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Washington Must Move Fast to Catch Clean Tech Wave by Jonathan Hiskes Sustainable Industries, January 26, 2011

What's it going to take for Washington's clean tech sector to finally take off?

For starters, a wake-up call that other states are leaving Washington in the dust, according to a new report from the Clean Energy Leadership Council, a sort of blue-ribbon panel commissioned by the state legislature two years ago to address this question.

Then the state needs a targeted plan that builds on local strengths; far more exports to larger markets (hello China); and - even during the budget doom-and-gloomery in Olympia - at least $20 million to prove the state is serious in pursuing the clean-energy businesses that are in vogue everywhere.

We'll unpack all that below, but first the report's top-line finding: Washington is underperforming, despite its tech expertise, software successes, private wealth and green leanings. It ranks just 14th in the nation in clean-energy jobs and barely above the national average, according to a Pew Charitable Trusts report.

And other states are spending much more to nurture home-grown businesses: California spends more than $150 million each year for energy research, pilot programs and commercializing new technologies. Massachusetts and Iowa each put about $25 million a year toward those goals. Oregon offers at least $250 million a year in tax credits for clean-energy projects.

"While Washington has a national reputation for sustainability its efforts to grow clean energy companies and jobs is significantly behind other states that have made job growth in clean energy a top priority," says the report, which was prepared by Navigant Consulting.

It's key to make that point clear to legislators who believe their state is already plenty green, says Marc Cummings, policy director of the Pacific Northwest National Laboratory and a co-chair of the energy council.

"There's a lot of enthusiasm here - nobody's opposed to this," he said in an interview. "But everybody's going after this sector now. Other states have made big investments, and in Washington we have a patchwork of policies that we turn on and off. It's a fragmented approach."

To fix that, the council (a collection of business leaders, financers, utility executives and state officials) makes four major proposals. Cummings expects a statehouse bill that reflects most of them to appear in the coming weeks.

1. Focus on three areas of strength: energy efficiency of buildings, bioenergy and electricity load distribution and storage. Rather than compete on solar projects with California (and China, Germany, and Spain ...), the report suggests focusing on three areas that have already seen local success. The state already has a national leader in designing and retrofitting energy-smart buildings in McKinstry. It has a biodiesel leader in Imperium Renewables and forests to support work in turning woody biomass into electricity. It has energy storage startups like EnerG2 and the utility-grid software company Itron of Spokane, both working in areas that can support intermittent energy from wind and solar farms.

   The key is to focus on innovation that can be sold elsewhere, since the local market isn't big enough to support a robust sector, says Cummings.

   "We have to be not competing with China on price but developing products and services for markets that are growing," he says. "Our strength is innovation, not bidding wars for relocating established companies."

2. Use at least $20 million in public money to prime private funding. Washington should use limited public funds to back projects as a way to attract other funders, the report says. State funds would require a minimum 50 percent match from other sources. A new public-private Clean Energy Partnership of business leaders and state officials would oversee these "market driving initiatives."

   "This is really one of the first post-crash economic development plans," says Cummings. "So rather than just throwing out big incentives and big mandates, it's a high-leverage strategy."

   Anything that requires a lot of new state money is probably a non-starter in this budget session, but Cummings said existing energy incentives could be redirected but didn't identify specific ones.

   Another idea for finding that money is modeled after a California fee:

   One of the more promising long‐term funding sources would be a so‐called "system benefit charge." This mechanism is a minor fee for each kilowatt hour of retail electricity supplied in the State of Washington. A charge of less than 20 cents a month for the average home would collect that $20 million, the report says.

3. Form a Governor's Energy Office. In a state with more than 60 utility jurisdictions and the usual nest of bureaucratic agencies, companies looking to build a manufacturing plant or a wind farm need a single office to provide guidance, the report says. An office of two or three staffers with access to the governor could help companies avoid bureaucratic runaround and ensure that top-level policy goals are matching up with implementation on the ground for particular projects:

   Having a couple of people with "Governor's Energy Office" on their card is also a benefit when working with companies because they feel that they are working with someone that has the Governor's ear and the authority to work across agencies to get things done

   (A similar proposal in Oregon would unite a string of agencies in a Oregon Energy Commission to make it easier for clean energy projects to get approved.)

4. Get utilities in the game. The report's last major theme - "align policy and regulation" so they're not working against clean energy goals - is largely focused at investor-owned utilities. The clearest example Cummings gave is the so-called "decoupling" challenge. Utilities that make more money the more electricity they sell aren't exactly motivated to encourage efficiency among their customers. So the state needs to move forward on separating (decoupling) utility's sales from their profits, so that utilities can reward homeowners, for instance, who seal up and insulate their dwellings.

"Everything's challenging in the budget environment we're in," said Cummings. "But there's clearly an appetite for growing this sector. I think we've done everything we can to minimize the cost and create the highest leverage possible."