f you follow sustainability issues, you could be forgiven for thinking that policy debates about climate change, energy, and the economy are essentially national or global in nature. And to judge by the policy results of large, international negotiating foray, you might conclude that little progress is being made. While it is true that sustainability concerns are international, citizens in individual communities inevitably feel the impacts at the local level.
In the United States, local citizens and their elected representatives – city councils, mayors, and governors – are in many ways on the leading edge of creating sustainable, prosperous economies. Real initiatives are underway in many municipalities and regions to address energy security and climate resilience in conjunction with economic development and job creation. To learn more about why regions are a key part of creating opportunity in a sustainable economy, we recently spoke with Andre Pettigrew, Executive Director of Clean Economy Solutions. Clean Economy Solutions focuses on bringing metro regions, businesses, investors, and markets together to grow the clean economy through real business transactions and practical economic development strategy.
GreenLeaders DC: What are the advantages of approaching green economic development from a regional perspective?
Andre Pettigrew: I think there are three basic advantages. First, the main reason why regional approaches to sustainability and the advanced energy economy make sense is that the movement is driven by business. When you’re thinking about advanced energy markets, for businesses these markets are more regional than they are local. They’re looking at how to develop a critical mass of market share. For example, if you’re trying to develop solar or wind capacity, you don’t do that city by city but rather you want to do that within a region and a state. I think another reason why we take this regional approach is that the supply chains are often regional. The communities who want to compete in this advanced energy economy are working very hard to make sure that they have a full range of assets – service providers, manufactured products, and other things – that are necessary to support the major producers of clean energy in their community. And finally, the labor market is regional. No one city or community has all the labor that’s needed, and so these companies are looking to source labor on a regional basis. And I’ll add that a regional approach is self-organizing. Metro regions aren’t just defined based on the statistical metropolitan standard areas anymore. These areas ebb and flow. A lot of our inner cities have lost populations over the last decade to the exurbs, but now that’s reversing itself.
GreenLeaders DC: You say regions are self-organizing. What are the bases for that self-organization?
Andre Pettigrew: First of all, the definition of regions really depends on energy sourcing. A traditional way of describing regions is by geography – northeast, southwest, etc. As it relates to the advanced energy economy in terms of energy production, research organizations like the NRELs (National Renewable Energy Laboratory) have done analyses of where the wind blows most efficiently and where the sun shines the most. And so energy-sourcing regions are being developed based on those patterns. For example, the northeast and the eastern seaboard all the way from Maine to North Carolina are looking to take advantage of offshore wind because that’s where the wind blows. We’ve also seen the region in the central United States from Iowa up to the foothills of the Rockies including Colorado and Kansas taking advantage of the wind that blows in that great basin. In Arizona, New Mexico, California, and Nevada, the sun shines hot and bright in these desert regions. Plus, in those areas they have the landmass to put up the large solar arrays to harvest that energy on a large scale. So regions are organizing around the resource and where the available assets come together to present a real opportunity for scaling and production efficiency.
GreenLeaders DC: How would you describe the economic development and job-related drivers behind these regions’ embrace of advanced energy industries?
Andre Pettigrew: It’s mix of factors. The regions that we’ve been working in are traditionally known as metro regions. These are the city centers and the adjoining communities that make up a region. Over the last five years what we’ve seen is, first, communities were hard-hit by the Great Recession. Second, in part as a reaction to the economic downturn, there’s a focus on what’s the next opportunity. How do we become more resilient in response to this downturn? With our programs, initially a lot of folks were suspicious of “green” because they weren’t sure what that really meant. But through our programs, communities are now understanding that green, sustainability, and advanced energy economy means much more than promoting a vertical industry. On one hand, the sustainability or green reference is about clean technology companies. Those are businesses that make solar batteries, wind turbines, and other products. That’s a vertical industry we call Cleantech. These are usually small, emerging companies that aren’t big players yet but they’re important for these communities because they’re working on the new set of services and technologies that will usher in what I would call a new sustainable business practice. These products and services will enable our traditional industries, whether its retail, manufacturing, or construction, to be more energy efficient, more resource efficient, and thus cleaner. As community leaders come to understand that the cleantech green is more a horizontal industry than a vertical industry due to these enabling products and services, they’ve developed a greater interest in it. I’ve spent 30+ years in the economic development space in various roles and responsibilities, and you are always looking for ways to attract investment, develop new markets, and grow existing markets in your community. When we talk about green or sustainability, I think what may have started out as something nice to do has developed into something that’s important to do because it’s generating innovation, investment, new markets, and more efficient businesses.
GreenLeaders DC: Are regions also looking at ways to manage risk?
Andre Pettigrew: I know that climate change is one of the areas of controversy in our country politically, but from a business standpoint, I think one could say that now, today, saving the planet, i.e. mitigating climate change, makes dollars and sense. It may have always made sense from an environmental standpoint because we don’t have a Planet B, and we need to figure out how to be more resource efficient and mitigate those impacts. But we have to acknowledge that in particular over the last five years, major corporations, small innovative companies, and public entities understand this movement of sustainability from a risk perspective. They’re also looking at climate change through the lens of economic opportunity and new markets. That’s been the powerful thing that has driven the interest in metro regions all over the country to take a harder and stronger look at these types of initiatives and programs.
GreenLeaders DC: Recently in the press, there’s been a lot of focus on the B Corp movement. Is the notion of companies earning their social license to operate for real? How does your organization’s regional approach fit into that?
Andre Pettigrew: The conversation surrounding sustainability has evolved. We’ve gone from “green” to “sustainability” and now to “resiliency”. They’re all relevant and important. To me, this movement is about behavioral change. That’s saying that people and the businesses they run want to be more resource efficient. That includes energy, water, land, and people. We’ve always kind of expounded that, but I really think the Great Recession woke up a number of folks in this country in terms of how we approach this change. I believe this movement now has deep and long legs because there are structural changes happening in our economy. First of all, the rich may have gotten richer, but the middle and the poor have not. Communities are going to have to continue to find ways to employ people, land, and available resources that much more efficiently. From a policy standpoint, I think mayors and governors get this better than Congress people, Senators, and Presidents. And the reason is that they’re on Main Street. They have to get things done. So what you’re seeing in cities and at the state and local level is a much more pragmatic response to climate change as an economic opportunity and a political opportunity. They absolutely want to mitigate the negative impacts. Hurricanes Sandy and Katrina are perfect examples. As mayors and governors have seen that play out, they want to build some resiliency in. And as you build that resiliency in, you’ve got to create opportunities for your citizens who are there. They’re committed to the community and they want to stay there. Public-private partnerships are a big part of that commitment to rebuild and expand opportunities. For example, economic developers recognize that the products and services from some of the emerging cleantech companies will be employed not only in their local community, but will also be sold nationally and globally. So its important to pay attention to these types of regional companies, universities, and research organizations because they will be exporting products and services all over the world and importing dollars back into the community. So this really is a sea change. With respect to corporate America, we’re always concerned about “green-washing”, but if you look at where some of the investments are being made, you can see the commitment. Those companies are trying to learn and do this better and more effectively. We’re on the right path.
GreenLeaders DC: How would you characterize the financing challenges in these regional advanced energy markets?
Andre Pettigrew: The financing challenge is significant and complex. I’ve come to the conclusion that in the U.S., we don’t have a money or financial availability problem, we have a distribution and prioritization problem. Here’s what I mean by that. There is 1.8 trillion dollars cash on Corporate America’s balance sheet. That’s money – liquid cash assets – that is on the bench and looking to be deployed. So how do you get that type of money off the bench and into the field of play? That’s part of the challenge in every community. When you talk to investors, whether they’re venture capital or equity investors, they’re always in a chase for quality investments. Now I’ve heard that there’s a lot of money out there, but there aren’t a lot of quality deals. Now especially with regards to the renewable energy sector, the investments continue to grow. But venture capital investment declined in 2012. Part of that had to do with no exits through IPOs and/or acquisitions. Investors want an exit as fast as, let’s say, some of the Internet and technology companies of the past. They’re still looking for investments that generate these sorts of returns. But the renewable energy sector is still just emerging and thus very risky. There are technology and market risks, which investors are pretty good at assessing. Where they’ve had the most difficulty in the energy sector is assessing political risk. Energy is a different animal as opposed to Internet technologies in that there’s still no single national energy policy. Each state has at least one public utilities commission that’s setting energy policy and rates. That creates a high level of uncertainty. At the federal level, a lot of the public policy initiatives such as tax credits for wind and solar are very short term. That’s inconsistent with the types of infrastructure investments that have to be made. Returns from those types of high-level investments come in over time. If you have public policies that don’t support that longer time frame, it makes capital formation that much more difficult. That may be the bad news. The good news is that we have seen a number of large corporations acting as strategic investors. They’ve been acquiring some the emerging technology companies who have wrung out a lot of the risk through product development, they’ve defined the market niches, and that’s helped mitigate the effects of a lack of venture capital.
GreenLeaders DC: Energy security is a crucial part of the economy. In addition to their roles as strategic investors, what other ways are large companies playing a role in the development of the energy sector?
Andre Pettigrew: There are companies like Apple, Google, and Wal-Mart for that matter, who are very much looking for energy independence and they want that power to be clean. For example, many state-level renewable energy portfolio policies stipulate that 20-30 percent of power must be generated from renewables. But many of these companies have said they’re looking to generate 100% of their power from renewables. So in my mind, these companies are going to drive innovation. From the utilities’ viewpoint, that can either be perceived as a threat or an opportunity. The business models must evolve to deal with the possibility of increased distributed power generation. One of the issues is that utilities still have to maintain the grid. If you have large companies or residences that are generating their own power, the question is how do you make an equitable cost or price assessment for this activity. What those models will look like is still an open question. Distributed power generation as a research project has been around for probably 20 years. But at no time in the past were there major customers like a Google or an Amazon who were calling for it. Now these companies are calling for it. That’s forcing regulated utilities, which have to recover their costs and guarantee shareholders a return on investment, to respond. The models they used in the past are kind of being blown up. Despite that uncertainty, there are some clear trends. For example, no one is arguing that the electrical grid in the U.S. doesn’t need to be updated. Everyone agrees on that. There’s a consensus that hundreds of billions of dollars are going to be invested in upgrading the grid system. New energy and efficiency technologies such as smart metering are definitely going to be a big part of that investment.
GreenLeaders DC: You said earlier that you think the sustainability movement has deep and long legs, and there appears to be a convergence of many factors to support an optimistic view on advanced, renewable, and distributed energy investments going forward. Why do you think these trends will continue to build?
Andre Pettigrew: I think we’re in the beginning of a transition that will redefine how business is conducted in the U.S. and the world. People are using more renewable energy. They’re using more of it and they want more of it. As the capacity of advanced energy systems based on renewables increases, the demand to utilize that will increase. This will drive additional investment and business opportunities. I think these are fundamental trends and I don’t see them falling off. The energy efficient economy – with things like efficient lighting, vehicles, green supply chains – will drive demand not only from consumers but from businesses who are looking to capture additional savings and efficiency in their operations. Finally, I would say that newer (younger) generations, anyone born after the baby boomers, are the key because they will simply demand cleaner air, efficiency, and more accountability from companies on these issues. These younger generations are growing up in a world where they know it’s possible to achieve these things. Just 20-30 years ago, that wasn’t the case. But now, renewable energy, smart meters, and social technologies have created a new mindset, especially among younger populations.
Executive Director of Clean Economy Solutions
Andre Pettigrew is the Executive Director of Clean Economy Solutions a nonprofit clean-economy accelerator for metro regions, helping them maximize their existing clean economy opportunity, envision how it could grow, and chart a roadmap for getting there. Mr. Pettigrew is responsible for the strategic management and development of the organization. Pettigrew was formerly the Executive Director of the Office of Economic Development for the city and county of Denver under former Mayor John Hickenlooper (now Governor of Colorado).
During his tenure the City launched the “Greener Denver Business” program, an economic development strategy in support of Denver Mayor John Hickenlooper’s “Greenprint Denver” climate action program. Under Pettigrew’s leadership OED played a major role in supporting renewable energy companies interested in expanding to Denver. He also played a role in recruiting two world class German manufacturing companies — SMA Solar and Repower— which opened major facilities in Denver creating over 700 manufacturing jobs.
He is a member of the US Chamber’s Environmental Innovation Network. Pettigrew serves on the national sustainability advisory board for KB Home, a national home builder and the technical advisory committee for the US Green Building Council’s STAR Community Index. He is currently a fellow at Massachusetts’ Institute of Technology’s Department of Urban Studies and Planning. Pettigrew received his bachelor’s degree in economics from the University of California at Los Angeles and graduated from the State and Local Government Senior Executive Program at Harvard University’s Kennedy School of Government.