When people think of the green economy in the U.S., they immediately think of Silicon Valley, the patch of land bordered by highways 280 and 101 that gave birth to the modern computer revolution.
But as time goes on, there is a real strong chance that a large portion of it could migrate to what geographers call the Bob Seger Crescent, that swath of land around the Great Lakes area that gave rise to Ford and mid-1970s bar bands.
I recently interviewed Sandra Pupatello, an Ontario Parliament member and Minister of International Trade and Investment about the activity in alternative energy and energy efficiency taking place in Ontario. She spelled out a great case on how going green and economic growth can go hand in hand.
Over the past several years, the province has enacted a wide-ranging set of environmental policies, including a goal of getting rid of all coal-burning power plants by 2014. This past May, Parliament enacted the Green Energy and Green Economy Act, which includes a German-style feed-in tariff and incentives to lure solar manufacturers to the area.
Home energy audits, unless waived by the buyer, are mandatory. Approximately $4 billion in clean projects are underway.
Ontario is the industrial and automotive heartland of Canada. Not one of the groovier parts that might support green technologies as a lifestyle accessory.
"We've got some large energy users," she said. "If Ontario can do this with its industrial base, any jurisdiction can do it."
In fact, you hear similar things from rustbelt politicians like Pennsylvania Governor Ed Rendell and Michigan's Jennifer Granholm. (Both Pupatello and Rendell, whom I've also interviewed, reinforce my personal belief that politicians are about the most enthusiastic and helpful group of people you could ever hope to meet. If Larry Craig had handled his scandal with a little more charm, he'd probably still be vetoing legislation and decrying the state of American society from inside our nation's finest men's rooms.)
Granted, laying out policy and actually succeeding are two different things, but here's why the plans from these somewhat hard-hit areas might work:
Unemployment, or at least soft employment, has remained a problem since the 1970s when Japan began to increase its global market share in steel and cars. The downturn hasn't helped.
"In North America, we're going through tough times in the auto sector. It is the canary in the coal mine for the overall economy," Pupatello said. "If you want to check how Canada is doing economically, go to the parking lot and look at the age of the cars."
In these areas, voters are going to be more willing to subsidize or underwrite legislation to attract new business. Solar and wind manufacturers will seek out these tax breaks and as time goes on they will get more generous. How generous can these programs get? When Taiwan wanted to build a chip industry, it created a tax credit structure so generous that for years behemoths like TSMC made more money after taxes in a profitable year than before because of accumulated credits.
North Americans have been reluctant to go as far with their tax breaks as some foreign governments, but if the economy doesn't crumble, Midwest state governments will up the ante. By contrast, California probably won't offer as many breaks. In California, technology companies are largely based around intellectual property. Offering tax credits usually means giving money to millionaires who will only hire a limited number of people – not a big vote getter.
California is also broke. Last year, even before the current fiscal crisis, one solar CEO told me the incentives he got from one city government for keeping prototype manufacturing in the Valley came to around $600.
Bricks and Mortar
Although technology and intellectual property will play a huge part in the greentech revolution, the business will likely be dominated and driven by mass manufacturers. That is perhaps the biggest difference between computing and green. A successful software company can find success with just a few programmers, a case of Red Bull and great word of mouth. A good part of the margin is also retained by these companies – the manufactured hardware devices mostly exist as a shell for delivering an experience.
Not so in green. Increasingly, technologically creative companies will need to latch onto the makers of hard goods. Some such as Nanostellar and Achates Power have already altered their business models to adjust to this.
If you saw Eight Mile, you know there are plenty of boarded-up buildings ready for redecorating. Serious Materials has purchased factories in Illinois and Pennsylvania to make windows.
Nine thousand engineers graduate from Ontario universities a year, Pupatello stated. Across the border you see the University of Michigan, RPI, Penn State, Ohio State and other well-respected technical universities whose graduates now often move elsewhere to get jobs. A local wellspring of talent is a key part in establishing a technology center.
Plus, there's the added bonus: Real estate in these areas is cheap now but will soar in price as global warming parches the southwest. I guarantee you'll hear that more in recruiting pitches.
The other cleantech. Although Ontario has an ambitious solar program, the bulk of its baseline power will come from hydroelectric and nuclear. Thus, the region can try to get rid of coal without scaring away mass manufacturers. Weirdly, you could even make a case that the future of solar and modern batteries will get paved by nuclear plants.
None of this, of course, is a slam dunk. To build a comprehensive green economy, these regions will also have to develop tech transfer policies at universities and California remains tops in that department. North Americans also often think of fuel as free.
"We've had the luxury of less expensive energy for decades," Pupatello said. "It is easier to make the case in Europe. They play the pay for energy is enormous."
But if we've learned anything in the past few decades, it's that businesses travel more than you'd think.