Olaf Babinet, Senior Manager, Global Expansion Optimization Group, Deloitte Consulting and Dustin Gellman, Senior Consultant, Global Expansion Optimization Group, Deloitte (Apr/May 10)
In many respects, the cleantech industry growth trajectory now rivals the Internet - in a short time, it has attracted staggering capital and is evolving rapidly. Cleantech encompasses a broad range of products, services, and processes designed to reduce cost, environmental impact, and natural resource use.
Evolution of Cleantech
Prior to 2005, the cleantech landscape looked dramatically different than it does today. Subsidies were generally limited to specific sectors, such as wind energy. Solar manufacturing was nascent - its technology too expensive for consideration beyond hobbyist or specialized installations. Mass-scale electric automobile production was on the drawing board, but still years away. And "green" and "clean" were adjectives best suited for crunchy environmental types, rather than shrewd venture capitalists. As illustrated in Figure 1, subsequent years saw a surge of investment as technologies matured on the adoption curve - led by Europe and Japan.
The credit crisis and global economic downturn temporarily slowed the flow of capital to solar and wind manufacturing facilities and generation projects. In response to a sharp downturn in traditional manufacturing and an increased environmental focus by the Obama administration, the U.S. federal government boosted its effort to advance clean-energy manufacturing with clearly stated objectives to increase energy independence, mitigate carbon emissions, and create jobs. The Emergency Economy Stabilization Act of 2008 (EESA) and the American Recovery and Reinvestment Act of 2009 (ARRA) created a more favorable policy environment and economic outlook for clean energy.
In 2009, the U.S. Department of Energy also announced $30 billion in federal loan guarantees and allocated $2.3 billion in investment tax credits to accelerate cleantech manufacturing - including solar, wind, advanced batteries, and numerous other technologies. In addition to government, private companies and venture capital firms invested billions in the U.S. cleantech market. To attract coveted green jobs, state and local governments offered manufacturers hundreds of millions in incentives - including tax breaks, grants, low-interest loans, and other subsidies. Finally, several other exogenous factors fueled growth of the U.S. clean-energy industry, including relatively lower wages when compared to abroad (also due to favorable exchange rates), rising commodities prices, and state policies for Renewable Energy Standards.
Fast forward. Clean energy is again poised for rapid expansion, and the United States is now racing to keep pace with Europe and Asia on related strategic growth initiatives. The next five years may determine which countries emerge as net importers vs. exporters of solar panels, wind turbine components, and other technologies. Billions of dollars in profit and millions of jobs are at stake. According to the National Renewable Energy Laboratory (NREL), the U.S. market for clean energy is estimated between $14 billion and $20 billion annually through 2030 (in 2008 dollars, not adjusted for inflation). This puts the industry on par with construction machinery, farm machinery, and household appliances.
Where Are the Green Manufacturing Jobs?
From a local perspective, clean energy is mainly about jobs. In Indiana, Brevini Wind will produce wind turbine gearboxes and employ 450 workers. In Albuquerque, New Mexico, Germany-based SCHOTT Solar has already invested $100 million of a planned $500 million and hired 300 out of an eventual work force of 1,500 to produce solar products. In Pennsylvania, the Greek-owned HelioSphera will invest $500 million to create thin-film solar panels, creating 400 jobs in the process.
Behind these and other cleantech capital investments are complex matchmaking rituals between companies and communities. In New York, SpectraWatt, an Intel Corp. spinoff, is building its first manufacturing plant with an investment of $85 million that will employ 161 workers. SpectraWatt also benefits from a 200-metric-ton-per-year supply agreement with New York for metallurgical grade silicon sourced from Globe Specialty Metals, also located in New York State. The sourcing agreement was part of the state's negotiated incentives package with Globe that gives New York an option on 20 percent of its in-state production in return for hydro power from Niagara Falls.