NEW ENERGY TALE OF TWO CITIES

Cities on the Front Lines; Conversion to solar and wind energy is an environmental necessity and an industrial opportunity. Success will require a concerted national policy.
April 13, 2009 (The American Prospect)

SUMMARY
The nation's cities are the on the front lines in the fight to find innovation and lead the shift to a New Energy economy, says Professor Joan Fitzgerald, director of the Law, Policy, and Society Program at Northeastern University. A detailed analysis of the experiences of Austin, Texas, and Toledo, Ohio, reveals them as exemplary of the difficulties and the rewards.

Fitzgerald identifies 3 challenges:
(1) The New energy industries can generate hundreds of thousands of jobs but the bulk are in manufacturing, not the design and installation that takes place on the cities' front lines.
(2) Not every city can be a New Energy power in the same way.
(3) Cities can only generate big New Energy markets if the federal government supplies mandates and incentives in support of their efforts.

Essentially the same challenges apply to solar, wind, geothermal, the building of Energy Efficiency and the transition to battery electric vehicle personal transportation.

Factors that favored success in developing solar energy in Austin:
(1) Strong and supportive political leadership that set a 5% by 2004 Renewable Electricity Standard (RES) as early as 1999.
(2) Austin Energy (AE), a city-owned utility and a strong New Energy advocate that early on set rebates for solar rooftop installations.
(3) Active citizen groups supportive of AE’s policies and elected Mayor Will Wynn, who upped the city’s RES to 20% by 2020.
(4) The University of Texas at Austin’s strong New Energy research programs.
(5) A well-educated workforce with experience in the IT industry.
(6) Local financial incentives for solar.
(7) A supportive business community.

Austin Energy is one of the most innovative utilities in the U.S. (click to play)

Factors that favored success in developing solar energy in Toledo:
(1) Before it developed a solar energy industry, Toledo had a glass technology and manufacturing industry that had lost 1/3 of its jobs by 2000.
(2) Out of the Toledo glass industry came First Solar, the biggest thin-film solar-panel manufacturer in the U.S., because thin-film solar panel manufacturing has much in common with some kinds of glass-making. $150 million in public and private funding, much from the glass industry, developed First Solar. In 2000, First Solar built a $16 million factory outside of Toledo, the world's biggest solar-panel factory at the time. It has ramped up production by 800% and grown revenues from $6 million to $500 million+ in 2007 and lowered production costs from $3 per watt to $1.12 per watt. In late 2008, First Solar said it would add 134 employees to its work force of 700 and announced a $25 million deal with SolarCity, a San Francisco area residential installer.
(3) The net result of the innovation and manufacturing is 6,000 solar industry jobs and 15 research and manufacturing businesses and institutions.
(4) Toledo’s Regional Growth Partnership (RGP) has a goal of 100 new high-tech and advanced-manufacturing start-ups by 2010. Toledo’s second-biggest success is Xunlight, a startup created by University of Toledo physics professor Xunming Deng and his wife, Liwei Xu. Xunlight makes flexible thin-film, used in building-integrated installations. With RGP backing, Xunlight grew into an 80-employee company and will soon expand its 25-megawatt production line.

Fitzgerald concludes that the difference between Toledo’s success at generating jobs and Austin’s less successful effort hinges on 1 thing: Toledo has concentrated on driving innovation and creating a manufacturing base while Austin has focused on innovation and installation.

Toldeo's biggest success since Corporal Klinger. (click to enlarge)

COMMENTARY
It is a far, far better thing to have built New Energy than ever to have built some other kind. Especially with the urgency of today’s climate change.

Be it building in retail or the blue collar sector, there is a pathway for every city. Though Professor Fitzgerald's assessment wisely emphasizes the value of each city finding its own economic base, she neglects to investigate the potential in the cities supporting each other's efforts. Would there ever have been, for instance, a First Solar if Austin's leaders weren't driving demand in 1999?

(click to enlarge)

Professor Fitzgerald’s article is, however, a masterfully documented demonstration of one simple and crucial point: The transition to a New Energy economy cannot happen in isolated communities. It will require a national commitment.

Blessedly, the U.S. elected a leader in 2008 who not only understands Professor Fitzgerald’s point but has the requisite political sophistication to lead the effort.

Fitzgerald's analysis is particularly timely as the influence of the urban and suburban over the rural emerges under the new administration. Yet there must be development programs and the right New Energies for urban, suburban and rural communities.

Despite Austin’s progressive policies, solar energy has not yet achieved significant economies of scale nationally and, therefore, above-market prices have kept use limited. The city has recently moved to power plant scale PV installations, has incentivized progressive, smart technologies and has attempted to lure manufacturers by building the Texas Clean Energy Park and offering big tax breaks. HelioVolt and DT Solar chose Austin over California, Pennsylvania, and New York locations but competition from other cities has been stiff and Solar Array and Renewable Energy Systems Americas are shopping for better incentive packages in New Mexico, Colorado and New York.

Austin's newest emphasis is solar PV power plant development. (click to enlarge)

Indicative of what Ohio's supplementation of Toledo's incentives meant, the University of Toledo's Wright Center for Photovoltaics Innovation and Commercialization in 2007 got $18.6 million in university solar-energy research centers from the Ohio Department of Development. Half went to the University of Toledo, which used an additional $30 million from federal agencies and industrial grants to dramatically advance research and solar-energy-incubator activities. It has already spun off 7 solar-energy start-ups.

Toledo’s Regional Growth Partnership (RGP) is a private nonprofit economic-development corporation that has launched 40 companies and has 90 New Energy, advanced-manufacturing, and biotech companies in the pipeline.

Is national policy important? The $25 million deal between Toledo's First Solar and San Francico's SolarCity was not finalized until the solar industry’s 30% federal investment tax credit was renewed, extended for 8 years and expanded in scope.

Austin has consistently had excellent policies for solar industry development but not the manufacturing base on which to build. Because it does not have the base, it did not develop policies to attract manufacturing and therefore continues to lose the companies that could offer strong blue collar job growth. Fitzgerald believes such policies could be created at the national level.

Meanwhile, Austin has somewhat turned its attention away from the blue collar sector. It may not have the people-power to match Toldeo but it has other resources in much greater abundance. It has begun building solar power plants to take advantage of its enormous insolation and buying wind-generated power from the many utility-scale wind farms around West Texas.

First Solar's manufacturing is growing as fast as is feasible. (click to enlarge)

QUOTES
- Roger Duncan, General Manager, Austin Energy: "I have no doubt that in the future, solar will be the dominant source of energy in the world…"
- Fitzgerald: “…the Austin story also illustrates that even when they do everything right, cities are only one link in the policy chain needed to create jobs in renewable energy.”
- Fitgerald: “In sum, this is a good-news/bad-news story. The good news is a good deal of local creativity as well as some successes in converting old-line industries into the advanced-energy industries of the 21st century. And some cities can rely on state support for research and commercialization. But for the opportunity to be maximized, the national government needs to become involved in a much more coherent way -- by combining a clean-energy policy with an industrial policy. Our two leading industries, bio-tech and aerospace, are the direct result of major federal investment and standard setting. At the same time, we should be realistic about the direct employment potential of renewable-energy production, which is not massive without the manufacturing component. And we need to assess how much public subsidy to provide to create these jobs. Still, becoming and remaining a world leader in clean-energy technology is an objective too important to pass up. If we remain in this game, it will lead to industrial possibilities that we can only begin to imagine.”