The Brookings Institution is releasing a report this morning, "Sizing the Clean Economy", which you should take the time to check out.
The report counts up the number of "clean economy" jobs by sector, painting a picture of an increasingly important set of markets and employers in the U.S. Hopefully, data points like these will continue to highlight the existing and growing importance of our sector.
The thing I find most interesting, however, is the clear indication that innovation clusters matter -- particularly sector-focused ones. This will come as old news to anyone familiar with Michael Porter's and others' ongoing work on the subject. But I've found it's not often recognized among regional economic development and political leaders who are looking to the cleantech sector for jobs growth in their area. Still, the Brookings Institution report finds a 1.4% growth rate delta between clustered efforts and non-clustered efforts. That's a significant difference.
The reasoning for why clustering matters is pretty simple. By putting innovative companies within the same sector in the same place, you help develop the necessary ecosystem around them. These startups will require specialized talent -- if there are multiple companies in a region that are all within the same technology sector, it's easier for talent to self-select to live in that area. It's also easier for funders, customers, and vendors to focus in on the companies in that cluster and give them special attention. It's perhaps easiest to illustrate this way: VCs are going to be much more likely to hop on a plane and fly to an out-of-the-way (for them, at least) location if it means getting to see multiple companies all in the same subsector that the VC is interested in.
But when I talk to regional economic development teams, I don't know how often this filters through. The cleantech jobs message has certainly gotten through; indeed, the Brookings Institution study's data will come as old news to many of these economic development teams, with so many already targeting "cleantech" as a sector of particular interest. But the challenge is that so often they're not focusing on promoting one subsector within cleantech over another.
"Cleantech" simply isn't an industry. It's an umbrella term covering a wide range of sectors and markets. And from a Porterian Cluster perspective, it's almost an irrelevant term. Take the issue of talent, for example: solar PV engineers have very little overlap with water tech entrepreneurs, nor with energy efficiency service providers, nor with smart grid solutions providers, etc. Similarly, the customers are different, the inputs are different -- really, the only things that these subsectors have in common are some overall market adoption drivers (or, given U.S. federal political ineptitude right now, the lack thereof) and some common funders.
I would like to see some of these regional economic development efforts be more sectorally focused. If a region already has a nascent cluster, the economic development agency should double down on helping to build out that ecosystem, rather than try to attract cleantech startups from other sectors.
Take the U.S. Southeast as an illustrative example -- we've seen several southern states' economic development agencies fall all over themselves to attract solar PV startups, providing very rich incentives to individual companies. Meanwhile, if the U.S. Southeast is rich in any potential renewable resource, it's biomass, and there's plenty of regional coal-fired generation capacity to play with. I'm not smart enough to say whether these agencies shouldn't be making those deals with PV companies -- that's not my point; these specific examples may be quite worthwhile. But my point is that if these states have those kinds of economic resources and priorities, I'm surprised I'm not seeing more efforts around commercialization of torrefaction and other ways of integrating woody biomass into the existing coal-fired generation capacity. That could be a key cluster of innovation and vertical value chain development for that region.
There can of course be more than one subsectoral innovation cluster within a given region. Places like the Bay Area and Boston already have several such "sectors of critical mass," for example. But you don't start out to grow a cluster by scattering these seeds randomly.
Many regional economic development groups already get this kind of reasoning. But others are continuing to view "cleantech" as one overall sector within which they want to check off a lot of subsectoral boxes, with solar very often being the first box to be checked off. That's not the way to build innovation clusters. And innovation clusters, as we're seeing proof of today, really do matter.
