The U.S. has a tradition of leading in new innovation-based industries. And clean energy is the next big thing, poised to become the largest global innovation market with $5-10 trillion of investment forecast for the coming decade.
However, the U.S. clean energy industry is growing more slowly than in many other countries and is at significant risk. As we look at the potential for millions of jobs and trillions in new wealth in this industry, we need to realize that clean energy innovation is not about government programs versus private sector investments. It requires an “all of the above” strategy that includes both federal R&D support along with private industry investments. It also requires the third leg of the stool: regional public-private partnerships to accelerate innovation and enable new markets.
In this three-legged stool, federal research funding and private sector investments undoubtedly make up the majority of dollars invested. But regional market development offers large returns on relatively small investments.
The U.S. economy is not top-down or centrally planned. It is composed of a network of regional markets, each with unique strengths, resources and opportunities. Nowhere is this truer than in energy with diverse local costs and infrastructure, regulated utilities and their state market regulators, and market structures that overwhelmingly favor incumbent technologies and fossil fuels.
New clean energy inventions need entrepreneurial talent, private investment capital, programs that support pilots and demonstrations of new technologies, and regulatory changes that remove barriers and increase access to early adoption markets. The majority of states and some multi-state regions are seeing new clean energy public-private partnerships being formed to address these regional market barriers and opportunities. For example, in New England hundreds of clean energy companies and entrepreneurs in the New England Clean Energy Council are collaborating with universities, large energy companies, and state agencies across all 6 New England states to accelerate offshore renewables, energy efficiency technologies, smart grid innovations, and other clean energy regional market segments. Similar collaborations in New York, Pennsylvania, Ohio, Florida, Maryland, Colorado, Illinois, California, Oregon, Washington and elsewhere are showing the potential for regional clean energy innovation partnerships to accelerate new clean energy markets.
These regional partnerships combine seed and gap funding with support services to move technologies from labs to new companies. They connect inventions to customers and potential markets. They bring regional energy and economic development agencies to the table with private investors, companies, entrepreneurs, researchers and regulators to collaborate on projects. They invest in workforce initiatives and programs to grow clean energy companies and jobs.
These regional public-private initiatives don’t require a large federal bureaucracy. But they do need flexible, federal matching funds to accelerate regional innovation markets.
These regional markets are critical to the continued growth of venture capital investments in clean energy. In 2000, less than 1% of venture capital investment was in cleantech. Today it represents more than 15%. Venture capital investment is an early indicator of industry and job growth. Think Apple, Microsoft and Lotus when they had their first 100 employees in the early 1980’s. Think Genzyme in 1990. Think Google in 2000 and Facebook in 2005.
However, venture capital cleantech investments have slowed markedly in the past year, not only from the recession but from uncertainly about market risk. Regional initiatives should be embraced to reduce these risks. Seed stage venture capital already is regional, where investors spend time with researchers, entrepreneurs, and early customers. Private investors need the market clarity that regional clean energy innovation partnerships aim to reduce.
The strength of the US economy and the potential of clean energy are rooted in regional diversity and entrepreneurship. In clean energy, it’s time for federal programs that support regional efforts to accelerate lab-to-market innovation and the development of clean energy markets. A network of emerging innovation markets and regional clean energy innovation partnerships exist across the country and can be unleashed to leverage regional clean energy ecosystems. But new forms of collaboration and public-private partnerships must replace obsolete command & control deployment systems.
This is not a call for a new, cumbersome federal program. This is a recognition that the seeds of a successful clean energy innovation sector have been forming all across the country. This bottom-up innovation needs a flexible federal partner to unleash cost-effective, regional public-private partnerships and leverage the best capabilities of the U.S. innovation economy across its diverse regions.