From Technopolis to Environopolis - Austin Embraces Green Energy
By Pam Losefsky

clean energy. artful rows of wind turbines noiselessly spinning electricity from the air. passive solar arrays transforming the beating sun into cool air for our homes and offices. all kinds of contraptions harnessing naturally occurring, renewable sources of energy like geothermal pockets, rotting garbage, and moving water. for many decades an unfulfilled promise, renewable energy is finally beginning to stakea claim in the resource portfolios of our nation’s utility companies. and austin, in particular, has made room for it with open arms.

Austin Energy, which is considered a leading environmental utility, accounts for a little over three percent of its total generation capacity with renewable energy resources.

But that leaves a wide berth for improvement. And now several movements are afoot in Texas and Austin that improbably suggest both happy days for environmentalists and bright opportunities for business types.

With a vision to make Austin the most livable community in the country, Austin Energy released a strategic plan in December 2003 that commits to raising to 20 percent the amount of its power derived from green sources by the year 2020. And that goal shouldn’t be difficult to achieve. “Renewable energy is one of the fastest growing sectors in the U.S. economy,” Juan Garza, Austin Energy’s general manager, writes in the plan. While much of that growth is driven by regulations and tax incentives, Garza says, “Some technologies, such as wind, are rapidly moving toward stand-alone economic viability.”

Austin Energy is aggressively looking at several technologies, including solar, biogas, hydropower, wind, and geothermal to satisfy its pledge. The utility’s commitment fulfills an energy policy resolution adopted by the Austin City Council earlier in 2003 that calls for “progressive and ambitious renewable energy and energy conservation programs.” And the city of Austin’s resolution comes on the heels of an already accommodating state legislature. You might not guess that Texas would cast a wary eye on fossil fuels, but in 1999 the state was the first, and may still be the only, legislature to mandate an energy efficiency goal.

Both the city’s resolution and the state’s mandate have wide-reaching implications for business interests, as these edicts place an emphasis on the successful development, recruitment, and retention of clean energy business enterprises in the Central Texas region. Already, Central Texas is home to more than 80 clean energy businesses that generate over $250 million in annual revenue and employ approximately 2,600 people, according to the City Council.

Key to Central Texas’ clean energy agenda are the presence of a highly educated workforce, a high level of entrepreneurial activity, a top-ranked university that has major commitments to research in the area, and a strong civic infrastructure that includes IC2, ATI, the Capital Network, the Austin Technology Council, the Business Success Center, and the Clean Energy Incubator.

Another feather in Austin’s green cap is the Austin Clean Energy Initiative (ACEI), a visionary group that promotes the economic and environmental benefits of clean energy with the goal of establishing Central Texas as the hub for the industry. The group’s 2002 report, “Enriching Economy and Environment: Making Central Texas the Center for Clean Energy” makes a convincing case for this potentiality. [For an in depth look at all you ever wanted to know about Texas and the clean energy industry, you can download the full text of the report at http://www.austincleanenergy.org]

The ACEI cites the presence of the Clean Energy Incubator (CEI) as one of the reasons why the city of Austin is so receptive to clean energy. The CEI, the Clean Energy Initiative says, is “a magnet for promising clean energy companies, [which] places Austin among a very small number of communities with such a resource.”

CEI Comes to Town

In existence for about three years, CEI was modeled after the very successful Austin Technology Incubator, which has graduated 70 companies that have raised $600 million in capital and generated almost $1.5 billion in revenue for the Texas economy. CEI currently houses six companies in the early stages of development [see Clean Energy Incubator Companies in Residence], providing infrastructure, programs and workshops, access to venture capitalists, and strategic consulting services like business plan refinement, market research, and investor preparation.

And just as ATI played a role in Austin’s distinction as a high-tech mecca, officials hope that the presence of CEI will bolster the city’s appeal to renewable energy companies.

The city’s strategies appear to be working. Last year, Austin drew such weighty industry events as the International Green Building Conference, the American Wind Energy Association Conference, and the American Solar Energy Society Conference, not to mention the events directly related to CEI. For instance, the CEI-hosted Sixteenth NREL (National Renewable Energy Laboratories) Industry Growth Forum saw record attendance last year, attracting 34 companies to vie for the attentions of venture capitalists.

CEI director Richard Amato, MBA 98, believes that the incubator will be critical for the advancement of clean energy companies in Austin because its role is to increase their business savvy. “This is generalizing, but normally on the ATI side you see a market-driven approach to developing a business.

Those companies have seen a need in the marketplace, and they are developing a solution to meet that need,” Amato explains. “On the energy side, more often than not, you see an inventor who has more of a product approach. They have developed a better mousetrap and their focus is on making it the best mousetrap out there.”

But if nobody buys it, what good is it? The job of the CEI is to turn those inventors into entrepreneurs with the ability to sell their product. Already, a couple of CEI companies are nearing viability, including WindKraft, makers of small, next-generation wind turbines, and PowerTube, developers of a geothermal power generation device.

Kip Wintenburg, president and CEO of WindKraft, says exposure to investors has been one of CEI’s most valuable benefits. “Our biggest challenge has been money, money, money,” he says emphatically. “Clean energy is not as exciting as an Internet play, and we’re also not a traditional play for a straight manufacturing interest, since we’re a niche market. It’s going to take a special tree-hugging investor.” But they’re getting close to finding that investor, thanks to CEI.

get a job

Since they have longer life cycles than are typical for the product development of technology companies, young energy companies require more coddling than ATI’s tech companies; consequently, time in residence at CEI will be longer. Therefore, Amato cautions that MBAs looking to get in on the ground floor of a clean energy company will either have to wait a couple of years or be willing to work for very little money.

“If you look at it from the start-up perspective, they’re all bootstrapping right now. There’s not a lot of money out there for early-stage start-ups,” he says of the venture capital climate. “It’s a challenge for all start-ups, but particularly in energy where the lead times are a lot longer. Investors are very cautious, more risk-averse and wanting quicker returns.”

But, with the support of the State of Texas and the City of Austin, and growth in the industry, generally, Amato believes that opportunities will continue to be more and more available. The 2002 Austin Clean Energy Initiative report projects a 330 percent increase in the world market for clean energy technology, an extraordinary amount of growth that will translate to an abundance of jobs. “Analysis shows that during the period 2002 to 2020, the world’s Clean Energy markets will create a total of approximately 6.8 million jobs [1.9 million in the U.S.],” the report states, with the bulk of those jobs deriving from energy efficiency, wind, and solar energy enterprises.

Dave Groberg, MBA 98, already sees a surge in the industry. “With traditional utilities facing a host of challenges from fuel price volatility to deregulation to waning fossil fuel availability, most have made major investments in renewables, including GE (in wind) and British Petroleum (in solar).” Groberg, who manages the development of the Texas electric grid for Cielo Wind, points out that BP (British Petroleum) has even recently changed its name to ‘Beyond Petroleum’ in an effort to capture that next-generation-energy-resource sentiment.

“There are plenty more opportunities in related equipment manufacturing, and there are all sorts of privately held companies,” Groberg says. “There’s also a cottage industry built up around renewables consisting ofnonprofits and government entities.” Rich Amato suggests that another way to make an entrée into clean energy is to work for a utility, as many have projects like Austin Energy’s GreenChoice program, which sources renewable energy from wind, solar, biomass, and landfill gas technologies, thereby enhancing associated commercialization opportunities.

So, you want to ride the green wave on your MBA? Growing companies to watch in the Austin area include Cielo Wind, Green Mountain Energy, Active Power, CSG Services, Good Company & Associates, Meridian Energy Systems, and Virtus Energy Research Association.

• For a more comprehensive list of renewable energy-related firms in Texas, visit http://energy.sourceguides.com.