The world is shifting toward a low-carbon energy industry. According to analysis by Bloomberg New Energy Finance in New York, a milestone occurred in 2013 when the world added 143 gigawatts of renewable electricity capacity, compared with 141 gigawatts in new plants that burn fossil fuels. Announcing that, “Fossil fuels just lost the race against renewables”, the report explains that this shift will continue to accelerate, and that by 2030 new capacity added from renewables will be more than four times that of fossil fuels.

Despite addition of capacity from renewables passing fossil-based energy, changing the world’s energy systems is not simple. Since the industrial revolution, coal, gas and oil have provided most of the primary fuel driving development of modern economies. This continues today – last year more than 86% of the world’s primary fuel came from fossil fuels. This reality is anchored by the fact that environmental externalities associated with burning fossil fuels, such as climate change and local air pollution, remain largely unpriced in the global economy. As such, renewable energy continues to face an uphill battle.

The big test for the renewable sector will be developing and deploying technology that can compete with the benefits offered by fossil fuels – currently regarded as steady, reliable and affordable. This means development of full-scale, commercially viable renewable energy infrastructure around the world in order to power the future. From large wind farms to rooftop solar arrays to electrical grid upgrades and electric vehicle charging stations, much change lies ahead. Law and policy figure prominently in this shift. Legislative change and policy direction led by governments have a key role in harnessing and directing market forces in a way that can create certainty for investors and stimulation for innovation.

There is no set recipe, however. Analyses and literature evaluating optimal policy tools for increasing integration of renewable energy into electricity markets are inconclusive. It is clear that a debate continues to unfold as to whether cornerstone instruments such as renewable portfolio standards, feed-in tariffs or market premiums are the ideal primary tool, and how best to complement these with measures like investment tax credits and net-metering.

Many illustrative cases are emerging, particularly in countries like Germany, Canada and Chile. Perhaps the most interesting example at the moment, however, is the United States. In the U.S., for example, the solar industry has grown significantly in recent years, a development that is attributed in part to a federal investment tax credit (ITC) created by the Energy Policy Act of 2005, as well as the proliferation of renewable portfolio standards at the state level. The long term potential is enormous. A recent study by the National Renewable Energy Laboratory found that renewable electricity generation from technologies that are commercially available today, in combination with a more flexible electric system, is more than adequate to supply 80% of total U.S. electricity generation by 2050.

The U.S. story is not totally smooth or simple, however. The future is fluid, especially in the law and policy space. The ITC is scheduled to step-down from 30% to 10% at the beginning of 2017 for corporate investors. A study based on five U.S. states (California, Colorado, New Jersey, North Carolina and Texas) and different segments of the solar industry, conducted this year by professors Stephen D. Comello and Stefan J. Reichelstein from the Steyer-Taylor Center for Energy Policy and Finance at Stanford University, found that “the anticipated ITC step-down in 2017 would increase the levelized cost of solar power by a significant margin, raising the specter of a ‘cliff’ for the solar industry”.

Added to this is another major legal development. In August of this year the Obama Administration announced the new “Clean Power Plan” (CPP) to reduce carbon emissions from power plants, which account for 40% of total US greenhouse gas emissions. Implementation of this plan has begun, with the Environmental Protection Agency (EPA) just announcing the final rule on October 23, 2015. The rule works by setting an emission reduction standard and then providing flexibility to states to meet it.

This is relatively good news for renewable energy. One of the ways a state can comply with the EPA rule is through integrating renewable energy into its electricity system. Choice of policy tools to facilitate this are left to the states for the most part. Some states are already taking action, and California is actually on track to exceed CPP requirements by a significant margin.

But the CPP doesn’t necessarily clear uncertainty out of the air. While the Obama Administration and the EPA are of the view that the CPP derives its legislative authority from s.111(d) of the Clean Air Act, some argue that the CPP is open to legal challenge. For example, Harvard law professor Lawrence Tribe has suggested that the CPP may infringe the Fifth and Tenth Amendments of the Constitution because it constitutes a regulatory taking by the federal government, limiting a corporation’s use of its coal plants without due compensation. He argues that it also coerces states into creating their own reduction plans by threatening that the federal government may impose its own plan. Drawing on this line of argument and others, 26 states have already filed suit to challenge the EPA’s rule.

Time will tell whether the CPP survives legal challenges, but in the meantime the outlook for renewable energy in the U.S. remains relatively bright. Flexibility offered to states by the CPP fits well with the lack of consensus around optimal legal instruments for adding renewable energy capacity. In this way, the EPA’s approach is wise. What’s more, the proliferation of different state approaches is likely to create what could be thought of the world’s largest “policy lab” experimenting with policy levers for renewable energy. This means that CPP benefits may actually accrue beyond US borders as other jurisdictions will be able to watch, learn, adapt and implement at home.

Given these developments in the US and observed trends around the world, Bloomberg and others may want to make their projections for 2030 “renewable” as well. The need for ongoing revisions to track the transition to a cleaner energy future is a certainty.