Regional Innovation Clusters Prove Catalytic to Clean Economy Growth

Metros with clusters across the United States

There are 2.7 million clean economy jobs in the United States, according to a recently released report by the Brookings Institution entitled “Sizing the Clean Economy: A National and Regional Green Jobs Assessment.” Brookings hosted an event to announce the release, at which one panel explored the fascinating and increasingly important role that Regional Innovation Clusters (RICs) play in fostering the clean economy.

The report shows that the majority of green jobs (defined as jobs with a direct or indirect environmental benefit) are in conventional sectors like manufacturing, waste management, and mass transit. But the fastest growing sector is clean technology, which includes renewable energy, smart grid, and energy efficiency. While 64 percent of green jobs in the U.S. reside within the 100 largest metropolitan areas (which hold 66 percent of the U.S. population), the same metros hold an outsized 74 percent of the clean tech jobs created from 2003 to 2010. The Brookings report takes this as evidence that metros have strong industry clusters that boost clean economy growth.

Regional Innovation Clusters (RICs) are regions (municipal, county, or larger) where various organizations including universities, private firms, nonprofits, philanthropies, venture capitalists, and government institutions are located close to each other and collaborate, catalyzing economic growth. Clusters generally form through networking and strategy alignment. RICs have been maturing informally for many years (as in Silicon Valley or Hollywood), though extensive analysis on their organization and effects only began in the last decade.

The organizations represented at the Brookings panel, NorTech and CleanTECH San Diego, focus on building capacity for RICs that contribute clean economy jobs. According to the Council on Competitiveness, regional leadership bodies that proactively set agendas, recruit leaders, and support a vision for RICs are necessary for an effective and consensus-based cluster. RIC leadership organizations have sprouted up across the nation, in places such as Louisville, Denver, western Michigan, and the Dan River Region in Virginia. Most of these organizations are designed to spur business development with market analysis, financial support, public relations support, and entrepreneurial training.

To provide a few examples, the University of Wisconsin’s School of Freshwater Sciences has partnered with the Milwaukee Water Council to spur water research and attract new businesses to Milwaukee. In Washington, the Puget Sound Regional Council has gathered municipal representatives, universities, and industry experts to contribute to the design of a Metropolitan Business Plan, which outlines the development of a market for the testing and commercialization of building energy efficiency technologies. The Illinois Smart Grid Regional Innovation Cluster provides engineering design, prototyping, and product development support to members, as well as assistance in commercializing products by attracting venture capital and public funding opportunities.

But back to the Brookings panel. NorTech is a nonprofit, technology-based economic development organization serving 21 counties in Northeast Ohio. They are primarily funded by a network of foundations, businesses, and government. President Rebecca Bagley said at the panel that NorTech has “several programs that work individually with our cluster members to understand what their needs and technologies are, and to give them access to markets and funding that they may have challenges [… accessing] on their own.” Nortech also convenes cluster members and develops roadmaps for pursuing funding, reconfiguring supply chains, training new and existing workers, and stimulating market demand.

Bagley described one Nortech initiative that evaluated 20 energy storage systems in relation to the companies, research, and other resources available within the region. Nortech built consensus among their cluster members and identified the five best systems for the region to collectively invest in over a seven-year timeframe. Nortech predicts that the roadmaps in their Advanced Energy project, which was funded by the Economic Development Administration of the U.S. Department of Commerce, would create 5,200 jobs over the seven years. Bagley expressed optimism for post-recession investment, but emphasized that RICs must be poised for opportunities to partner with manufacturers.

CleanTECH has also proved a valuable resource for its members in the four years since its founding. The CleanTECH-led San Diego Biofuels Initiative received over $7.4 million in state and federal funds to develop training programs for the algal biofuel industry; the City of Santee received guidance from CleanTECH on developing a sustainability plan, receiving federal financing, and establishing a greenhouse gas emissions inventory; and the San Diego Unified School District received $70 million in Federal Clean Renewable Energy Bonds with CleanTECH’s legal, financial, technical, and administrative support. Unlike Nortech, CleanTECH is a member-funded nonprofit. Co-founder James Waring says his organization acts as a “connective tissue” to facilitate interaction among the 781 cluster members and policymakers.

Government is beginning notice how RIC leadership organizations are making an impact. In 2010, the Obama Administration created the Energy Regional Innovation Cluster program, which made $130 million available over five years to the Greater Philadelphia Innovation Cluster (a group of 90 public and private sector organizations). The goal of the program was not only to reduce the U.S. carbon footprint through energy efficient building design, but also to enhance the economic development and commercial competitiveness of America. The America COMPETES Act, passed in January 2011, also provides some funding for RIC development, as does the bipartisan SECTORS Act currently in committee in the Senate. Combined with policies that create markets for clean jobs—like California’s mandate for a 33 percent renewable energy portfolio by 2020, or Obama’s proposal for a federal clean energy standard—these recent bills can ensure that new RICs contribute to clean economy.

Even though all panelists stressed the importance of federal support to accelerate cluster growth, they also stressed that the clean economy will keep growing due to private sector investment in response to global demand for innovation. The Brookings report emphasized that RICs must take initiative to analyze the local economy, identify competitive strengths, and formulate ‘bottom up’ strategies. RIC leadership organizations like Nortech and CleanTECH San Diego that bring together key stakeholders in green industries can play a crucial role in catalyzing low carbon economic growth.

For now, clean economy growth is relatively slow. Since 2003 the clean economy grew at a rate of 3.4 percent compared to 4.2 percent growth for the national economy. The American Recovery and Reinvestment Act funding went a long way to increase the number of clean economy jobs, though not enough to make up for the massive losses during the recession. However, median wages in the clean economy are 13 percent higher than the median national wage, despite the fact that 45 percent of clean economy workers have a high school degree or less (compared to 37 percent in the national economy). Brookings also found that clean economy jobs grew 1.4 percent faster in metros than in isolated regions due to the benefits of clustering. As private industries and policymakers try to increase the number of green jobs, they will look to Regional Innovation Clusters, paving the way for more organizations like Nortech and CleanTECH to build momentum toward the clean economy.

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