Monday, August 20, 2007

MA Clean Energy Industry Census: A Brief Review and Some Thoughts

Last week, the Massachusetts Technology Collaborative (MTC) released the results of its recent "Massachusetts Clean Energy Industry Census".

Most importantly, in my opinion, the findings of this report provide quantitative evidence of what most of us involved with the MA clean energy cluster have already clearly observed over the last few years: the MA clean energy cluster is hot and growing fast. (I highly recommend taking a look at the New England Energy Innovation Collaborative's (NEEIC) New England Energy Innovation Cluster Map for a very visual representation of the "cluster".)

I predict that this report (on hype alone) will begin to land MA/Boston onto most of the "Hot Spots for Cleantech" lists in the near future, on which it has been notably absent up until now (for example MA/Boston was not mentioned in "The Clean Tech Revolution", a popular recent book on cleantech by The Clean Edge folks) . For example, wrote a story on the MA clean energy cluster because fo the census report.

The report gives a good fact-based picture of the current state of the MA clean tech industry. It also shows some very promising trends and provides insights for potential bottlenecks to growth.

However, in my opinion, the report was a little bit too focused on jobs and not enough on revenues/profits. A high tech cluster should have high productivity and create high market value/profits per worker (while providing a whole bunch of high paying jobs as well of course). But given the MTC's mandate, this bias is too be understood.

One more criticism is the lack of a detailed discussion of clean technology research intensity trends in MA's most valuable hubs of innovation: its universities. I didn't see any explicit mention of the MIT Energy Initiative, for example. A lot of MA university professors have been unable to work on clean energy for more than two decades due to a lack of government/university financial support during a previous era of low oil prices, and are hungry to innovate in this technology area. It is the growing number of university clean tech innovations that are happening now that will be fueling the continued growth of the MA clean energy industry down the line.

Some highlights below:

Clean Energy Cluster is Significant in Employment Size:
The clean energy cluster (at 14,400 jobs) is the 11th largest industry cluster in MA (closely behind "Textiles and Clothing", which is no slouch cluster due to the presence of Reebok, New Balance, et al in MA)

Clean Energy Cluster Employment is Growing Much Faster than Any Other MA Cluster :
Clean energy executives expect the number of clean energy jobs in MA to grow by 20% next year, more than 3x the rate that any cluster grew last year. The number of clean energy start-ups founded each year has grown at a CAGR of 15% since 1995.

Large Number of Small Firms in MA Clean Energy Cluster:
68% of MA clean energy firms have annual revenues < $10M, 41% have revenues <$1M.

The study identified some potential bottlenecks that need to be overcome:
1.) The need to develop a strong regional market in New England for clean energy products. This will require pro-active regulatory action by MA gov't to both instate clean energy product friendly rules and regulations (i.e. net metering laws, ...) and to provide state clean energy product subsidies (i.e. feed-in tariffs, tax credits, ...)
2.) The need for MA clean energy companies to expand their reach into non-local markets as well.
3.) The need to compete with California, which census respondents identified as the most supportive region for a clean energy cluster, by creating a regulatory and subsidy environment supportive of the clean energy industry.

A parting thought related to the MA clean energy industry cluster: the MACA Fallacy?

How obsessed should the MA clean energy cluster be in comparing itself to California?? California is clearly the leader right now (and often has been in the past) in terms of progressive energy policies. However, when absolute numbers are compared between MA and CA (which they often are and are used as evidence that MA is lagging CA), CA's numbers should always be bigger simply because it is just a much larger economy (area & people). For example, the Clean Tech Venture Network (according to Rob Day) reported that approximately 20% of Q1 2007 venture investment in cleantech was in companies in the Northeast. Is this number good or bad for New England? I think we need some better metrics. Perhaps MA/Boston should compete directly with CA/Bay Area or CA/LA-San Diego.....

Anyone have any ideas for a good metric/comparison methodology?