Archive for November, 2009

How green is the Valley?

November 10, 2009

(c) www.treehugger.com

In 2007, Al Gore laid down a challenge to Silicon Valley: invent the technologies to conquer climate change. The Valley has spent the past few years trying to do just that. The green economy and ‘cleantech’ are big deals here: if you believe the hype, this is what Silicon Valley 3.0 will look like.

So can the world’s most innovative region really do it again?

It’s important to pin down what the green economy means. UC Berkeley’s Karen Chapple identifies four components: energy, building, transport and recycling. Each is very broad – e.g. energy covers tidal, wind and solar power, decentralised infrastructure (or ‘smart grids’), and installation and maintenance activity.

The South Bay has rapidly developed a presence in all of these, particularly in solar (which shares technologies with semiconductor manufacture). Joint Venture Silicon Valley recently put out a Greenprint for the Valley [pdf] setting out ‘climate prosperity’ – growing a new generation of innovative, world-beating firms and dealing with climate change on the side. For solar, the upper level jobs target is 20,000 positions by 2017.

The Valley has plenty of first-mover advantages – a big talent pool, strong industry networks, an entrepreneurial culture, lots of venture capital, eco-conscious consumers, and helpful regulation designed to boost local green industries (California recently passed AB32, a state-level cap and trade scheme, and has just passed AB920, a feed-in tariff system).

The area’s cultural diversity helps too. Kim Walesh, San Jose’s Chief Strategist points out that South Bay firms are already plugging into big markets in Chinese cities.

And yet … this may not turn out to be the world’s eco-region. As GBN analyst Olaf Groth told me, the sheer diversity of ‘the green economy’ presents challenges – much of has limited ICT crossover. Geographies of innovation, production and sales are diverse, and don’t really favour a single hot location. There are dozens of distinct cleantech clusters in the US and around the world; production is often outsourced; consumer markets are very localised. It will be hard for Valley firms to access all of these.

Government’s role is also critical. Green technologies need subsidy and regulation to be fully economic: traditional VC won’t invest on a 20 year payback schedule. But the big public contracts that helped kick start ICT 30 years ago will be harder to secure today.

So the Valley’s traditional advantages may be of limited help. And as Karen Chapple and Bill Lester argue in forthcoming research, green industry may not mean local green jobs. The South Bay already has a number of defunct semi-conductor factories, as production shifts to cheaper locations offshore.

What can we Brits learn from this? I think there’s a few key points here. First, ‘green growth’ is feasible. But UK policymakers need to get clearer on which bits can generate growth and jobs. In energy, that means wind and tidal power; and there will be significant waste, construction, transport and maintenance markets in urban areas.

Second, there is an important spatial dimension. The UK is small but highly urbanised; many of the key green markets (in waste and transport, for example) will be in and around cities. London’s Mayor already has powers to combat climate change, and is using these to leverage extra funds for business development; other big cities should get the same.

Third, national policy is hugely important – meaning regulation, planning and tax tools aimed at fostering behaviour change and stimulating green industries. As the Turner Climate Change committee argues, this requires a strong national planning system.
The Opposition stance here is unhelpful: a Cameron Government would probably abolish the Independent Planning Commission, which takes decisions on energy networks.

More broadly, the UK is still seen as a bit soft on cleantech: according to Deutsche Bank, the UK is not seen as a safe bet for international investors, who increasingly prefer China or Germany.

The Silicon Valley story tells us there is unlikely to be a single winner in the green economy. But it also suggests that the UK can do a lot more to push forward its own distinct eco-sectors, and develop greener cities (and valleys) while we’re doing it.

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