State Cleantech Experts Debate Policy, Finance, and Global Opportunities at MITEF Event
“The easy answer is, ‘Of course it will,’” said panel moderator Jesse Berst, the head of Redmond, WA-based research and consulting firm GlobalSmartEnergy. He was referring to the title of last night’s event in downtown Seattle organized by the MIT Enterprise Forum: “Will Green Return the Green?”
It’s a reasonable question, especially here in Washington state, where things have been fairly quiet on the cleantech and energy front as of late. Despite the presence of such companies as EnerG2, Verdiem, Optimum Energy, Powerit, Bio Architecture Lab, Areva T&D, Avista, and Imperium Renewables, much has been made of the region’s lack of competitiveness with other parts of the country like Silicon Valley and New England—not to mention global competitors like China. (I’m using a broad definition of “green” tech here to include both alternative energy and sustainability.)
To discuss business and policy leaders’ concerns around financing opportunities, regulations, resources, and hot areas in the green sector, the MIT Enterprise Forum (together with a team of volunteers led by Seattle law firm Graham & Dunn) convened a distinguished panel:
—Berst (the moderator), a global authority on smart grid technologies and economics, and an Xconomist.
—Patricia Irving, CEO and founder of Richland, WA-based InnovaTek, which develops technologies for sustainable energy and environmental safety.
—Rogers Weed, director of the Department of Commerce, Washington state (and a former Microsoft vice president).
—Roger Woodworth, vice president for sustainable energy solutions at Avista, the Spokane, WA-based energy and utilities company.
—Bradley Zenger, managing director at Pivotal Investments, an early-stage cleantech venture investing firm in Portland, OR.
(By the way, all of the panelists are involved with the Cleantech Open, which is gearing up for its 2010 business plan competition.)
Berst kicked things off by saying that dozens of smart grid companies around the world have been raising $50-100 million or more, and many will be going public in the next 12 to 18 months. In terms of Washington state, he said, “We’ve got some real challenges here around creating a real cleantech cluster. The one thing you can’t fake is proximity. We have a lot of islands of innovation scattered 150 miles apart.” He also talked about the entrepreneurial culture of the region: “We don’t have a lot of people with the urgent desire to crush” competitors in Silicon Valley, Boston, New York, and so forth, he said.
Irving, whose company makes fuel cells and other technologies for partners like Boeing, summed up the mindset of consumers in the Northwest. “We love to be green, but we’re not willing to take the risk that’s necessary to shift our paradigms,” she said. “Part of the challenge is we haven’t been willing to stand up. Sacrifices need to be made.”
Weed, who has been on the job for 10 months since being appointed by Gov. Christine Gregoire, said cleantech is one of Washington’s top three opportunities for growth. But the state faces two key challenges, he said. One is the budget situation. “The state is struggling to make our finances work, so extra investment is hard,” he said. And two, “The state lacks a clear energy strategy.” Which is where Weed, and discussions like this, come into play.
Zenger, whose venture firm recently funded Seattle-based Tuusso Energy, pointed out that the Northwest lacks capital focused on cleantech—especially relative to the number of patents and engineers in the field. “Capital begets entrepreneurs, and it’s a virtuous cycle,” he said. But he’s convinced that the Northwest has high early-adoption rates here. That is, people are willing and eager to support innovations from cleantech companies based here. That customer base is “a strength of the region,” he said.
And Woodworth maintained, “We’re in a transition for a new era of energy. But we’re rooted in a culture that doesn’t race to embrace new policies.”
Much of the discussion revolved around the role of government in promoting the green industry. From where Weed sits, he said, “I have concerns about the government in the role of venture investor. I’m pushing back on that.” Instead, he said, “We can serve as a convener.” To that end, the state has appointed a clean energy leadership council, mostly from the private sector, to provide advice on how to power the economy through cleantech. “They owe us an answer by this summer,” Weed said.
Zenger mostly agreed, saying the key is to help companies compete globally the way local giants like Boeing, Amazon, Microsoft, and Nike do. “We need to create an environment around catalyzing these companies, but not protect them,” he said. “Instead of government allocating capital, government should be putting [in place] policy that supports our long term goals. As a taxpayer, I’m mortified that the [federal] government is picking winners and giving them grants.”
But Irving said the federal government does need to “level the playing field.” That means charging consumers for the “true cost of fossil energy” versus clean energy. “I can’t sell my products in the state, they don’t compete,” she said. “ I can sell much more easily in California or Europe where there is embedded in the cost of electricity all the other factors.”
Weed agreed to some extent, saying, “We need a price on carbon.” But he also pointed out that “there are businesses here because of our low prices, so you have to figure out how to manage that.” And he defended his boss, Gov. Gregoire, saying she “has been driving for a cap and trade” policy, and represented the state at the recent Copenhagen climate change summit. (That was in response to Berst saying that the role of government is leadership, and that the legacy in Washington state is to “offend the fewest.”)
On the price front, Woodworth pointed out, from a utility’s perspective, that any increase in the price of electricity is a “tax on the population who can’t pay their bills today.” Berst sympathized, saying, “Utilities are between a rock and a hard place. They get paid for selling electrons, and they’re being asked to send fewer electrons.”
The importance of thinking globally—particularly about Asia, given its geographical proximity—was another theme of the evening. “We’re a gateway to Asia Pacific,” Weed said. “We’ve done a great job in this state building relationships. We need to double down.” He told a story about a Chinese real estate mogul (“Mr. Jiang,” he told me later) who reached out to him, wanting to invest in U.S. cleantech companies and bring them over to an incubator in Shanghai, starting this spring. “We’ll make sure that guy gets a bang-up tour of Washington when he starts looking for investments. That’s about foreign direct investment,” Weed said.
Zenger said the Asian consumer market also plays a big role in the potential growth of local companies. Northwest companies can “demonstrate how these technologies work in a real-world environment and how they pay,” before scaling up operations for overseas, he said. (This sounds like a very tough slog to me, but it is absolutely crucial to our global competitiveness as a nation.)
Lastly, each panelist gave his or her most promising area for growth (except for Weed, who maintained there are opportunities in every area of cleantech)—here are some useful takeaways for entrepreneurs:
Irving: “Sustainable design, life cycle design. A product shouldn’t have a lifetime, it should constantly cycle.” (That goes for everything from cellphones and computers to power plant equipment.)
Zenger: Energy storage. “The real innovation is driving efficiency without requiring a significant change in behavior.”
Woodworth: “Electrification of vehicles, processes, and devices…And my sleeper would be the [agriculture] space.” That means modifying how farms operate.
Berst: “From the smart grid, we’re heading toward smart infrastructure” that will extend out to water, gas, farming, and other equipment.
Indeed, Berst foresees a world where smart devices and networks give consumers, utilities, and regulators real-time information and control of their resources, and better efficiencies. Which is to say, the green will be returned.