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The following section summarizes a background literature survey, as well as a series of interviews by the authors of executives and managers in several sustainable energy firms and trade associations. Where appropriate, we also speculate (in small type) the relevance of each factor for Mesa del Sol.
- Healthy local market: Above all, most sustainable energy firms wish to see a predictable nearby market in place before contemplating a move. Considerations may include physical resources, new housing starts, local demand, general enthusiasm for sustainable energy, and state and local policies. Proximity to the ultimate users of their products can be especially important for firms that contract to provide servicing for their products.
To attract an industry cluster to Mesa del Sol, local leaders may wish to document the market for sustainable energy technologies, as well as factors that tend to indicate a latent market for those firms willing to build it.
- Proximity to regional and overseas markets: In addition to nearby markets, firms will consider access to transportation infrastructure. For example, the Boston PV cluster has convenient air access to key European markets.
Mesa del Sol could benefit from exploiting the foreign market for sustainable energy in Central and South American and in the Caribbean. Local leaders may wish to document the experience of New Mexico firms that successfully serve these markets. However, other domestic markets, for example those in California and Texas, as well as in Indian Country, may be more important.
- Local energy policy: In weighing a move, sustainable energy firms may look next to local energy policy. For instance, where states have restructured their electric system or appear poised to do so, wind firms and other suppliers of bulk power may be attracted by renewable portfolio standards, which specify that a certain percentage of retail power be generated from renewable resources.18 More generally, they will prefer states that have created an active retail market for electricity generally, since green power marketing has proven most successful in states such as Pennsylvania, where green power represents only one option in a vibrant retail market. Creation of such a market will entail cropping the market power of incumbent players, making available in an easily understood format information on the cost and environmental impact of various energy options, and so on.
In states where restructuring proceeds more slowly, sustainable energy firms will look to the policies of the state commission and legislature. For example, Minnesota is a key market for renewable energy, largely due to a compromise that allows the local utility to store nuclear waste in dry casks in return for aggressive development of wind power and closed loop biopower.
Likewise, markets for distributed sustainable energy technologies depend on the rules of road set by the utilities that control the distribution system. Thus, fuel cell firms and others may prefer states that have established fair standards for interconnection to the grid, or net metering, by which utilities pay owners of grid-connected distributed generation units for the excess power they feed back to the grid.
New Mexico's restructuring legislation, signed April 1999, includes a system benefit charge of 0.03 cents/kWh for consumer education, low income energy efficiency and promotion of renewable energy. Power suppliers must disclose the fuel mix and emissions impact of their products, and they must offer renewable energy, although the legislation sets no portfolio standard. Texas's legislation (signed June 1999) has a portfolio standard requiring 2000 MW of renewables by 2009, as well as a mandate for utilities to cut load growth by 10% through increased efficiency. (See text box for California's renewable energy program.)
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A Comprehensive Policy Package:
California's Renewable Resources Trust Fund
California is channeling $540 million from a four-year system benefit charge on all customers to a Renewable Resources Trust Fund. This fund supports four different programs:
The Existing Renewable Resource Account ($243 million) will pay 1.5 cents/kWh to existing renewable energy facilities, channeling $135 million to biomass, waste tire and solar thermal projects; $70 million to wind; and $37.7 million to geothermal, small hydro, landfill and digester gas, and municipal solid waste.
The New Renewable Resource Account ($162 million) finances a production incentive for new renewable facilities. To qualify, projects must win an auction (i.e., offering a certain level of generation for a certain level of funding). The Fund will fund 55 projects, including 300 MW of wind, 157 MW of geothermal, 70 MW of landfill gas, 12 MW of biomass, 1 MW of digester gas, and 1 MW of small hydro.
The Emerging Renewable Buy-Down Program ($54 million) provides rebates and direct subsidies to the purchasers, sellers, lessees and lessors of grid-connected PV, small wind turbines and fuel cells using renewable fuels. The subsidy per watt of capacity will decline, thus encouraging early purchases and subsequent cost improvements.
The Customer-Side Account ($81 million) provides rebates to purchasers of green power, with a cap of 1.5 cents/kWh and $1,000 for industrial customers, and funds public education on renewable energy and the CEC's programs.
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- An existing industry cluster: Most firms seek proximity to their upstream suppliers, and downstream integrators and distributors. For instance, PV firms may look for glass suppliers or computer firms that generate silicon waste. The location of NEG Micon's new Illinois wind turbine facility allows access to interstate highways and rail links, but also to the Midwestern industrial belt, which produces bolts, gearboxes, generators, hub castings, fiberglass, etc. The Boston cluster of PV firms shares a critical mass of local experts.
Firms may be more cautious about co-locating with companies at the same level in the value chain-their direct competitors, especially if they have identified the same target markets. An industry cluster forces such firms to compete for local markets through innovation and price-cutting. While obviously benefiting local consumers, this innovation has the more important effect of making all cluster participants more competitiveness in external markets. While some ambitious firms see the value in this competition, others may prefer to agree tacitly on semi-exclusive territories, as the solar water heater industry has to some extent done.
Unless the concept is explained carefully and in a compelling manner, microturbine manufacturer Capstone might hesitate to enter New Mexico in strength, as they may perceive the state as the "home turf" of rival AlliedSignal, as may firms producing other technologies perceived to compete with microturbines. Local policy makers might indicate that a critical mass of sustainable energy firms would justify tailored policy making and infrastructure development, thus sweetening the pot for wary firms.
- Financial incentives for local manufacturing: Several firms pointed to Virginia's multi-million-dollar tax breaks, which helped draw Solarex (now BP Solarex) to the state. Less well known, federal disaster relief funds helped attract LM Glasfiber (a manufacturer of wind turbine blades) to Grand Forks, ND.
- Skilled labor and research facilities: The importance of skilled labor will vary according to industry. PV firm ASE Americas, for example, finds a low cost of labor important. Fuel cell manufacturer Ballard describes its work force as a mixture of college educated engineers and technicians with vocational education; the firm doubts that labor would be a constraining factor in choosing a location, and strives to make its process as independent of skilled labor as possible. Some wind firms do require skilled mechanics and assemblymen, perhaps indicating the semi-mature nature of the industry. Necessary skills may cross industries: NEG Micon reportedly benefited by hiring workers laid off from a nearby computer disk drive plant. With respect to high-tech skills, ASE Americas, Evergreen Solar and Ascension Solar emphasize that their Boston location gives them access to the historic home of photovoltaic research, at the Massachusetts Institute of Technology.
Sandia National Laboratory could play an important role in attracting firms to Mesa del Sol; other high-tech industries in the area include Intel and IBM. Local leaders might also survey the shills of the local labor market and the capacities of local four-year, community and vocational college.
- Opportunity for partnerships: Many sustainable energy firms, especially those that lack distribution arms, may seek locations that allow easy partnerships with larger companies able to utilize and distribute their products. For instance, Ballard and other fuel cell manufacturers have sought partnerships with automobile firms which can integrate fuel cells in cars and market them, and indeed which might otherwise see fuel cells as a threat. Equally important but less discussed, many sustainable energy firms are comparatively small, and in need of industrial savvy in making the tradition from craft to mass production. Ballard, for example, hopes to learn from Ford, Alstom and its other partners how to build the components of its fuel cells using assembly line procedures and modular construction.
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