ADMIN., U.S. DEP’T OF ENERGY, DOE/EIA-0348, ELECTRIC POWER ANNUAL
2006, at 62 tbl.7.5 (2007) [hereinafter “EPA”], available at
http://www.eia.doe.gov/cneaf/electricity/epa/epat7p5.html; ENERGY INFO.
ADMIN., U.S. DEP’T OF ENERGY, ELECTRIC SALES, REVENUE, AND AVERAGE PRICE 2006,
EIA.DOE.GOV at tbl.10 (2007) [hereinafter “ESR”], available at
http://www.eia.doe.gov/cneaf/electricity/esr/esr_sum.html.
149
. See EPA, supra note 148, at 62 tbl.7.5.
150
. See ESR, supra note 148, at tbl.10. This equates to a
0.02 percent participation rate.
151
. Faden, supra note 42, at 122. Arguably,
utilities should not fear programs diluting their markets, as the actual
use of clean tech by customer-generators is so small relative to
traditional means of energy production. See ENERGY INFO. ADMIN., U.S. DEP’T
196
contracts used in many states are burdensome remnants
of prior-era152 agreements, which anticipated hundreds of
megawatts of electricity production rather than the small-
scale production of net-metering.153 There are also hidden
fees in many states’ net-metering plans that deter
customers.154
One final dispiriting note on net-metering is that, like
portfolio standards, its conceptually simple arrangement
is convoluted when customized by each state. For
example, in some states utilities must pay for excess
customer generation,155 while in others they do not.156
Additionally, some states credit excess generation to a
customer’s account as a rollover for the next cycle,157
while others provide no such rollover.158 Connection costs
OF ENERGY, DOE/EIA-0384, ENERGY ANNUAL REVIEW 2006, at 7 tbl.1.2 (2007),

available at http://www.eia.doe.gov/aer/pdf/pages/sec1_7.pdf.
Regardless, utilities may recognize that if clean tech’s usage expands,
the programs could actually deteriorate the utilities’ market base. See
generally Faden, supra note 42, at 121–22.
152
. The “prior era” referenced is that under the Public
Utility Regulatory Policies Act of 1978, enacted to stimulate renewable-
energy growth by forcing utilities to purchase energy from certain
“qualified facilities.” Pub. L. No. 95-617, 92 Stat. 3117 (codified as
amended at 16 U.S.C. §§ 2601–45). The Act was generally ineffective,
and was amended in the Energy Policy Act of 2005. Pub. L. No. 109-58,
§§ 1251–54, 119 Stat. 594, 962–71.
153
. See Faden, supra note 42, at 128.
154
. Id. at 121. Utilities seek to maintain a steady revenue
stream to whatever extent possible through connection costs, liability
insurance, engineering fees, building fees, taxes, metering fees, and
stand-by charges to compensate themselves for having electricity
available when the customer needs it. Id. Finally, there are also
technological and practical business reasons hindering the growth of
net-metering, some of which would arguably be solved with national
standards. See Travis Weller, Standardized Interconnection Standards
—A Step Towards Realizing the Potential of U.S. Distributed Generation
13–15 (Aug. 2007) (unpublished comment) (on file with Professor Peter
Carstensen, University of Wisconsin Law School).
155
. See, e.g., N.J. STAT. ANN. § 48:3-87(e)(1) (West 2007)
(requiring generators ultimately be compensated for the value of their
excess generation if not used to offset subsequent monthly bills). This
Comment uses excess generation to mean the amount of electricity a
customer produces over his or her own needs and subsequently feeds
into the grid.
156
. See, e.g., 220 ILL. COMP. STAT. 5/16-107.5(d)(3) (2007)
(allowing residential customers’ excess generation to simply be
forfeited if not used to offset subsequent monthly bills).
157
. See, e.g., id. at 5/16-107.5(d)(2).
158
. For example, in Oklahoma, excess generation is
sometimes granted to the utility free of charge. OKLA. ADMIN. CODE §
165:40-9-3(b) (2007).
to the customer also vary significantly by state,
depending on the strength of utilities’ lobbies or the
state’s general sympathies for utility companies.159 As
with portfolio standards, this fragmentation creates a
cloudy market that discourages clean-tech
development.160
B. Flaws in State Autonomy Inhibit Clean-Tech

Development
Ultimately, the biggest obstacle the U.S. renewable-

energy framework places in clean tech’s path is the
autonomy given at the state level. Individual state
autonomy in renewable-energy policy allows states to act
in their own self-interests rather than focusing on the
greater goal, and also creates an unacceptable amount of
risk and market fragmentation for clean-tech
developers.161
1. STATE MYOPIA AND SELF-INTEREST
States’ private interests affect their renewable-energy

incentives,162 in turn compromising clean-tech developers’
ability to calculate true national demand for clean-tech
equipment. For example, despite Pennsylvania’s much-
ballyhooed renewable-energy policies, the state’s ties to
the coal industry have posed “formidable challenges for
any policies that might encroach on that resource.”163 The
state’s portfolio standard reflects these challenges in its
two “tiers” of renewable-energy production.164 Tier I
includes sources commonly associated with clean tech,
such as solar, wind, and fuel cells.165 Also included,
however, is coal-mine methane.166 Tier II includes waste
159
. See NETWORK FOR NEW ENERGY CHOICES, supra note 142, at 6–
7.
160
. See Faden, supra note 42, at 129.
161
. See id.
162
. Interestingly, Texas is an exception to this theory.
Despite its ties to the oil industry, the state is the nation’s leader in
wind energy thanks to its portfolio standard (and thanks also to its
abundance of wind, of course). See Rotary Club, FORTUNE, Oct. 29, 2007,
at 178, 178.
163
164
. See 73 PA. CONS. STAT. ANN. § 1648.2 (West 2008).
165
. Id.
198
coal and other coal-related production.167 The inclusion of
these questionably-renewable sources highlights special
interests’ influence in state capitols.168 This differential
treatment of energy sources stifles clean-tech innovation,
as special-interest projects divert capital and compete
with legitimate projects.
2. ADJUDICATORY UNCERTAINTY
State autonomy also creates legal risk and

uncertainty, as fifty different states mean not only fifty
different laws, but also fifty different court systems
interpreting them.169 Consequently, potential clean-tech
investors and innovators must contend with the judicial
166
. Id.
167
. See id. These provisions are one reason that some call
Pennsylvania’s the dirtiest portfolio standard in the nation. Rabe, supra
note 100, at 14.
168
. Rabe, supra note 100, at 15. Another example of
special interests in state politics comes from Colorado, where a
political coalition led by coal-mining interests blocked the state’s
portfolio standard in three consecutive legislative sessions until the
state resorted to a referendum to get it passed. Id. at 14. Admittedly,
special interests are prevalent on a federal level as well; thus, national
legislation is not a panacea. See Thomas Stratmann, Can Special
Interests Buy Congressional Votes?, 45 J.L. & ECON. 345, 367–68 (2002).
Despite this, various procedural and practical considerations—such as
accessibility of decision makers, greater diversity of constituent
interests, federal lobbying rules, and the sheer cost of influence—add
at least a few additional hurdles to special-interest groups at the
federal level. Cf. Geoffrey P. Miller, Public Choice at the Dawn of the
Special Interest State: The Story of Butter and Margarine, 77 CAL. L. REV.
83, 86–87, 98 (1989) (explaining the dairy industry’s difficulty in
lobbying for federal antimargarine legislation). Thus, while national
legislation does not eliminate special-interest concerns, it does at least
pluck the problem’s low-hanging fruit. Since remedying special-interest
influence is beyond the scope of this Comment, it is only relevant that
a national framework removes at least one layer where corruption may
take place.
169
. Similarly, this deterring effect was one of many
motivators to the enactment of national regulations affecting
commerce, such as the Uniform Commercial Code. See STEWART MACAULAY
ET AL., 1 CONTRACTS: LAW IN ACTION 34–36 (2d ed. 2003). The existence of
varying commercial laws across states acts as a serious roadblock to a
nationalized economy. Id. But see Nccusl.org, Model Employment
Termination Act,
http://www.nccusl.org/Update/uniformact_factsheets/uniformacts-fs-
meta.asp (last visited Oct. 27, 2008) (illustrating some model acts
drafted with inter-state uniformity in mind languish and gain little
legislative traction).
interpretations of myriad differing laws.170 While no court
system is predictable, forecasting the outcome of future
cases becomes exponentially more difficult as the number
of laws grows.171 Furthermore, constitutional issues may
also arise in the interplay of such varied laws.172 While the
variance in state case law is far too great to discuss
exhaustively, four illustrations relating to net-metering
and portfolio standards follow, along with a brief
discussion of constitutional issues.
Ohio’s case law is a perfect illustration of how states
reduce the appeal of net-metering by narrowing the
spread between its costs and benefits. In First Energy
Corp. v. Public Utility Commission of Ohio,173 the Supreme
Court of Ohio considered what constituted electricity
when a utility pays customers for excess generation.174
The court held utilities must only reimburse a customer
for the generation costs avoided, but not for other costs
associated with electricity, such as transmission and
distribution.175 Of course this decision makes net-metering
less attractive for customers in Ohio, as they will receive
lower rates of compensation for their excess generation
than would have otherwise been possible. This lowered
customer interest will theoretically lead to a diminished
market for clean-tech equipment.
New Jersey’s case law also diminishes demand for
clean-tech equipment, as it allows utilities to satisfy
portfolio standards without adding new renewable-energy
capacity. In In re the Ownership of Renewable Energy
Certificates,176 the appellate division of the New Jersey
Superior Court addressed who owns the renewable-
energy credits stemming from a generation agreement
created before the state’s portfolio standard was
enacted.177 The court ultimately held the credits belong to
the purchasing utility,178 even though this grants an
unexpected benefit for which it never bargained. In so
holding, the court missed an opportunity to expand the
170
. See generally MACAULAY ET. AL., supra note 169, at 35.
171
. See generally id.
172
. Infra text accompanying notes 187–92.
173
. 95 Ohio St. 3d 401, 2002-Ohio-2430, 768 N.E.2d 648.
174
. See id. ¶ 13.
175
. Id.
176
. 913 A.2d 825 (N.J. Super. Ct. App. Div. 2007).
177
. See id.
178
. Id. at 832.
200
generating capacity of renewable energy (and the market
for clean-tech equipment), as the holding potentially
allows utilities to avoid making clean-tech capital outlays
of their own. Given the prevalence of portfolio standards,
many more of these suits will follow, further casting a
cloud over the industry.179
In juxtaposition to Ohio and New Jersey, New Mexico
has actually induced renewable-energy generation
through its case law by making it more costly for utilities
to purchase energy credits from others. In New Mexico
Industrial Energy Consumers v. New Mexico Public
Regulation Commission,180 the Supreme Court of New
Mexico considered the issue of utility reimbursement for
purchases of unbundled energy credits.181 The court held
a utility in that state could charge customers for the cost
of open-market power purchases needed to meet
consumer demand, but could not recoup the costs of
energy credits purchased to comply with the state’s
portfolio standard.182 This holding may make it more
beneficial for a utility to generate renewable energy itself,
as it can then recoup the full cost of complying with the
state’s portfolio standard through its rate structure.
Pennsylvania struck a similar blow for the clean-tech
cause by checking the growth of otherwise rampant state
protectionism. In Pennsylvania Power Co. v. Public Utility
Commission,183 the Pennsylvania Commonwealth Court
addressed both state protectionism and the uncertainty of
where renewable power can be generated.184 The case
centered on an order by Pennsylvania’s Public Utility
Commission that stated a particular utility could satisfy
portfolio standards only with renewable energy produced
in the state so that economic benefits would not be
transferred to other states at Pennsylvania’s expense.185
179
. Despite the prevalence of portfolio standards, only nine
states have addressed the issue. Id. at 828.
180
. 2007-NMSC-053, 142 N.M. 533, 168 P.3d 105.
181
. See id.
182
. Id. ¶¶ 31–35.
183
. 932 A.2d 300 (Pa. Commw. Ct. 2007).
184
. See id. at 304–05, 308.
185
. See id. The standard states, “Energy derived only
from . . . sources inside the geographical boundaries of this
Commonwealth or within the service territory of any regional
transmission organization that manages the transmission system in
any part of this Commonwealth shall be eligible to meet the
compliance requirements under this act.” 73 PA. CONST. STAT. ANN. §
1648.4 (West 2008).
The court reversed the order, finding the utility could
purchase power from either of Pennsylvania’s regional
transmission systems, even though one of them
predominantly covered other states.186 This finding
provides a measure of certainty for clean-tech investors in
Pennsylvania, as well as a small building block for a truly
free market in renewable-energy production.
These four illustrations show that not all state case
law is harmful to clean-tech development. However, what
is most troubling is not the specific case law of any one
state, but rather the existence of such extreme variances
between states. Such disparity has real implications as it
creates unwanted risk for clean-tech investors and
innovators.
As a final note on adjudicatory uncertainty,
constitutional issues are also present in the state-by-state
system due to the dormant commerce187 and privileges
and immunities188 clauses of the U.S. Constitution.
Conceivably, any policy designed to minimize the role of
out-of-state renewable-energy production could face a
constitutional challenge.189 For example, since
Pennsylvania lies partly in one regional transmission
organization and partly in another,190 a number of states
could feed renewable energy to the state if its portfolio
standard had no protectionist limitation.191 Therefore, this
limitation could be deemed unconstitutional because it
regulates interstate commerce and discriminates against
other states. This point underscores the need for a
national framework to reduce needless uncertainties.192
186
. Pa. Power Co., 932 A.2d at 308.
187
. See generally Amy M. Petragnani, The Dormant
Commerce Clause: On Its Last Leg, 57 ALB. L. REV. 1215 (1994). The
dormant commerce clause suggests the power to regulate interstate
commerce is Congress’s alone, and the states cannot act even if
Congress has not. Id. at 1215.
188
. U.S. CONST. art. IV, § 2, cl. 1. The privileges and
immunities clause prevents any state from discriminating against
citizens of another state. See id.
189
190
191
. Of course, the courts have recently relaxed this
limitation. See id.
192
. See Rabe, supra note 100, at 14–15. However, some
argue that constitutional means of favoring in-state renewable-energy
production do exist if carefully crafted. See Kristen H. Engel, The
Dormant Commerce Clause Threat to Market-Based Environmental
Regulation: The Case of Electricity Deregulation, in BOSSELMAN ET AL.,
supra note 112, at 1086, 1087–88 (2006). One method proposed is to
202
3. GAME THEORY AND THE PRISONER’S DILEMMA
Game theory193 offers an interesting way to frame the

concepts of state myopia and illustrates the need for a
national renewable-energy framework. A common game-
theory concept is that of the collective-action problem,
where the players’ self-interests forestall the optimal
solution.194 One framing of this problem is the “prisoner’s
dilemma,”195 where two partners in crime have been
caught and must decide whether to confess.196 If one
confesses and the other does not, the confessor will go
free and the other will receive a lengthy sentence.197 If
both confess, they will both receive a medium-length
sentence.198 Finally, if neither confesses, both will receive
minimal sentences since the evidence is only enough to
prove a lesser crime.199 Therefore, the best scenario from
the prisoners’ perspectives is for both to stay quiet and
serve minimal sentences, as this minimizes their
combined punishment.200 In practice, however, game
theory predicts both will confess out of self-interest or
distrust.201 Consequently, they do not achieve the optimal
outcome.202
use the state’s taxation powers to incentivize in-state production. Id. at

1088. Another proposed method is to limit qualified renewable-energy
credits to those sold to in-state customers, thereby ensuring
renewable-energy production and its environmental benefits are not
decoupled. Id. at 1088–89. Even proponents of such methods
acknowledge they are not foolproof, however, and constitutional issues
may remain. Id. at 1090–91.
193
. Game theory is the logical contemplation of strategic
interactions. Crump, supra note 102, at 331. The theory is often used
in analyzing legal problems. See Stephen W. Salant & Theodore S.
Sims, Game Theory and the Law: Ready for Prime Time?, 94 MICH. L.
REV. 1839, 1840 (1996) (book review).
194
. DOUGLAS G. BAIRD ET AL., GAME THEORY AND THE LAW, 31–35
(1998).
195
. Id. at 33–35.
196
. Id. at 33.
197
. Id.
198
. Id.
199
. Id.
200
. Crump, supra note 102, at 373–76.
201
. Id.
202
. Id. Note, when the players in a prisoner’s dilemma
know the game will be repeated, they tend to develop a “tit for tat”
mentality and begin to cooperate more readily. See id. at 375–81.
Thus, in an iterative decision-making process, the result tends to be
“more optimal” than with a one-time decision. Id.
This dilemma is readily transferrable to the state-by-
state renewable-energy regulatory scenario. While it is
well recognized that optimal results come from
collaboration, the pressure to maximize economic
benefits within each state’s borders deters serious
consideration of interstate collaboration.203 This pressure
sets the stage for suboptimal, self-interested actions.
Since traditional energy production is currently less
expensive than clean-tech innovation,204 a state requiring
clean-tech use risks losing constituents to other states
where clean tech is not required and costs are lower. 205
The prisoner’s dilemma thus suggests a state will choose
the less desirable outcome of traditional energy
production.206 This decision stymies the clean-tech
equipment market and thereby discourages further
development in the area.207
One solution, of course, is centralized governmental
action.208 A central decision maker is able to strip out
short-term self-interests and create an optimal, unified
law.209 A unified law means states may no longer act out
of fear that their neighbors will violate the rules.210 In fact,
unified national laws were used to solve many other
dilemmas in U.S. history.211 Today, a national renewable-
energy policy would encourage the use of clean-tech
203
204
. See infra note 261.
205
. See Daniel P. Petrov, Prisoners No More: State
Investment Relocation Incentives and the Prisoner’s Dilemma, 33 CASE
W. RES. J. INT’L L. 71, 82–83 (2001).
206
. See id. Ironically, in making this short-term decision,
the state ultimately sacrifices greater long-term gains. Id. at 82.
207
. One might ask, why does this need to be a race to the
bottom? Rather than cheap energy being the benefit, could we not
assume states would see a clean environment as the benefit, and
compete to enact stronger clean-tech mandates? For more on this
novel theory, see Rabe, supra note 100, at 11. In practice this
interpretation has not come to fruition, however. See generally Petrov,
supra note 205 (discussing how incentives for positive growth within a
state-by-state framework are still subject to a prisoner’s dilemma,
leaving states worse off).
208
. See BAIRD ET AL., supra note 194, at 34.
209
. Id.
210
. Id.
211
. See, e.g., United States v. Darby, 312 U.S. 100 (1941)
(upholding the Fair Labor Standards Act of 1938, which created
minimum wage and maximum hours for certain occupations); Steward
Machine Co. v. Davis, 301 U.S. 548 (1937) (upholding a congressional
act creating an unemployment tax);
204
equipment, solidify demand in the area, remove
unnecessary risk, and spur the requisite capital formation
to finance innovation.
V. A CASE STUDY IN STATE-LAW PROBLEMS:

RECENT ILLINOIS LEGISLATION
Another stumbling block for the development of clean

tech is that some states simply enact laws ill suited for its
growth. A good example comes from Illinois212—not
because the legislation is particularly awful, but only
because it was so recently enacted.213
In August 2007, the Illinois Power Agency Act became
law.214 In addition to other measures, the Act created a
new renewable portfolio standard to begin in 2008.215
Another bill, signed the same day, was an amendment to
the Public Utilities Act,216 implementing net-metering in
the state.217 The portfolio standard and net-metering
amendment follow the molds discussed in Part IV, with
minor variations.218 The following Sections discuss flaws in
the regulations as adopted, and their effects on clean-
tech innovation.
A. A Critique of Illinois’s Portfolio Standard
Although portfolio standards have become quite

popular among the states219 and are theoretically a sound
means of encouraging renewable-energy use,220 states
often dilute the model’s effectiveness through poor policy
choices.221 Thus, while Illinois should generally be
212
. See 220 ILL. COMP. STAT. 5/1-101 to 5/70-503 (2007); ILL.
P.A. 095-0481, 2007 Ill. Legis. Serv. 5085 (West).
213
. In reality, the law is not particularly awful relative to its
brethren, but instead is rather pedestrian, making its status as a
representative for the group even more worthy.
214
. ILL. P.A. 095-0481, 2007 Ill. Legis. Serv. 5085; Bob
Matyi, Illinois Governor Finally Signs Electric Rate Relief/Power
Procurement Bill, ELEC. UTIL. WEEK, Sept. 3, 2007, at 9.
215
. ILL. P.A. 095-0481, § 1-75(c)(1), 2007 Ill. Legis. Serv.
5096.
216
. 220 ILL. COMP. STAT. 5/1-101 to 5/70-503.
217
. ILL. P.A. 095-0420, 2007 Ill. Legis. Serv. 4855–58.
218
. See supra text accompanying notes 135–140, 155–160.
219
. See supra note 114 and accompanying text.
220
. See generally supra Part IV.A.1.
221
. See, e.g., ILL. P.A. 095-0481, § 1-75(c)(1), 2007 Ill. Legis.
Serv. 5096 (requiring 75 percent of renewable energy to come from
commended for enacting its portfolio standard, the
provision does contain several flaws if viewed solely as a
means of encouraging clean-tech development.
The first flaw of the Illinois portfolio standard is that it
applies only to investor-owned utilities.222 This provision
leaves out rural electric cooperatives, small utilities, and
municipal power-generation facilities.223 While investor-
owned utilities cover the majority of customers and
electricity sold in Illinois—approximately 90 percent of
each224—the standard still leaves a significant gap.
Troublingly, no compelling rationale supports this gap
other than that municipalities and community-owned
generators are simply more politically sympathetic than
investor-owned corporations.225 Moreover, the standard is
further limited to utilities with more than 100,000
customers.226 This additional limitation carves out another
112,297 customers who use a total of 2,606,356
megawatt-hours of electricity annually.227 These gaps in
the portfolio standard eliminate a significant market for
clean-tech equipment, making the area less appealing to
investors and innovators alike.228
wind generation).
222
. See id. The portfolio standards apply to public utilities,
defined in the Public Utilities Act. 220 ILL. COMP. STAT. 5/3-105 (2007).
223
. See ILL. P.A. 095-0481, § 1-75(c)(1), 2007 Ill. Legis.
Serv. 5096.
224
. See ESR, supra note 148. Investor-owned utilities serve
approximately 5,054,009 customers, compared to 530,470 municipal
and cooperative customers. Id. Investor-owned utility generation is
106,797,900 mwh, while municipal/cooperative production is
11,983,546 mhw. Id.
225
. E-mail from Peter Carstensen, Professor of Law,
University of Wisconsin Law School, to Brad Kopetsky, author (Nov. 19,
2007) (on file with author). See generally Paul A. Meyer, The
Municipally Owned Electric Company’s Exemption from Utility
Commission Regulation: The Consumer’s Perspective, 33 CASE W. RES. L.
REV. 294 (1983) (concluding the costs of lax regulation of municipally
owned utilities outweigh any justifications for them).
226
. ILL. P.A. 095-0481, § 1-20(a)(1), 2007 Ill. Legis. Serv.
5087.
227
. See ESR, supra note 148.
228
. The justification for limits based on ownership type is
that municipal and other smaller utilities are typically nonprofit entities
existing solely for local interests, and state regulation will needlessly
raise their costs. See Meyer, supra note 225, at 295–96. While there
may be merit to this argument, in the present concern of solving the
nation’s energy and environmental crises, the rationale for such
loopholes seems questionable. Illinois is not alone in these limits, but
other states have begun to close the gap. Oregon, for example, does
206
Another flaw is that the standard further limits
qualifying production to Illinois producers.229 The
justification for this limitation is purely political and
protectionist, as state policy makers do not want utilities
—reluctant to invest in clean tech—simply purchasing
energy credits from other states.230 Many economists
would argue Illinois’s utilities should simply sink or swim
in the marketplace,231 encouraging utilities to innovate
and develop cost-effective clean tech. The current
provision blatantly hinders the natural market by sealing
it off and allowing the perpetuation of inefficient
technologies.232
The protectionist provision also compounds another
flaw in the Illinois portfolio standard—a cost-containment
clause. The clause limits qualifying energy to “cost-
effective resources,” and caps annual electricity-rate
increases.233 If the cost increases more than those
minimal amounts, utilities may reduce the renewable
not exclude entities by ownership but does scale down the

requirement based on capacity. See S.B. 838, § 7, 74th Leg. (Or. 2007).
229
5097. Through 2011, eligible producers must be located in state unless
a shortage of cost-effective, in-state production necessitates the
purchase of energy from neighboring states. Id. If there is still not
enough available from neighboring states, utilities may purchase
energy from other regions of the country as well. Id. After 2011, equal
consideration will be given to power generated within Illinois and
neighboring states, with production from other regions allowed only as
needed. Id.
230
. Cf. supra note 128 and accompanying text.
231
. See generally ANDREW SCHOTTER, FREE MARKET ECONOMICS 1–15
(1985).
232
. Cf. id. at 5. Some argue such protectionist measures
ensure that the state’s citizens benefit from their own legislation and
any additional costs they must bear. See Engel, supra note 192, at
926–27. Another theoretical argument may be that the measures
guarantee a market for in-state production, making it easier for
producers to sell their production (as opposed to competing with
outside concerns) and therefore encouraging clean-tech development.
Cf. BOSSELMAN ET AL., supra note 112, at 52–53 (discussing natural
monopolies). However, one can foresee additional dangers in the
protectionist measures. If Illinois’s provision causes other states to
enact similar provisions, inefficiencies may develop in each market.
See supra Part IV.B.3. This would inflate clean-tech costs nationwide,
reducing acceptance and thus making capital inflows unlikely.
233
. ILL. P.A. 095-0481 § 1-75(c)(2)(A), 2007 Ill. Legis. Serv.
5096. The cost to customers attributable to the standard cannot
increase more than 0.5 percent in 2008. Id. The cap changes each year
through 2011, when the retail price cannot exceed 0.5 percent of the
2010 cost, or 2 percent over 2007 levels. Id.
energy produced to bring costs down.234 Troublingly, the
aforementioned protectionist provision creates slack in
the market, where Illinois producers operate less
efficiently than competitors.235 This slack could lead to
higher energy costs and potentially trigger the cost-
containment clause unnecessarily. The cost-containment
clause is obviously counterintuitive, as the more widely
dispersed clean-tech equipment becomes, the more likely
technological advances and economies of scale will
reduce its costs.236
Another flaw of the cost-containment clause is that it
creates unnecessary risk for investors. As a result of the
clause, investors can never be sure what the end market
for their projects will be. Why develop a clean-tech project
only to find cost increases have triggered the cost-
containment clause and made your investment worthless?
While the clause was drafted to protect consumers from
runaway inflation,237 it is clearly poorly conceived and will
prematurely stymie the outgrowth of clean-tech
investment and innovation.238
A final critique of the Illinois standard is that it
requires 75 percent of renewable energy to come from
wind power.239 This requirement is presumably tied to the
“cost-effective” language of the Act, since wind power is
one of the lower-cost forms of clean tech. 240 However, the
mandate is just another unnecessary constraint on the
234
. Id.
235
. Cf. supra text accompanying note 231.
236
. See Del Chiaro & Gibson, supra note 20, passim. The
response to this critique is that the goal of the overall legislation was
to protect consumers from excessive rate increases. See Matyi, supra
note 214. This response may prove shortsighted, however, if the
scarcity of natural resources drives the cost of traditional production
well above the costs of renewable means. See, e.g., Price Index Soars
on Spike in Energy Costs, supra note 1.
237
. See Matyi, supra note 214.
238
. The logical solution is to allow larger price increases
now, with stricter tolerances in the future when innovation has reduced
costs. Again, the shortsighted counterargument is that the primary
goal of the legislation was rate relief. See supra note 236.
239
5096.
240
. See Solarbuzz.com, Photovoltaic Industry Statistics:
Costs, http://www.solarbuzz.com/StatsCosts.htm (last visited Oct. 27,
2008). Wind energy is up to five times less costly than solar. See id.
Illinois is also a flat state, giving geographical support to wind power.
See City-data.com, Illinois Topography, http://www.city-
208
free market.241 The provision willingly accepts lower
energy costs today at the risk of capping clean tech’s
long-term potential.242 State provisions such as this
generally discourage innovation and investment by
restricting free choice.243
B. A Critique of Illinois’s Net-Metering Amendment
Unlike portfolio standards, net-metering leaves little

room for criticism if implemented effectively. Net-
metering creates renewable-energy demand with the end
user, pulling clean-tech equipment development through
the system.244 This is extremely appealing for prospective
investors as it creates a broad end market for clean
tech.245
Illinois’s net-metering amendment is a mixed bag,
however. One positive note is that the amendment
defines renewable energy broadly enough to encourage
proliferation of a variety of energy sources, reducing the
risks of a narrow focus.246 The amendment’s “connection
fee” provisions are investor friendly as well because they
prohibit any additional fees to net-metering customers.247
Utilities must also supply a meter equipped for net-
metering to any nonresidential customers with a capacity
of more than forty kilowatt-hours at the utility’s cost. 248
These provisions are generally favorable to prospective
customer-generators, and avoid the pitfalls of many other
states, where restrictive definitions of renewable energy
data.com/states/Illinois-Topography.html (last visited Oct. 27, 2008).

241
242
. See id.
243
. Cf. Del Chiaro & Gibson, supra note 20, passim.
244
. See infra Part VI.
245
. See id.
246
. Compare with supra text accompanying notes 103–05.
The definition of renewable energy in Illinois includes anything
“powered by solar electric energy, wind, dedicated crops grown for
electricity generation, anaerobic digestion of livestock or food
processing waste, fuel cells or microturbines powered by renewable
fuels, or hydroelectric energy.” 220 ILL. COMP. STAT. 5/16-107.5(b)(iii)
(2007).
247
. 220 ILL. COMP. STAT. 5/16-107.5(e).
248
. Id. at 5/16-107.5(c). It should be noted, however that
the cost of meters to residential customers, and nonresidential
customers with generating capacity of less than forty kilowatt-hours,
and exorbitant interconnection fees reduce the appeal of
net-metering programs.249
Another credit to the amendment is that any
renewable-energy credits associated with customer
production remain the property of the customer. 250 This
provision reduces ownership uncertainty.251 It also further
encourages customers to purchase clean-tech equipment
and participate in net-metering, as the certificate is
effectively additional compensation for doing so.252
The provision regarding energy-credit ownership
could be improved, however, as the added value given to
customer-generators comes with additional burdens.
Individuals participating in net-metering may be unaware
of the complexities of energy credits, creating a
potentially unfair transaction between a utility—whose
business it is to market and trade power—and a “regular
Joe,” who likely knows little about an energy credit’s
value.253 A more fair approach would be to grant the credit
to the purchasing utility and compensate the customer-
generator through higher rates for their renewable
energy. The generator would then receive guaranteed,
hassle-free value for production via clean tech.
Another area of mixed results within the amendment
is the treatment of customer-generators that are net
producers of electricity. Any electricity generated by
residential customers in excess of monthly needs is
credited at the current market rate to their accounts for
the following month.254 This approach encourages
customers to purchase larger renewable-energy systems
are still the responsibility of the customer-generator. Id.

249
. See NETWORK FOR NEW ENERGY CHOICES , supra 142, at 7.
Reportedly, “[i]n some cases, standby charges are equal to or even
exceed rates for full electrical service, in effect creating an economic
disincentive for customers to install renewable energy systems.” Id. at
6.
250
. 220 ILL. COMP. STAT. 5/16-107.5(g).
251
252
. The credit can theoretically be sold to a utility subject
to a portfolio standard.
253
. Admittedly, renewable-energy credits typically
represent one megawatt-hour of production. See, e.g., DEL. CODE. ANN.
tit. 26, § 352(16) (2007). Consequently, those parties in a position to
sell credits are likely to be larger, nonresidential customers with
presumably more business sense than the average citizen.
Nonetheless, a utility is still likely to be in a better bargaining position
than the typical industrial customer-generator.
254
. 220 ILL. COMP. STAT. 5/16-107.5(d)(2).
210
—taking advantage of economies of scale—without fear of
wasting productive capacity.255 This benefit is mitigated,
however, since the rollover credit expires at year end. 256
Customers are thus effectively forced to purchase
systems that underserve their annual electricity needs to
avoid waste.257 Consequently, customer-generators
provide less renewable energy, the market for high-
capacity equipment is constrained, and investors’ interest
in the area is similarly limited.258
Conversely, nonresidential customers receive no
rollover credits, but are reimbursed monthly for their
power at the utility’s avoided cost.259 An overarching
problem of this avoided-cost compensation structure is
that it makes net-metering more attractive only as the
energy crisis worsens and utilities’ energy costs rise.260
255
256
. 220 ILL. COMP. STAT. 5/16-107.5(d)(3).
257
258
. In comparison, some states compensate generators for
rollover credits at the end of the annual period. See, e.g., N.J. STAT. ANN.
§ 48:3-87(e)(1) (West 2008). This sensible approach does not force
customers to underserve their needs for fear of “wasting” excess
production; however, such provisions may hurt utility buy in to the
program, and simply lead utilities to extract fees from customers via
other avenues. See supra note 154.
259
. 220 ILL. COMP. STAT. 5/16-107.5(f)(2). This means
nonresidential customers are compensated less handsomely than
residential customers (who receive credit for the retail rate of their
excess production), since the avoided cost to the utility is less than the
retail rate of electricity. See Awea.org, Frequently Asked Questions
about Net-Metering,
http://www.awea.org/pubs/factsheets/netmetfin_fs.PDF (last visited
Oct. 27, 2008). At the same time, however, the monthly payment at
the utility’s avoided cost is more favorable than having credit for
excess generation expire, and therefore mitigates the negative effect.
An obvious compromise would be to extend the period over which
excess generation is calculated from a month to a year. See, e.g., N.J.
STAT. ANN. § 48:3-87(e)(1). This would grant nonresidential customers
the benefit of a rollover period, while maintaining compensation for
excess generation, and encouraging purchases of larger clean-tech
equipment.
260
. It is to say, as the energy crisis worsens, the cost of
energy to utilities will rise, thus raising the rates paid to customer-
generators. Admittedly, utilities’ costs should decline over the long
term and mitigate this concern if they invest in cleaner, cheaper forms
of renewable energy in the future. Nonetheless, the avoided-cost
structure is damaging in the short term, as we need to encourage
clean-tech investment now, rather than incentivizing the market to
withhold capital so as to collect the higher avoided-cost compensation
as rates rise. Remember, the fundamental objective here is not the
absolute lowest energy cost, but the total positive externality package
Additionally, the avoided cost of electricity a utility must
pay a customer-generator is less than the cost of
generating that energy, since the customer-generator’s
renewable energy is more expensive than the utility’s
traditional production.261 The utility is thus able to
purchase renewable energy from customers without any
economic incentive to generate its own.262 This scenario
diminishes the demand for clean-tech equipment, and
further reduces the market’s appeal to innovators and
investors.263
Perhaps the amendment’s biggest flaws are the limits
restricting its own reach: a customer-generator is limited
to two megawatt-hours of production capacity, 264 the total
of clean tech.
261
. In 2007, electricity generated from coal and nuclear
plants cost 2.47 cents/kwh and 1.76 cents/kwh, respectively. Nei.org,
U.S. Electricity Production Costs (1995–2007),
http://www.nei.org/resourcesandstats/documentlibrary/reliableandaffor
da
bleenergy/graphicsandcharts/uselectricityproductioncosts (last visited
Oct. 28, 2008). By comparison, typical renewable-energy costs were 4–
50 cents/kwh. See Photovoltaic Industry Statistics: Costs, supra note
240.
262
. In fact, one study calculated that “when distribution
system savings and environmental externalities are incorporated, net-
metered customers . . . actually subsidize other utility customers.”
CHRISTOPHER COOK & JONATHAN CROSS, THE ECONOMIC COST OF NET METERING IN
MARYLAND: WHO BEARS THE ECONOMIC BURDEN? 1 (1997), available at
www.e3energy.com/netmeter.pdf.
263
. The remedy is an alternative payment method,
requiring a utility to pay customer-generators a premium for renewable
energy rather than merely their avoided costs of traditional production.
See infra Part VI. This would incentivize (1) customer-generators to
produce more, since they will be compensated at higher rates, and (2)
utilities to look for ways to lower the costs of renewable energy. Both
of which would stimulate market-driven innovation in clean tech as
markets would expand. See id. In fact, incentives fixing a static
premium on retail energy rates have worked elsewhere. For example, a
price-cap regulation enacted in the United Kingdom spurred innovation
and cost reduction, because any reduction of costs below the capped
rate translated into pure profit for the utilities. Brian J. Miretzky, The
Implications of Restructuring of the Electricity Market in Reference to
Consumer Price and Choice 9–10 (Aug. 2007) (unpublished comment)
(on file with Professor Peter Carstensen, University of Wisconsin Law
School). Ultimately, prices fell by 30 percent, yet the industry
continued to profit. Id. at 10–11.
264
. 220 ILL. COMP. STAT. 5/16-107.5(b). Admittedly, this is
becoming the new consensus among states. See NETWORK FOR NEW ENERGY
CHOICES, supra note 142, at 3. However, the cap certainly precludes at
least the possibility for customers to make use of net-metering through
systems of more substantial size.
212
amount of energy a utility must accept via net-metering
need not surpass 1 percent of its total capacity,265 and the
number of users below forty kilowatt-hours of production
is limited to a mere 200 through March 31, 2009.266
Together, these provisions severely cap both the potential
amount of renewable energy produced through net-
metering as well as the disbursement of clean-tech
equipment throughout the public.267 These caps further
hinder cost-reducing economies of scale, a viable market
for clean tech, and ultimately clean-tech innovation.268
Taken collectively, then, Illinois’s portfolio standard
and net-metering amendment are more-than-fair
representations of the disappointing state efforts to
propagate renewable energy. Interestingly, the acts
illustrate not only the variance between states, but also
the great potential for inconsistencies within a single
state’s legislation.269 Of course, the ultimate result of this
inadequate state-by-state arrangement is a dampened
climate for clean-tech innovation.
VI. THE SOLUTION TO THE CRISIS
If current federal subsidies only work to a certain

point, and a state system of portfolio standards and net-
metering is not working at full capacity, how can the
United States maximize clean-tech innovation? The
perceived success of state portfolio standards has led to a
clamor for a federal portfolio standard. 270 The concept has
265
. 220 ILL. COMP. STAT. 5/16-107.5(j). The limit is presumably
in place to protect existing utilities from market erosion; however, a
number of other states have not found such protection necessary. See,
e.g., N.J. STAT. ANN. § 48:3-87(e) (West 2008). That said, many states are
admittedly worse, such as Utah, which caps net-metering at 0.1
percent of peak demand. UTAH CODE ANN. § 54-15-103(2) (2008).
266
. 220 ILL. COMP. STAT. 5/16-107.5(j). This limit is
presumably for administrative purposes, however wide disbursement
of clean tech is critical, so cutting it off at this formative stage is not
optimal. See infra Part VI.
267
. Additionally, like the portfolio standard, net-metering
applies only to public utilities, leaving a substantial portion of
electricity customers without access to net-metering. 220 ILL. COMP. STAT.
5/16-107.5(b)(ii).
268
. See Del Chiaro & Gibson, supra note 20, passim ; infra
Part VI.
269
. See, e.g., supra note 259.
270
. Diverse Group Seeks Federal RPS, INSIDE ENERGY EXTRA,
May 25, 2007, at 1 (reporting that in May of 2007 nearly 200
corporations, unions, and environmental groups sent Congress a letter
already expanded outside state borders into regional
agreements, where portfolio standards treat whole
regions as single markets.271 Many oppose the prospect of
a national portfolio standard, however, since not all states
have the same capacity for renewable-energy
development, and a portfolio standard would reduce their
flexibility.272
Rather than implementing a portfolio standard alone,
this Comment contends the United States must (1) create
a national renewable-energy policy to provide the clarity
investors prefer, thereby stimulating capital infusion in
clean tech; (2) abandon traditional forms of flat subsidies,
as they have been ineffective in stimulating a sufficient
market for clean tech; and (3) implement a demand-pull
strategy through distributed generation273 to create a
long-term, diverse end-market for clean tech. Together,
these actions will provide a quantifiable clean-tech
seeking a federal portfolio standard). However, some commentators

have argued that a decentralized approach, in which state and local
governments can adopt individualized programs, is superior to a
federal standard. See Mary Ann Ralls, Congress Got It Right: There’s
No Need to Mandate Renewable Portfolio Standards, 27 ENERGY L.J. 451
passim (2006).
271
. An example of such a regional market exists in the Mid-
Atlantic states. See Rggi.org, About RGGI, http://www.rggi.org/about
(last visited Oct. 27, 2008).
272
. Dawn Reeves, Utilities May Lose Bid for Veto Threat on
Low-Carbon Rule in Energy Bill, CARBONCONTROLNEWS.COM, Oct. 11, 2007,
http://carboncontrol
news.com/index.php/ccn/show/utilities_may_lose_bid_for_veto_threat_o
n_low_carbon_
rule_in_energy_bill. Considerable debate also exists as to whether this
type of program would actually yield the results necessary to face
today’s crisis. A portfolio standard of 15 percent on a national level
would drive down electricity prices, but not lead to a significant
reduction in greenhouse-gas emissions, according to consulting firm
Wood Mackenzie. RPS Seen Cutting Gas, Power Prices, INSIDE ENERGY
EXTRA, Mar. 6, 2007, at 2. Conversely, another study has indicated that
if a portfolio standard of 25 percent by 2025 were employed, it would
lead to higher electricity costs, a slight reduction in projected
greenhouse-gas emissions (but still an increase from today’s levels),
and an overall adverse effect on the country’s economy. Proposed
Renewable Plans Assessed, INSIDE ENERGY EXTRA, Sept. 11, 2007, at 1.
273
. Distributed generation consists of “[s]mall, modular,
decentralized . . . systems located in or near the place where energy is
used.” Epa.gov, Green Power Partnership: Glossary,
http://www.epa.gov/greenpower/pubs/glossary.htm (last visited Oct.
27, 2008).
214
market, reduce excessive investment risk, and allow for
economies of scale and innovation.274
The lynchpin of the U.S. policy must be distributed
generation. While policy makers have long believed the
electricity industry to be a natural monopoly,275
distributed generation is actually key to encouraging
innovation and growth in the clean-tech equipment
market.276 Distributed generation creates a bigger market,
allows for economies of scale and innovation, and
ultimately creates capital formation.277 The United States
has already taken a step toward distributed generation
with the 2005 Energy Act’s requirement for consideration
of net-metering.278 The existing act is not enough,
however, since state standards will still vary. 279 For the
next step, the United States must look to Germany as a
model. More than beer, more than fine engineering, even
more than David Hasselhoff,280 if there is one thing the
Germans appreciate, it is clean tech.281
A. The German Renewable Energy Act as a Model
Germany’s successful renewable-energy regulatory

framework is epitomized by the German Renewable
274
. Interestingly, these developments would also allow
utilities to more easily meet their portfolio standards in states with
such requirements.
275
. Richard D. Cudahy & William D. Henderson, From Insull
to Enron: Corporate (Re)Regulation After the Rise and Fall of Two
Energy Icons, 26 ENERGY L.J. 35, 46 (2005).
276
. Cf. Del Chiaro & Gibson, supra note 20, at 371–72
(discussing the success of several of California’s distributed-generation
incentive programs in fostering clean-tech equipment adoption by end
users).
277
. See id. This stimulation is also vital since electricity use
in American homes is expected to increase by 39 percent over the next
twenty-five years. See ENERGY INFO. ADMIN., U.S. DEP’T OF ENERGY, DOE/EIA-
0383, ANNUAL ENERGY OUTLOOK 2007, at 82 (2007), available at
http://www.eia.doe.gov/oiaf/archive/
aeo07/pdf/0383(2007).pdf.
278
. Energy Policy Act of 2005, Pub. L. No. 109-58, § 1251,
119 Stat. 594, 961–63.
279
. See id. 119 Stat. at 963.
280
. Okay, not more than David Hasselhoff.
281
. This appreciation has borne out in venture capital as
well, where clean tech fetched 14 percent of German venture capital
from 2003–06. See UK Dominates European Investment in Clean
Energy, supra note 51. As a reminder, this was a period during which it
began at 3 percent, grew slowly, and then “exploded” to a mere 9
percent in the United States. See MAKOWER ET AL., supra note 34, at 4.
Energy Act (“Renewable Energy Act”), which prominently
illustrates the benefits of distributed generation. 282 In
passing the Renewable Energy Act, Germany recognized
renewable sources enjoyed no economies of scale, with
low production leading to higher costs.283 The solution was
a demand-pull strategy to create widespread demand for
clean-tech equipment, thereby lowering production costs,
energy prices, and ultimately the required tariffs. 284 This
demand-pull strategy took the form of a feed-in tariff,
which is basically a distributed-generation provision that
allows customer-generators to sell renewable energy back
to the grid at above-market rates.285
282
[Erneuerbare-Energien-Gesetz] [Renewable Energy Sources Act], Mar.
29, 2000, BGBI. I at 305, last amended by Gesetz, July 21, 2004, BGBI.
I at 1918, translated at Renewable Energy Sources Act,
http://www.erneuerbare-
energien.de/files/pdfs/allgemein/application/pdf/
eeg_en.pdf (last visited Oct. 26, 2008). The Renewable Energy Act was
first implemented in 2000, and subsequently amended in 2004. See id.
In actuality, however, Germany’s successful renewable-energy
framework reaches as far back as 1990. See Gesetz über die
Einspeisung von Strom aus Erneuerbaren Energien
[Stromeinspeisungsgesetz] [Act on Feeding into the Grid Electricity
Generated from Renewable Energy Sources], Dec. 7, 1990, BGBI. I at
2633, last amended by Gesetz, Apr. 24, 1998, BGBI. I. at 730,
translated at Wind-works.org, The Original Electricity Feed Law in
Germany, http://www.wind-works.org/FeedLaws/Germany/
ARTsDE.html (last visited Oct. 27, 2008).
283
[Erneuerbare Energien Gesetz] [EEG] [Renewable Energy Act], Mar. 29,
2000, BGBI. I at 305, explanatory memo, § A, translated at
http://www.erneuerbare-energien.de/files/pdfs/allgemein/
application/pdf/res-act.pdf. Germany also recognized clean tech costs
more because traditional energy production methods contain
unconsidered, external costs to the environment and future
generations. Id.
284
. See id.
285
. See generally id. This above-market price, is—
admittedly—a subsidy; however, unlike flat subsidies in the United
States, it is neither a one-shot effort to encourage equipment
purchases, nor is it tied to generation by concentrated, utility-sized
producers on the supply end of the energy equation. Today it is a
common sentiment in the United States that “[w]ithout federal tax
incentives . . . no markets would exist for alternative energy
sources . . . and the result is no capital.” See Hymel, supra note 5, at
45. Taking this as a given, then, any incentive should be shifted to a
more logical place in the chain—as the Renewable Energy Act has
done—so innovation can eventually reduce the need for incentives
altogether.
216
Feed-in tariffs are not entirely novel,286 but the
Renewable Energy Act’s specific provisions have led to
astounding success. Specifically, the Renewable Energy
Act applies to a wide array of renewable energy sources
such as hydrodynamic, wind, solar radiation, and
geothermal energies, as well as gas from landfills, sewage
treatment plants, mines, or biomass.287 The law also
requires each utility to connect an individual’s renewable
energy source to the grid and to give priority to using that
energy first, rather than producing its own. 288 This
requirement ensures a market for a customer-generator’s
production. Furthermore, fixed compensation rates are
tiered to pay more at lower levels of production,
encouraging the “little guy” to get involved and fostering
widespread adoption.289 The rates also typically decline
over a contract’s life to encourage efficiency and
innovation.290 Together, these provisions encourage
investment and growth because they give customer-
generators certainty and an incentive to produce more
efficiently over time.291
The results of the Renewable Energy Act have been
phenomenal.292 The regulation is well on track to meet its
286
. For example, an Argentine law requires the purchase of
wind energy. See Miretzky, supra note 263, at 14. The Chinese also
followed the German model in their renewable-energy law, which is
now being credited as the major driver of their renewable-energy
growth. Renewable Energy Law Powering the Growth of the Chinese
Renewable Energy Markets, NEWSWIRETODAY.COM, Apr. 30, 2007,
http://www.newswiretoday.com/news/17331.
287
. BGBI. I at 305, last amended by Gesetz, July 21, 2004,
BGBI. I at 1918, art. 3, ¶ 1. This broad definition allows for widespread
development and market selection. See Del Chiaro & Gibson, supra
note 20, at 371–72.
288
. BGBI. I at 305, last amended by Gesetz, July 21, 2004,
BGBI. I at 1918, art. 4, ¶ 1.
289
. See id. BGBI. I at 1918, arts. 6–11.
290
. See id.
291
. The provisions are admittedly bolstered by other
governmental support, such as favorable loan terms for solar
equipment purchases and individual German state subsidies for solar
installations. See Solarbuzz.com, Fast Solar Energy Facts: German PV
Market, http://www.solarbuzz.com/FastFactsGermany.htm (last visited
Oct. 27, 2008).
292
. See, e.g., Germans Offer Tech in Renewable Energy,
FINANCIALEXPRESS.COM, Sept. 29, 2007,
http://www.financialexpress.com/news/
Germans-offer-tech-in-renewable-energy/222395; Paul Gipe, Feed Law
Powers Germany to New Renewable Energy Record,
RENEWABLEENERGYWORLD.COM, Feb. 5, 2007, http://www.renewableenergy
goal of doubling Germany’s renewable energy by 2010.293
In fact, Germans already led the world in electricity
production from wind, solar, and biogas sources 294 when
they installed an additional 100,000 solar systems295 and
invested $10 billion in renewables in 2006.296 Today,
Germany has almost twice the wind-generation capacity
as the United States, even though it is one-fourth as
populous and one-twentieth the geographic size.297
The Renewable Energy Act has also delivered
remarkable economic benefits, refuting worries that clean
tech’s costs outweigh its benefits.298 In 2006, 214,000
Germans worked in the renewable-energy industry—a
creation of 57,000 jobs since 2004.299 The industry also
contributed €22.9 billion to the German economy in
access.com/rea/news/story?id=47322.
293
. See Erneuerbare Energien Gesetz, BGBI. I at 305, last
amended by Gesetz, July 21, 2004, BGBI. I at 1918, art. 1. The
renewable sources of energy installed through the Renewable Energy
Act so far produce approximately 10 percent of Germany’s electricity
consumption. See Gipe, supra note 292. This is remarkable in
comparison to the mere 6 percent that renewables generated in 1998.
See Fast Solar Energy Facts: German PV Market, supra note 291.
294
. See Gipe, supra note 292. In fact, Germany currently
produces nearly 30 percent of the renewable energy worldwide,
excluding hydroelectricity. See Germans Offer Tech in Renewable
Energy, supra note 292.
295
. Gipe, supra note 292. The photovoltaic collectors
installed in 2006 alone span roughly 8 million sq/m. Erneuerbare-
energien.de, General Information – Renewable Energy,
http://www.erneuerbare-energien.de/inhalt/print/4306.php [hereinafter
BMU] (last visited Oct. 28, 2008). It is also important to note 90
percent of these installations are tied into the grid, proving the
Renewable Energy Act’s effectiveness. Fast Solar Energy Facts:
German PV Market, supra note 291.
296
. Gipe, supra note 292. Furthermore, these investments
alone have prevented the release of 101 million tons of CO2 gas. BMU,
supra note 295.
297
. Gipe, supra note 292. To be fair, Germany is home to
almost one-third of the world’s wind capacity. Wilson Rickerson,
German Electricity Feed Law Policy Overview, WIND-WORKS.ORG, July 2002,
http://www.wind-works.org/articles/fl_
Rickerson.html.
298
. See Roberta Mann, Waiting to Exhale?: Global Warming
and Tax Policy, 51 AM. U. L. REV. 1135, 1148–50 (2002).
299
. BMU, supra note 295. Even more impressive is that the
total clean-tech jobs created (not limited to renewable energy) was
250,000, with an additional 150,000 projected by 2020. Eric Reguly,
Germany’s Green Example Could Be Revolutionary, GLOBE AND MAIL
(Canada), Sept. 28, 2007, at B8. By then clean tech will employ more
people than the German auto industry. Id.
218
2006.300 These are clear indications that the model works
and investment in clean tech pays dividends.
The Renewable Energy Act has clearly encouraged
innovation and investment in German clean tech. The
Act’s demand-pull strategy more than adequately
achieves its environmental goals, while simultaneously
spurring technological and economic growth. The German
model is therefore a solid base from which the United
States can build when reforming its renewable-energy
framework to encourage clean-tech innovation and meet
national environmental goals.
B. The Proposed U.S. Renewable-Energy Reforms
Reforms to the U.S. renewable-energy framework

should build on the prior success of both state portfolio
standards and the German Renewable Energy Act.
Specifically, the United States should first implement a
feed-in tariff to expand clean-tech equipment distribution
and allow for innovation and economies of scale. 301 The
United States should then add a renewable portfolio
standard. The cumulative effect of these measures will
give both utilities and their customers an incentive to
champion broad clean-tech development and therefore
draw innovators and investors to the space.
The feed-in tariff implemented in the United States
must contain a broad definition of renewable energy.
Specifically, the tariff should define renewable energy as
those processes generating electricity from
hydrodynamic, wind, solar radiation, or geothermal
energies; or gas from landfills, sewage treatment plants,
mines, or biomass; or any other means which (1)
consumes no tangible resource as fuel, or (2) produces no
waste product which itself is not a productive resource in
contemporary commerce.302 This definition would be
300
. BMU, supra note 295.
301
. See Del Chiaro & Gibson, supra note 20, passim.
302
. The tariff should also include a “reassessment
provision,” allowing Congress to reassess acceptable technologies
every five years to ensure all technologies implemented reflect the
tariff’s goals. Technologies that technically meet the definition but do
not advance the goals of the tariff should be excluded, while
technologies that serve the goals of the tariff but do not fall under the
definition should be included. Importantly, existing projects should be
grandfathered, regardless of definitional changes. This grandfather
provision will prevent amendments from interfering with the
investment-based expectations of entrepreneurs and innovators, and
broad enough to encompass all existing clean tech, as
well as to leave the door open for significant future
innovation.303 The broad definition would also allow for a
maximum adoption rate304 and avoid the myopic favoring
of one technology over another.305 Cumulatively, these
factors make the clean-tech industry more attractive to
investors, which is ultimately a boon for innovation.
The feed-in tariff should also require utilities to
provide customer-generators with meters that allow
participation in the program. Customers would draw on a
utility’s grid only when needed, and utilities should be
required to give priority to purchasing customers’
renewable energy before generating their own.306
Customer-generators should receive above-market rates
for any renewable energy they feed into the grid, with
monthly excesses being rolled over to the next period,
and annual excesses receiving cash compensation. 307
Again, each of these provisions makes using clean-tech
equipment more attractive, which in turn will draw more
capital to the clean-tech-equipment space and spur
innovation.
Furthermore, the compensation rate paid for
customer generation should be tiered, with slightly higher
rates paid at lower levels of production and slightly lower
rates paid at higher levels.308 This tiered effect further
incentivizes “the little guy” to get involved, encouraging
broader adoption of clean-tech equipment.309 Finally, the
rates paid would be subject to a stepped annual reduction
therefore avoid discouraging investors from risk-taking behavior. Cf.

supra note 19.
303
. See supra note 136.
304
. See id.
305
. See id.; see also supra text accompanying notes 103–
05. Admittedly, while national legislation and a broad definition may
help mitigate concerns of special-interest influence, they do not
eradicate all such concerns. See supra note 167. For the purposes of
this Comment, however, what is pertinent is that a national framework
removes at least one layer at which corruption may take place. See id.
306
. This provision is therefore substantially similar to the
German Renewable Energy Act. See BGBI. I at 305, last amended by
Gesetz, July 21, 2004, BGBI. I at 1918, art. 4, ¶ 1.
307
308
Gesetz, July 21, 2004, BGBI. I at 1918, arts. 6–11.
309
. See supra text accompanying note 289.
220
each year for the first ten years of the tariff,310 after which
Congress should reassess the program and adjust rate
formulas accordingly. This stepped reduction would
encourage investment in innovation, as customer-
generators would seek lower-cost production means to
preserve their profit margins.311
During the first two years of the feed-in tariff, the bulk
of the costs should be borne by the federal
government.312 The government should reimburse utilities
for the premium paid to customer-generators, 313 as well
as for the profits on energy they would have sold absent
the tariff.314 This provision ensures utilities will be no
worse off than before the tariff, which reduces their
resistance to the program315 and also spreads the costs of
the program across the country rather than concentrating
costs on utilities in areas where the feed-in tariff makes
the greatest inroads.316 While this period will therefore be
costly, it will ultimately allow the feed-in tariff to develop
310
Gesetz, July 21, 2004, BGBI. I at 1918, arts. 6–11.
311
. See generally supra text accompanying note 290.
Under no circumstances would the rate drop below market rates, as
this would unfairly disrupt the profit expectations of prior clean-tech
purchasers.
312
. As will be discussed later, this funding obligation
changes after the initial two-year period. See infra notes 326–28.
313
. Admittedly, this is effectively a subsidy. However, the
subsidy is production based, helping to mitigate the common flaws of
flat subsidies. Cf. Friedman, supra note 86, at 965 (discussing how only
“matching” subsidies (similar to production-oriented subsidies in this
Comment’s context), and not flat grants, can encourage long-term
changes to the market for a good).
314
. This too is effectively a subsidy; however, this provision
will likely reduce utility industry opposition to the tariff, and will also
terminate after the initial two-year period. See infra notes 326–28.
315
. Reducing resistance from utilities is key, as resistance
from utilities is a factor in net-metering’s low adoption rate. See supra
text accompanying note 151. Note, utilities will bear the burden of
supplying customer-generators with proper metering equipment.
However, with the implementation of a national portfolio standard (to
be discussed shortly), utilities receive the benefit of customer-
generator renewable energy without making capital outlays. See infra
notes 326–28. Consequently, the nominal meter expense will
presumably be more than offset by savings on generating equipment.
316
. It is to say, in areas where the feed-in tariff is widely
used by customer-generators, utilities will feel a disproportionate
erosion of their revenue base. Spreading the costs across the nation
for a period of time will prevent this phenomenon from immediately
taking place and allow for solution analysis in the interim.
and also provide a valuable reference point as to how
much renewable energy will come online and from
where.317
After the feed-in tariff has been in place for two years,
the United States should introduce a national portfolio
standard and energy-credit trading program.318 The
portfolio standard should initially require 12 percent of a
utility’s energy mix to be renewable energy (including
hydroelectric), and increase by 1 percent each year until
reaching a total of 20 percent.319 These targets represent
ambitious, but achievable, goals from current levels.320
The portfolio standard should also contain a cost-
containment provision to stave off unexpected costs and
ease the minds of voters fearing cost overruns. 321
However, this provision should be tiered, with higher
levels of inflation permitted early in the process in
exchange for a subsequently lower tolerance when the
technology becomes less expensive.322 As a result, there
is a lesser likelihood of the cost-containment provision
capping clean-tech equipment proliferation early in the
317
. This data will be key in providing certainty for utilities
making investments in renewable energy once the next phase of the
reform sets in, as they will have an idea of distributed generation’s
capacity, and therefore what their own capital requirements will be.
Additionally, while the short-term monetary costs will be high, many
other economic and noneconomic benefits will be generated in the
future. See supra notes 298–300 and accompanying text.
318
. Two years is admittedly a somewhat arbitrary
timeframe, selected to be long enough to provide market players with
time for adjustment and to prevent an anomalous year from skewing
any data collected, while simultaneously being short enough to avoid
putting off reform for too long.
319
. Thereafter, the standard should be reassessed and
adjusted as circumstances dictate.
320
. See ENERGY INFO. ADMIN., U.S. DEP’T OF ENERGY, supra note
151, at 7. In 2007, 9.5 percent of U.S. energy demand was met by
renewable energy (including hydroelectric). Id. Based upon this figure,
an initial requirement of 12 percent—starting at least two years out, if
the statute were implemented today—represents a marked, but wholly
achievable, increase in renewable-energy usage. If enacted today, the
statute would place the portfolio standard at 20 percent by 2018,
which is not dramatically out of line with many current state goals.
See, e.g., MINN. STAT. § 216B.1691(2a) (2007) (requiring most utilities to
meet a portfolio standard of 20 percent by 2020); S.B. 838, § 6(c), 74th
Leg. (Or. 2007) (requiring large utilities to meet a portfolio standard of
20 percent by 2020).
321
. Cf. supra note 126.
322
. See supra notes 236–38 and accompanying text.
222
process.323 Moreover, if the free market works, there is
little reason to believe the cost-containment provision will
ever be triggered, as a jump in energy prices will
presumably cause customer-generators to generate more
energy under the feed-in tariff, helping to reduce energy
costs.324
Finally, with the addition of the national portfolio
standard, the feed-in tariff’s provisions should be
amended slightly to alleviate program costs to the federal
government. Specifically, while the government should
still support the premium rates for renewable energy paid
to customer-generators,325 it should no longer reimburse
utilities for foregone profits. Instead, the feed-in tariff
should specify any energy credits generated under the
tariff belong to the utility purchasing the power, rather
than to the customer-generator.326 With the introduction
of the national standard and energy-credit program, these
credits would presumably have value and help
compensate utilities for any market erosion,327 as well as
giving them motivation to encourage the program.328
Again, these provisions would cut costs and reduce the
utilities’ resistance to the widespread distribution of
clean-tech equipment.
The amendment to the feed-in tariff would also
address concerns about the disparity of renewable-energy
capacity in differing regions of the country.329 The
portfolio standard should make no separate provision for
these geographic differences because the combination of
323
. See id. It is important to note, if the cost-containment
provision were triggered, utilities would still be required to purchase
customer-generators’ excess generation. The provision only relieves
utilities from adding their own clean-tech capacity or purchasing
energy credits from other utilities.
324
. See generally Henderson, supra note 128.
325
. Although by this time the premiums will be slightly less
than originally paid, due to the stepped reductions built into the tariff.
See supra text accompanying notes 310–11.
326
. While this initially appears to take a benefit away from
customer-generators, recall they are still in a better position relative to
current conditions due to the premium paid for excess generation.
327
. Cf. supra note 151 and accompanying text.
328
. Id. The motivator is that the more renewable energy
produced by customers, the more energy credits a utility accumulates
—thereby inheriting economic return without capital outlays.
329
. See Reeves, supra note 272. With a national standard,
the fear is that areas conducive to renewable energy (i.e., windy or
sunny areas) will easily meet the standard, while other areas may
struggle. See generally id.
the feed-in tariff and energy-credit program should
mitigate differences in renewable-energy capacity.
Theoretically, in areas conducive to renewable energy,
more citizens will take advantage of the feed-in tariff.330
For the utilities in these areas this means (1) they will be
required to purchase more energy from customers, rather
than supply it to them at a profit, and (2) utilities will
accumulate an abundance of energy credits. In areas less
conducive to renewable energy, the reverse will be true—
the feed-in tariff will not be as lucrative for customer-
generators, meaning utilities will sell more energy at a
profit but have a harder time meeting the national
portfolio standard. Consequently, utilities in one area will
accumulate excess profits, while utilities in another area
will accumulate excess energy credits. The establishment
of an interregional energy-credit market—where the
excess profits of one utility are traded for the excess
renewable-energy generation of another—could provide
economic parity, despite geographic differences in
renewable-energy capacity.331
The combination of benefits from a feed-in tariff and a
national portfolio standard is compelling. Properly drafted,
the programs can encourage broad clean-tech equipment
distribution. This distribution creates an end market for
equipment manufacturers, entices investors, and
ultimately allows for further clean-tech innovation.
330
. Cf. Robert Frick, Solar Finally Pays Off, KIPLINGER’S PERSONAL
FINANCE, Oct. 2007, at 68, 68 (suggesting citizens view geographical
factors as the key to home power generation’s viability).
331
. Absent in this discussion is the renewable-energy
generation of utilities themselves. A concern some may have is that
utilities in areas with low feed-in tariff adoption will interfere with the
parity discussed by simply generating their own renewable energy
(rather than purchasing energy credits from other regions). This
concern is likely unwarranted because where geographic constraints
limit the feed-in tariff’s use, they also constrain the practicality of a
utility’s renewable-energy production. Consequently, rational utilities
would purchase energy credits from areas where they are generated at
the lowest cost, rather than generating their own energy at a greater
cost. See generally Henderson, supra note 128, at 689. Furthermore,
most rational business enterprises prefer to operate with as little
capital overhead as possible. See generally DOUGLAS J. WHALEY, PROBLEMS
AND MATERIALS ON SECURED TRANSACTIONS 22 (7th ed. 2006) (suggesting
businesses prefer to limit the amount of capital equipment on their
balance sheets for financing purposes). Thus, purchasing extensive
clean-tech equipment for their own generation will likely be less
preferable than obtaining the generation from others if practical. See
generally id.
224
CONCLUSION
While the myriad problems surrounding traditional

energy use are ominous, much hope lies in clean-tech
innovation. The U.S. federal government and several
states have each implemented measures in an effort to
promote clean-tech development, but their fragmented
approach has so far been inadequate. The measures
taken by the federal government generally fail to
adequately incentivize investment and innovation, and
state measures leave much to be desired as well.
Furthermore, the very nature of the fragmented state-
by-state approach creates an unacceptable amount of
investment risk, hindering capital formation and
innovation in clean tech. In order to address its energy
crisis adequately, the United States must adopt a unified,
demand-pull strategy similar to German law. This will
encourage widespread adoption of clean tech, reduce
investment risk to clean-tech investors, and foster the
requisite innovation in clean tech.

Deutschland Über Alles - Why German Regulations Need To Conquer The Divided U.S. Renewable-Energy Framework To Save Clean Tech (And The World)

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Deutschland Über Alles - Why German Regulations Need To Conquer The Divided U.S. Renewable-Energy Framework To Save Clean Tech (And The World)

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COMMENT

DEUTSCHLAND ÜBER ALLES:

The current U.S. renewable-energy regulatory framework

Global warming, threats to energy security, and rising

focus of this Comment tends to invoke renewable energy more

$7.4 Billion in Q2 2008 According to the Moneytree Report (July 19,

The problems with traditional energy production are

Time and again American innovations have broken

Morocco’s renewable-energy-sources law follows Germany’s model).

Investment in clean tech is as important as

the E-Economy (Mar. 1, 2001), available at

Despite the deep need for further commercialization

III. THE FEDERAL FRAMEWORK AS A HURDLE

One factor precluding clean-tech development is the

A. The Energy Policy Act of 2005

After many years of wrangling, Congress passed the

B. Flaws in the Federal Response Inhibit Clean-Tech

While the federal government’s approach toward

Two notable flaws exist in the Clean Renewable

Federal subsidies have long been used to incentivize

sensitive to external market forces and consumer sentiment,

IV. STATE RESPONSES: ALL OVER THE MAP

The relatively hands-off approach of the 2005 Energy

A. Two Common State Approaches Described

While individual state measures vary considerably,

1. RENEWABLE PORTFOLIO STANDARDS

Several states have recently enacted renewable

Renewable Portfolio Standards, http://apps1.eere.en

benefits of the standard may actually be exported to another state.

Net-metering, while not nearly as well-publicized as

Efficient Wind Turbine Blade Designed, supra note 33. Consequently,

OF ENERGY, DOE/EIA-0384, ENERGY ANNUAL REVIEW 2006, at 7 tbl.1.2 (2007),

B. Flaws in State Autonomy Inhibit Clean-Tech

Ultimately, the biggest obstacle the U.S. renewable-

1. STATE MYOPIA AND SELF-INTEREST

States’ private interests affect their renewable-energy

State autonomy also creates legal risk and

Game theory193 offers an interesting way to frame the

use the state’s taxation powers to incentivize in-state production. Id. at

V. A CASE STUDY IN STATE-LAW PROBLEMS:

Another stumbling block for the development of clean

A. A Critique of Illinois’s Portfolio Standard

Although portfolio standards have become quite

not exclude entities by ownership but does scale down the

B. A Critique of Illinois’s Net-Metering Amendment

Unlike portfolio standards, net-metering leaves little

data.com/states/Illinois-Topography.html (last visited Oct. 27, 2008).

are still the responsibility of the customer-generator. Id.

VI. THE SOLUTION TO THE CRISIS

If current federal subsidies only work to a certain

seeking a federal portfolio standard). However, some commentators

A. The German Renewable Energy Act as a Model

Germany’s successful renewable-energy regulatory

B. The Proposed U.S. Renewable-Energy Reforms

Reforms to the U.S. renewable-energy framework

therefore avoid discouraging investors from risk-taking behavior. Cf.

While the myriad problems surrounding traditional

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