Sacramento Blazes The Cleantech Trail
Vibrant cleantech clusters are found in communities that have fully bought into the prospects.
By Rachel Duran
During the last two-and-a-half decades the cleantech industry has gone through fits and starts. The last few years have seen solid growth for the sectors that comprise cleantech, thanks in part to federal, state and local subsidies that support industries such as solar energy and wind energy, as well as energy efficiency and green building initiatives.
A pioneer in the cleantech sector is Sacramento, Calif., where officials are plugging away to create the greenest region in the country. The region’s moniker is the Emerald Valley, and from Sacramento Mayor Kevin Johnson to municipalities to policymakers to funding organizations, the region is well positioned to support all things cleantech.
Cleantech initiatives are supported by the both the “private and public [sectors] because most cleantech ends up on a grid or having a public application,” says Bob Burris, senior vice president, Sacramento Area Commerce and Trade Organization. “There has to be a real connection between public policy development, the universities where R&D is taking place and industry. The stronger the connection, I think, there is a greater opportunity for growth.”
Incentive programs have and are winding down; however, when the country returns to a “‘normalized’” economy, we will see more organic growth in the industry,” Burris says. ”Maybe not as fast as we have seen in the last three or four years but it will play a real role in the economy and be accepted.”
There are skeptics that believe but for the subsidies, cleantech industries would not be performing as well as they are. “No matter what your opinion of climate change and global warming, there is a business proposition in making our environment healthier,” says Julia Burrows, president and executive director, Greenwise Joint Venture in Sacramento. Greenwise is a six-county effort that is charged with enacting initiatives in three transformational categories in regard to cleantech: economy, environment and engagement.
Corporate executives want to lower their emissions, and municipalities across the country are striving to meet mandates in regard to lowering emissions. “There is a need for technologies to support these efforts,” Burris says. “I do think there will be a wave of activity that will grow during the next 10 years to 20 years.”
Cleantech Is Many Things
The term “cleantech” includes many industry segments such as energy generation; energy storage; energy efficiency products; alternative fuels; and green building design, construction and development.
In Sacramento, officials describe cleantech industry members as “establishments with primary business activities that provide products or related services focused on producing clean energy, conserving the use of energy, or creating more efficient vehicles and buildings.”
Sacramento’s areas of strength in the cleantech sector include generating solar energy, establishing smart-grid technologies, and lowering the emissions in the real estate and transportation sectors. For example, thanks to leaders such as the Sacramento Municipal Utility District (SMUD), the community is approaching 200 megawatts of solar energy generation. SMUD installed its first megawatt of solar energy in 1983 at a decommissioned nuclear power plant site. “With that they have brought in talent,” Burris says. “We were in the game earlier than most metro areas.”
In regard to the smart grid, nearly the entire Sacramento region is connected to the system. SMUD, the area community college district, and Sacramento State University are strengthening the smart grid by collaborating through the support of an approximately $129 million grant from the U.S. Department of Energy to implement smart technologies, smart meters, and study them.
“This has led to a fledgling group of software and monitoring companies, and companies that are bridging the gaps between other technologies and the smart grid, such as electric vehicle charging stations,” Burris says. For example, manufacturers of batteries research the smart grid and smart meter applications to learn if battery storage applications can be fed back to the grid and how they can be monitored.
When it comes to reducing transportation-related emissions, California is the nation’s most electric-vehicle ready state, where officials are eager to build out the infrastructure to support the electric highway. An electric vehicle collaborative is partnering with car dealers and utilities to develop a plan for charging stations. Officials are also working to streamline the permitting process in order to advance the sector.
There are also innovations underway in regard to transportation fuel. The region is home to Clean World Partners, which has developed a biodigester technology that uses less water in the process to convert food waste to gas. The state of California has passed legislation that requires large commercial entities to reduce their waste by 75 percent by 2020. “They can’t put their rotten lettuce in the garbage anymore,” Burrows says.
Clean World Partners’ first plant is located on the campus of a cardboard manufacturer where it converts 7.5 tons of food waste and cardboard and burns the gas to provide one-third of the electricity at the cardboard plant. The company also has a plant under construction, which will initially take 25 tons of food waste to create renewable natural gas that will power the garbage trucks that will be dedicated to collecting the food waste. What’s more, because the garbage trucks are able to fuel up onsite instead of at outside fueling stations, Clean World Partners’ biodigesters have been ruled carbon negative.
Beyond innovations in transportation-related sustainability measures, a signature project in the Sacramento region focuses on building retrofits in school districts. With the Green Schools program, officials hope to finance the efforts through a unique financing mechanism called the Joint Powers Authority. “We are conducting an inventory of all the school districts,” Burrows says. “Building retrofits, specifically green schools, are key.
“The reason we are focused on building retrofits, more broadly, is job creation to solve a problem and meet state mandates,” Burrows continues. One approach to overcoming the challenges of securing financing to support commercial building retrofits is the Property Assessed Clean Energy (PACE) funding mechanism. The model in Sacramento is unique in that in other PACE programs, building owners conducting retrofits are required to enter an owner arranged financing model, which requires consent from a lender to move forward with retrofits.
In Sacramento, the PACE program operates under a lender notification model. Through a bonding validation agreement between the city council and the Ygrene Energy Fund, a district was created so that assessments can be placed on properties within the district. The Ygrene Energy Fund is a business model where Barclays Capital is supporting a $100 million fund. Organizations that qualify for the funding send their banks letters stating they are adding an assessment to the building. “Technically this is a property tax assessment; this is not a loan on the property,” Burrows says. “It is more scalable when you have financing and lender notification instead of lender consent because a lot of banks are not approving these loans. This has made it difficult.”
In June, the Sacramento City Council approved the expansion of the PACE financing to include public buildings and schools as a result of the recently passed California Senate Bill 555. Burrows says the financing is a big win because in California the funding mechanisms available through redevelopment agencies was slashed in budget negotiations. “If I am a city and I want to renovate city hall and do it with redevelopment funds, I now have access to another funding source,” Burrows says.
Under the PACE program, eligible projects include:
*Water conservation measures
*The implementation of renewable energy
* The replacement of HVAC equipment, boilers, windows, insulation and so forth
Creating And Fostering The Culture
SACTO’s Burris says a critical factor in maintaining a thriving cleantech economy is a customer base and residents that want to make a difference, save energy, and even create it. “When you have buy-in, it is easier to build an economy around cleantech,” Burris says.
Cleantech companies involved in expansion projects should consider selecting communities receptive to cleantech operations, including incentive support offered by local and state agencies. “The one thing that comes up in the cleantech sector more than anything else is a qualified workforce and the ability for the education system to adapt to new industries,” Burris says. He notes the community colleges in the region are adept at supporting new industries. A number of “green collar” programs are in place at the community colleges, providing training in areas such as the installation of products, software development, and energy efficiency.
While these components create a favorable environment for cleantech firms, Burris says a challenge in promoting cleantech to international firms is a fear that a change in political office, and even changes at agencies, will affect existing grants or policies.
In order to avoid such a scenario, Sacramento’s officials have formed the Greenwise Joint Venture as a nonprofit to ensure that no matter who is holding the mayor’s office, the area’s cleantech action plan will move forward beyond any election cycle.
Another challenge to the cleantech sector can be found in the solar energy marketplace. “We are not sure who will be the supplier of the future for solar in the U.S. — whether the components will come from China, Europe or from within the U.S.,” Burris notes. “We are not sure how government is going to react to lower cost panels coming into the U.S. from China.”
The solar energy industry is a sleeping giant, Burris points out. Most of the development has taken place on a large scale commercial level where utilities have been the primary customers. “The customer of the future is the person in the home or apartment building,” Burris says. “That is a result of grid parity. It becomes logical to put panels on our roofs. We don’t have to worry about how much it costs to finance and implement.”
Grid parity is achieved when an industry such as the solar energy industry is able to compete with traditional energy sources without subsidies.
Sacramento is well on its way to becoming one of the greenest regions in the nation. The region has created a self-sustaining cleantech sector, driven in part to comply with state environmental mandates. Burrows says the region will continue to develop new financing options and hopes to see the continued development of new companies.
For complete details on the organizations featured in this article, visit:
Greenwise Joint Venture, www.greenwisejv.org
Sacramento Area Commerce and Trade Organization, www.sacto.org