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Recently, challenge-oriented innovation policy has become increasingly popular in political and scientific discussions. However, the extent to which such a challenge-based thinking has entered regional policy making is relatively unclear. This paper examines the scope of the regional level in promoting challenge-based innovation, focusing on the recent renewable energy innovation policy in Schleswig-Holstein, Germany. The results show that while regional innovation policy in Schleswig-Holstein aims to address several structural and transformational systemic failures, many other problems and challenges remain, as they are beyond the capacity of a single region to address. Based on this analysis, we draw four conclusions. First, similar to many other structurally weak regions, policymakers in Schleswig-Holstein are struggling with some of the same key challenges that the policy was originally designed to address. Second, multi-scalar governance and inter-scalar coordination are essential for managing regional sustainability transitions. Third, challenge-driven innovation policy is an extension of, rather than a replacement for, conventional regional innovation policy. Finally, environmental and economic goals should be well balanced in challenge-driven regional innovation policy design. [ABSTRACT FROM AUTHOR]