Everyone knows that California leads when it comes to innovation. But when I say ‘innovation’ do you think only about green dollars, or an environmentally clean and green economy, too? See what you think after this scan of the Golden State’s energy ecosystem, from government-supported policies to its robust startup scene.

swissnex San Francisco recently welcomed a group of policy-makers from Switzerland that came to experience the innovation ecosystem in California, in particular in the San Francisco Bay Area.

Switzerland’s current Vice President and head of the Federal Department of Economic Affairs, Education and Research (EAER), Federal Councillor Johann Schneider-Amman, related how when he visited California Governor Jerry Brown on this trip to discuss innovation, Brown kept bringing up climate change and sustainability.

Was Governor Brown trying to impart a message about the future of innovation in the Golden State? Perhaps.

Often, we think about innovation only in terms of entrepreneurs in the high-tech/ICT sector, dazzled by tales of garage-to-yacht riches and fame built on code and zero marginal cost scaling.

But the innovation ecosystem here in the San Francisco Bay Area cultivates more than clever apps and the latest social media trends; it also contributes to ensuring that humans have a place to live—and tweet—on a warming planet.

California is a hotbed of innovation activity for sustainability, it turns out, and the heat is turning up in more ways than one. Here’s an overview:

Governing Innovation

While not likely the first thing to come to mind when thinking about innovation, even if maybe it should be, government actually plays an extremely active role in creating the conditions that allow green business to thrive in California.

The state leads the US in policy innovation to support sustainability goals, ranking #1 on the US Cleantech Leadership Index for the sixth straight year.

Governor Brown is busy promoting the latest addition the state’s ambitious targets, a senate bill (SB 350) that proposes to double California’s renewable energy generation, double the energy efficiency of buildings in the state, and halve the amount of petroleum consumed by automobiles, all by the year 2030.

While too early to tell whether the bill will pass or not, California has already established its climate leadership with the landmark 2006 Global Warming Solutions Act.

With the goal of reducing greenhouse gas emissions to 1990 levels by the year 2020 (a 25% reduction), that legislation created a functioning carbon market, which has already contributed over $1 billion to clean energy projects. It also nudged privately owned utilities along a path to renewable power by establishing a Renewable Portfolio Standard (RPS), mandating that a third of the state’s consumption comes from renewables by 2020.

To back that up, the state required those same utilities (who generate about 3/4s of the California’s power) to procure 1325 MW of storage— roughly the equivalent of supplying one million homes—by 2020. These policies combined are credited with helping California reduce its overall emissions while simultaneously developing a strong cleantech economy.

Cleaning the Cloud

Tech giants in California’s Silicon Valley are also participants in the sustainability ecosystem. Apple already powers all of its US operations and data centers with 100% renewable energy, and its global figure is not far behind at 87%.

Facebook aims to power half of its operations with renewable power by 2018, and Google is currently at 35%. Both companies have long-term plans to get to 100%.

Tech companies and other commercial customers with large energy needs also now have the ability to enter directly into long-term Power Purchase Agreements and buy renewable energy directly from plants.

For example, First Solar’s California Flats Solar Project is set to provide Apple with 130 MW of clean power, produced in-state, once the project is up and running next year.

Around Silicon Valley, industry is achieving greater energy efficiency and saving money through a combination of offsets, employee incentives, and technologies that can cool more efficiently and respond to peak demand by automatically reducing power to non-critical machines.

Startups on the Green

Startups are also seeing lucrative as well as beneficial opportunities helping customers with increasing energy costs brought on by peak power pricing, using “demand response” technologies.

Peak power pricing is intended to encourage energy savings through “negawatts” and will be in effect everywhere in California by 2019, so this market will continue to grow.

The Bay Area is already home to a number of companies in this space including Ohmconnect, Genability, and EcoTrust, in addition to established players such as Nest, whom Google acquired last year for over $3 billion—one of the early success stories in this developing market.

But energy management technologies are just one part of the clean energy market. Expect to see more energy startups become household names as the planet heats up and we are forced to reconcile our lifestyles with the amount and type of energy needed to sustain them.

The Bay Area has a number of incubators and accelerator programs to support energy startups, places like Prospect Silicon Valley, Greenstart, and solar-focused SfunCube.

Given that the three national labs in the region have assembled their research expertise in an energy storage consortium called CalCharge, perhaps we’ll soon see an accelerator dedicated to the energy storage market alone. After all, someone is going to need to compete with Tesla’s Power Wall…

And who knows, maybe that competitor will come from abroad. Perhaps even from a small country with a square flag that’s well known for its research-based innovation.

In my humble opinion, sustainability presents the biggest innovation opportunity in human history—and the field is wide open for the collective of entrepreneurs with the vision and dedication to creating entirely new systems, not just products.

In fact, to encourage one small country’s entrepreneurs to tackle the energy problem, swissnex San Francisco is partnering with Impact Hub Fellowship and Impact Hub Zürich to launch the SAFT challenge, energy startup solutions for 2050.

German for ‘juice’, SAFT invites early stage Swiss startups in the fields of energy efficiency, smart cities, and distributed generation to compete for an intensive internationalization program complete with a trip to Silicon Valley to take their idea to the next level.

Stay tuned to find out what these startups will envision to innovate the energy system and help Switzerland and the world transition to a sustainable future.