Washington State Should Flex Software Muscle to Grab Lead in Cleantech, Says Michael Butler

How will President Obama’s proposed economic stimulus package affect the energy and cleantech industry in the Northwest? We’ve been hearing a lot of rumblings on this front lately. To help sort it all out, I spoke with Michael Butler, chairman and CEO of the Seattle investment bank Cascadia Capital, which is heavily involved with energy and sustainable technologies.

In recent weeks, Butler has been working with Marc Cummings of the Pacific Northwest National Laboratory and David Benson of Stoel Rives to put together a private-sector task force, appointed by Gov. Chris Gregoire, to identify the areas that Washington state should focus on. Butler also has some key insights into the role of cleantech in driving innovation and economic growth.

“More than anything, the President and the proposed stimulus package has had a really strong mental aspect,” says Butler. “People in cleantech are more optimistic about their own prospects than others. I attribute that to the election of a President that ‘gets it.’ People in the cleantech industry were pleasantly surprised by the amount of money [proposed]. It’s done a lot to help people’s moods. This year could be a rough year, but the intermediate to long term is bright.”

The question on everyone’s mind is resources. “The biggest challenge is how that money will be allocated. We’re hearing Washington state is expecting to get $6 billion for different projects,” Butler says. “A significant portion will be allocated to cleantech. That will disperse through the state and through the cities. People are thinking, ‘How do I get access to that money?’ People are thinking energy efficiency and smart grid are the big beneficiaries. The other one is solar.”

The first two, at least, should be strengths in the state. “What is important to Washington state is that smart grid and energy efficiency, greater than any other subset of cleantech, involves software. And software is probably what this region is best at,” Butler says. “The moon and stars are aligned.”

For examples of strong local organizations in energy efficiency, Butler points to Paul Allen’s Vulcan, The Schuster Group, McKinstry, Powerit Solutions, Optimum Energy, and Verdiem. As for smart-grid technologies, Butler says, “The core of the infrastructure is materials science, but then at the edges it’s software-based. Where we think we have a competitive advantage is software.” He points to Itron in the Spokane, WA area as an example of a leading smart-grid company. (Butler also cited biofuels as a local strength, especially Boeing’s work for the aviation industry.)

The outlook for the solar industry in Washington is not as hot. “The bleak reality is we really don’t have a competitive advantage in solar,” Butler says. “For Washington, the biggest challenge in solar is tax equity.” Oregon, New Mexico, California, and Arizona all benefit from more favorable tax laws.

More importantly, Butler and others are waging a broader political campaign for cleantech in the state. “Bluntly, Washington is behind the power curve in terms of public-private partnership. Even states like Michigan and Pennsylvania” are ahead of Washington, he says. “The Washington state legislature and Governor understand what kinds of regulations, tax policies, and infrastructure are important to the cleantech sector. What we’ve been hearing is, ‘We thought we were doing a good job for you guys.’ But here the government is doing nothing compared to other states.”

Why is that? “We haven’t done a good job of educating them,” Butler says. Which is where his task force enters the picture. He is trying to help unite local organizations like Puget Sound Energy, Boeing, Stoel Rives, the Pacific Northwest National Laboratory, Verdiem, Powerit, and large trade groups like the Washington Technology Industry Association—and together tell the state government, “Here’s where we think Washington is strong, and here’s where we want to organize our resources.”

Of course, Butler also sees a much broader significance of cleantech to the economy. “I’m hopeful it’s going to drive innovation and drive growth,” he says. Cleantech “could be the engine that pulls the economy out of the recession. I think it’s the best chance for growth. I don’t know where else you’re going to get growth. Financial services? No. The tech sector? Very low growth. This is the best chance we have to rev up the engine.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and Editor of Xconomy Boston. E-mail him at gthuang [at] xconomy.com. Follow @gthuang

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