With the failure of cap and trade emission pricing in Washington and in international negotiations, we’re all wondering how to make progress on clean energy adoption without major leadership from the federal government.

The possibility of such progress was one of the topics of a paper I recently worked on with colleagues from the American Enterprise and Breakthrough institutes. And it’s also something my colleague Jonathan Rothwell and I have been mulling as we work on a major forthcoming measurement of the clean economy in U.S. metropolitan areas.

Now, our friend Lew Milford of the Clean Energy Group has put out a smart new paper that nicely encapsulates the present moment en route to stressing something Jonathan and I have come to think is critical: the utility connection in clean energy uptake.

A good federalist with a feel for how real-world markets work, Lew first places states at the center of action on clean technology adoption. Writes Milford and his colleague Jessica Morey: “States today are at the forefront of domestic efforts to address clean energy and climate change. They have shown extraordinary bipartisan leadership as they design and implement creative and diverse clean energy programs.”

But then, having said that, Milford and Morey then drill down, and hone in what Jonathan and I are increasingly feeling is one of the really crucial issues in the clean energy push: the central, mediating role played in the energy marketplace by regulated utilities.  Here are Milford and Morey: “It makes sense that states have been on the cutting edge of clean energy technology deployment . Through their utility regulators, states decide what kinds of power plants--coal, oil, solar, or wind--are financed and built in the U.S.  While the federal government can influence state energy investment decisions through research and development funding and tax incentives, federal agencies ultimately have little control over those electric power generation decisions…[By contrast], state governments, through price setting, permitting policies, incentives, and approvals for utility procurement of power or investment in new generation capacity, mandate what kinds of power sources are used to create electricity in the United States.”

In a word, Milford and Morey’s report hits the bullseye with its simple reminder that any solution to the “demand” problem in clean energy is going to have to involve state-regulated utilities, which not only mediate most demand in America but represent the greatest source of investment capital for new clean energy technologies of any meaningful scale.  Quite simply, utility revenues represent the largest source of reliable capital in the country for investment in new energy technology, and it is not directed by customer preferences but by state governments in the form of utility commissions. Which makes the issue clear: Isn’t figuring out some way to redirect utility capital toward cleaner energy production one of the critical issues of our time?  We suspect it is, and will be thinking about that going forward.