Countdown to Michigan 2031: All In On Cleantech

4/12/11Follow @xconomy

Michigan may have potential in medical devices and software but in the end, the state’s high tech future, for better for worse, is really tied to cleantech.

For one thing, it offers the most natural and logical extension of Michigan’s core expertise in automobiles/manufacturing, experts say. Think lithium batteries, electric cars, next generation engines equipped with software that smartly manages energy consumption.

“I think Michigan has a great chance at cleantech because it so tied with transportation,” says Chris Rizik, CEO and fund manager of Renaissance Venture Capital Fund in Ann Arbor, MI. Rizik is a featured panelist for Thursday’s Xconomy: Michigan 2031, a forum for the state’s best investors and entrepreneurs to envision the future of Michigan’s high tech economy and brainstorm ways to make that vision a reality.

But here’s what really pushes cleantech ahead of the pack: unlike medical devices and software, cleantech enjoys significant financial and institutional support from both Uncle Sam and Michigan’s top politicians.

Last fall, Watertown, M-based A123Systems opened a lithium battery plant in Livonia, MI, thanks a $249 million grant from the U.S. Department of Energy (DOE) and $125 million in refundable tax credits from Michigan’s 21st Century Jobs Fund. U.S. Energy Secretary Steven Chu, along with then Gov. Jennifer Granholm and Sens. Carl Levin and Debbie Stabenow, attended the plant’s opening ceremony.

In 2009, Michigan established the Centers for Energy Excellence program, which provides $45 million over three years to fund technology commercialization and research between companies and universities and national laboratories.

Later this month, the U.S. Department of Energy (DOE) and University of Michigan are hosting a conference exploring Michigan’s investments into manufacturing and clean energy.

“Though Michigan’s research infrastructure suffered during the deep recession that forced major cutbacks in the research funded by the auto industry, the state has leveraged local investment, American Recovery and Reinvestment Act [federal stimulus] funding, and the strengths of its universities to begin rapidly rebuilding manufacturing by investing in new industries,” the DOE said on the conference website. “Many of these new investments are in clean energy, and the DOE is interested in learning from this natural experiment in rapid rebuilding of R&D and manufacturing capability.”

Not surprisingly, local cleantech startups attracting investor cash are developing auto-related technologies. Khosla Ventures, for example, is backing lithium ion battery maker Sakti3 in Ann Arbor, MI, and EcoMotors in Allen Park, MI, which is developing a more energy efficient engine. (Sakti3 CEO Ann Marie Sastry will be joining ups at Michigan 2031 as well.) General Motors has invested $5 million in wireless charging startup Powermat in Commerce Township, MI.

But is there more to Michigan cleantech than just greener cars?

Jennifer Baird thinks so. Baird, founder and former CEO of Accuri Cytometers, is now running Accio Energy, a startup in Ann Arbor, MI, designing a wind energy system that requires no moving parts. (EDM Ventures and Resonant Ventures are backing Accio.)

Baird, who had no previous experience in wind power, says there are more opportunities in clean energy for entrepreneurs like her.

“There are quite a few tech entrepreneurs getting involved in this space,” she says.

Draths, a promising biochemical startup backed by Khosla Ventures, recently moved back to Michigan from Minnesota. The Lansing, MI-based company, founded by Michigan State University professors John Frost and Karen Draths, was named by AlwaysOn, an online technology magazine, as one of the country’s top 100 green companies in 2009.

BoraPharm, another MSU spinoff, is expanding its operations at the University of Michigan’s North Campus Research Complex. The company, the first private tenant at the former Pfizer R&D facility, has developed an efficient, more environmentally friendly way of making boranic acid, a key building block in organic chemistry. In 2008, BoroPharm won the Presidential Green Chemistry Challenge Award, administered by the Environmental Protection Agency.

In Saginaw, MI, a solar energy manufacturing cluster has begun to emerge, led by Dow Corning (a joint venture between the Dow Chemical Co. and Corning to develop silicon-based technology) and Hemlock Semiconductor Group. In 2008, Hemlock, which is partially owned by Dow Corning, said it will spend up to $3 billion to expand production of polycrystalline silicon (polysilicon), a key raw material used to manufacture solar cells and semiconductor devices.

Jeff Bocan, managing director of Beringea, a venture capital/private equity firm in Farmington Hills, MI, says he sees strong possibilities in LED lighting and electronic waste recycling. Beringea has invested in Relume Technologies in Oxford, MI, which is developing more energy efficient outdoor lighting, and Recellular in Dexter, MI, a large recycler of cellphones and other electronics.

Looking ahead, Michigan could lead the nation in developing smart grids, says Ron Gardhouse, president and CEO of NextEnergy, a non-profit research organization in Detroit. Such technology enables household devices and electric cars to use only the energy they need while “returning” excess power back to the grid.

While all of this sounds exciting, Rizik of Renaissance Ventures urges caution. Not all cleantech technologies will attract venture capital, he says. Clean energy technologies, like solar, wind, and biofuels, require expensive physical equipment and could took a while for investors to turn a profit. Remember ethanol?

“Cleantech may not offer as meteoric growth as other industries,” Rizik says. Over the years, “there has been a lot of money forced into a lot of things called cleantech.”

Baird of Accui Energy thinks the biggest obstacle to cleantech is political.

“We need good policy, funding, and smart people,” Baird says. “We’ve got a lot of innovation capability in this state. But [cleantech] doesn’t always align with the political process. Energy development has to be [complemented] with clear policy. China does a much better job than the U.S. [The Chinese craft] 20 year plans. We have trouble with two week plans.”

One of our main aims for Michigan 2031 is to get people thinking in that critical 20-year timeframe. And with only two days to go until the event, the time to register is now. So click here to sign up, and I hope to see you there.

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