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While Washington bickers, green tech goes local

With political paralysis and the turmoil of Solyndra in Washington, states are taking the lead on green technology action, pitting individual states against other countries.

As dark clouds form over solar in Washington, a handful of U.S. states are taking the lead in a global economic race to develop green technologies.

General Electric last week announced plans to invest $600 million to build a solar panel factory in Aurora, Colo., based on thin-film technology originally developed at nearby National Renewable Energy Laboratories.

The move comes amid ongoing political fighting in Washington, D.C., over the failure of bankrupt solar company Solyndra, which had received a $535 million federal loan guarantee to build a factory.

With the Solyndra debacle hanging over renewable energy, it's harder for young solar-technology companies to raise money, and there is concern that existing tax incentives and loan guarantees will get rolled back.

What's driving much of the green-tech business activity now are state and regional policies, both in creating clusters of new companies and deploying wind and solar. But the effect is not widespread: a few states, including California, Oregon, and Massachusetts, are advancing clean-energy technologies while other regions idle.

"The truth is, we really haven't had strong federal leadership for some time, so it's really been up to the states to find ways to lead," said Ron Pernick, managing director of research company Clean Edge. "Companies are looking for the best set of incentives, skilled labor, technical infrastructure, and easy access to ready markets."

Clean Edge last year did a survey of green-technology business activity in the different states based on technology, capital, and policy. Unsurprisingly, California was way ahead of the pack in both new company creation and adding renewable energy to the grid. But other states less known for clean energy were making significant moves.

Mississippi, for example, has lured a solar company, an energy-efficiency "smart glass" maker, and biofuel companies with tax incentives. Led by a flurry of activity at General Motors, Michigan was tops in the number of clean-energy related patents, according to Clean Edge.

In terms of deploying existing technology, Iowa, North Dakota, and California combined produced 10 percent of utility-scale solar, wind, and geothermal last year. In overall rankings, the top five in order were California, Oregon, Massachusetts, New York, and Colorado.

In announcing the GE factory outside Denver, GE was joined with several state politicians, including state governor John Hickenlooper, who helped woo GE to the state. GE's vice president of renewable energy, Vic Abate, said locating the factory near its research center will allow it to improve the manufacturing process and bring products to market quickly.

On the chopping block?
The federal government, of course, remains deeply involved in all types energy policy. But in green tech, start-up investors and entrepreneurs now need to pay close attention to the states most active in creating new industries, such as electric vehicles, modern grid technologies, and renewable energy.

The stimulus program led to the ARPA-E research agency and a two-year funding period in the loan guarantee program, which was created in 2007 to scale up new energy technologies. A number of universities and startup companies received, and continue to receive, grants from ARPA-E and other research programs.

But with the political rancor in Washington and lawmakers unable to pass any significant new legislation to advance clean-energy technologies, investors and entrepreneurs are just hoping that existing programs don't get chopped back, said Bilal Zuberi, a venture capitalist at General Capital Partners.

"Instead of trying to affect things, we see the situation as it is and just try to find what the best place (region) to go is," said Zuberi. "We're not expecting (Washington) to deliver, and we see positive trends at the state level."

For example, Silicon Valley-based thin-film solar company Stion, which is backed by General Capital Partners, had first started its operations in Asia and then recently agreed to build a solar manufacturing plant in Mississippi because of state incentives.

Moving to China
This regional activity has led to what entrepreneurs call "ecosystems" of businesses in related fields. Wind turbine makers, for example, benefit from having nearby component manufacturers, or smart grid application developers can tap a pool of energy-savvy software engineers.

The challenge with this regional approach is that states and even cities are effectively competing with entire countries.

China, Germany, Japan, and Korea stand out as having aggressive policies for establishing green-technology businesses. For example, lithium ion maker Boston Power, which had contemplated an electric-vehicle battery factory in Massachusetts, last month decided to move its headquarters from Massachusetts to China. It was drawn by the "combination of financial support from the government, very eager and aggressive Chinese investors, and the fact that it's the biggest (green-tech) market in the world," said company founder Christina Lampe-Onnerud.

U.S. states and cities are at a disadvantage economically because U.S. federal policies are not as effective as those in countries which consider clean energy a key part of their economic growth strategies, Pernick said.

"Yes, we'll have leadership and successes in California, Oregon, Massachusetts, and elsewhere, but the lack of a national baseline handicaps all of these players," he said.