Massachusetts goes green to relive tech glory
The Bay State used to rival Silicon Valley for tech industry leadership. Can green tech help it regain some of that cachet?
It's been a long time since the Boston area could claim to be home to more than a handful of big high-tech companies. Now regional leaders are betting on green to restore cutting-edge luster to "the Hub."
The state already hosts a number of established green-tech companies such as Evergreen Solar and Conservation Services Group, which does building energy-efficiency retrofits. Of course, no green-tech companies have replaced former tech powerhouses like Digital Equipment (acquired by Compaq, which was in turn acquired by Hewlett-Packard) or Lotus Development (now part of IBM).
But that doesn't mean green-tech boosters such as Massachusetts Gov. Deval Patrick aren't thinking big.
During an opening ceremony for a proposed Boston Power auto battery plant last month in Auburn, Mass. not far from where shuttered Digital Equipment offices once were, Patrick crowed about receiving $25 million in U.S. Department of Energy grants for a wind blade testing center in Boston. Yet he seemed to understand that the clean-energy industry, much like the Cape Wind offshore wind project he supports, is a work in progress.
"People around the nation are taking notice of our plans," Patrick said. "If we get clean energy right, the world will be our customer."
The challenges are considerable. A thicket of regulations and political issues around the power grid pose serious barriers to new energy technology adoption. Most green-tech companies also face the formidable financial challenge of scaling beyond prototypes and demonstration facilities. Because the capital needs for energy or water-related projects are so high, many green-tech companies need to devise business and financing models to crack through and go beyond what's called "Valley of Death."
As in high tech, California still leads the Bay State when it comes to the number of green-tech companies. The New England Clean Energy Council counts at least 75 technology company members, compared to hundreds in California. But the Boston area has emerged as one of the country's top green-tech "clusters," buoyed by experienced entrepreneurs, strong academic foundations, and a supportive state government.
Massachusetts' legislature passed five laws last year aimed squarely at boosting clean-energy business activity and creating jobs that can range from home solar installers to materials scientists.
"It's really just a question now of the companies that are emerging to take advantage of the opportunities," said Philip Giudice, commissioner of the Massachusetts Department of Energy Resources. "What's neat about clean tech is this isn't just a few Ph.D. software guys coming up with some magical solution--it's a whole value chain."
Modernizing the grid
Just like cracking open the telecommunications industry created a spike in innovation and new tech businesses, the energy business is slowly starting to open, if only on the edges, said Steve Kropper, founder and CEO of wind developer WindPole Ventures.
"It's going to be the same as telecom--everything smells exactly the same," said Kropper who was a telecom industry analyst at IDC before jumping into energy about three years ago. "The only challenge is that most people will get wacked. Eight out of 10 telecom companies failed--the same will happen in energy. Hopefully, the region will be smart in figuring which will go under and not."
Kropper was one of about a dozen mid-career professionals who did a sort of "clean energy boot camp" last year, a fellowship organized by the New England Clean Energy Council specifically for transitioning telecom, IT, or life sciences professionals into green tech.
The training, available for 25 people this year, includes seminars and lab visits,including one to the National Renewable Energy Laboratories. Kropper estimates it saved him about two years in preparing for a new career. It serves the industry, too, as many new green-tech companies lack experienced management and entrepreneurial talent.
If Boston Power receives a U.S. Department of Energy domestic battery manufacturing grant, it hopes to build a factory in Massachusetts that would serve as a launching pad into the automotive market, said founder and CEO Christina Lampe-Onnerud.
"We have an opportunity to fulfill existing markets and be neighbors to where emerging markets (in transportation) are being invented," she said. During the opening ceremony for the planned factory, she likened Massachusetts' budding clean-energy industry to the beginning of the industrial revolution, where nearby Massachusetts mills played a starring role.
Drawing on IT and biotech
So who are the promising green-tech companies in the Bay State?
Boston-based EnerNOC, one of the few green-tech companies to go public, sells software to help utilities to dial down energy at peak times. Another example of an IT-heavy company is tiny Second Wind in Somerville, Mass., which has made a niche for itself with better methods to measure wind speed for wind farm developers.
Founded by experts in biotech and chemicals, Mascoma is genetically engineering microbes to make ethanol from wood chips cheaper than current methods. University of Massachusetts spin-off Qteros, which also promises a breakthrough ethanol process, last year lured the former head of BP's biofuels business to be CEO.
The area's chops in material science has led to the creation of a few established energy storage companies--lithium ion battery makers A123 Systems and Boston Power among them--and even a few auto-related companies, including GEO2 Technologies which makes high-tech filters to clean diesel emissions.
In academia, the Massachusetts Institute of Technology is, not surprisingly, a hotbed for green-tech research and development. In addition to A123 Systems, there are a number of MIT spin-offs taking lab work to market, including solar company 1366 Technologies and Lilliputian Systems, which is making fuel cells for small electronics.
An energy-related company can be very similar to a software company, but a better comparison is to the data communications industry, said Paul Maeder, a venture capitalist at Highland Capital Partners, who left enterprise software to focus on green tech.
"Much of what we are going to do in clean tech is going to involve selling through, with, and around utilities and they behave a lot like (telecom) carriers," he said, noting that both test products rigorously. "It may take them a long time but once they make a decision, it can absolutely make you."