Strategist Says State Energy Effort Trailing

March 17, 2008
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GRAND RAPIDS — Michigan’s lack of energy and environmental policy suppresses demand in these industries and discourages capital investment as well as “entrepreneurial dynamism.”

Jim Croce, CEO of NextEnergy, presented that prognosis for the state’s economy based on a future that will become more dependent on alternative energy sources. His comments came last week as Grand Valley State University hosted the Alternative and Renewable Energy Summit, an event that covered current and emerging technologies surrounding renewable energy. The summit also discussed the state and West Michigan’s position in these markets.

Croce leads the nonprofit NextEnergy, founded in 2002 and capitalized with a $30 million seed grant from the Michigan Economic Development Corp. The center’s initial charge was to implement an economic development strategy for the state to accelerate research, development and manufacturing of alternative energy technologies to advance the AET industry in Michigan. The center is located in a facility that opened in 2005 near Detroit’s Wayne State University campus.

Croce presented a survey that shows Michigan’s economic development in this field has the potential both to create 17,000 to 19,000 jobs and to cut down on the $20 billion per year Michigan spends on importing energy.

According to Croce, Michigan is ranked fourth in the nation as best equipped to manufacture wind power components. Croce, however, believes the culture around energy innovation in Michigan is sluggish. He pointed to three key aspects necessary to this culture: technological development, experienced “venture-backed CEOs,” and risk capital, both public and private.

He said technological development is the area in which Michigan is the strongest. The state’s rich history in manufacturing has made for a strong supply chain that is applicable to the renewable energy industry, particularly wind turbines. Wind turbines are responsible for $23 billion in the global market, and with the U.S. being the fastest growing market ($3.7 billion in 2006), the industry is expected to double by 2010. Many of the parts used in wind turbines are similar to those in the automotive industry, but on a larger scale.

Croce said one of the weak points in the state is the lack of “venture-backed CEOs.” He described this type of CEO as those who have “made venture capitalists a lot of money in the past, who can be counted on to make venture capitalists a lot of money going forward.” Without these people, Croce suggests, it is difficult to raise any risk capital.

Fred Keller, chairman and CEO of Cascade Engineering, spoke at the summit on the state’s need to create a Renewable Portfolio Standard and revamp its Federal Production Tax Credit Policy.

Michigan’s current Production Tax Credit is set to lapse at the end of 2008, and Keller listed some of the troubles that come with an inconsistent policy, such as the difficulty in planning transmission expansions, threats from foreign manufacturing, and the overall drop of investments in renewable energies. A Production Tax Credit extension would enable domestic renewable energy manufacturing in the wind sector to double in 10 years.

A Renewable Portfolio Standard is not in effect for the state, putting it behind several others, including Wisconsin, Colorado, and most notably, Iowa. Iowa’s Renewable Portfolio Standard currently includes many tax breaks, state grants and loans, rebates and discounts — all mechanisms that have a high draw to foreign investors. A debate is taking place on the implementation of a portfolio mandate, but specifics are still being worked out.

Still, Croce sees the state in a position to take advantage of the four main emerging markets of large wind turbines, solar thermal and photovoltaic, converting biomass to energy, and advanced batteries for hybrid electric vehicles, which, along with wind turbines, is one of the more appealing sectors short-term.

The survey shows all four emerging market segments are experiencing rapid growth and have “anchor” companies to establish a base. Michigan’s natural resources of water, wood and wind create a large advantage for the state, Croce said.

The summit’s goal was to “energize and assist West Michigan companies to fully understand the market opportunities of alternative and renewable energy for the region’s economy.”

Among the attendees were members of the manufacturing community, technology developers, supply chain providers and executive managers. The event was a collaboration between the Seidman College of Business, the Seymour and Esther Padnos College of Engineering and Computing, and the Michigan Alternative and Renewable Energy Center. Other partners include the Michigan Economic Development Corp., NextEnergy, The Right Place Inc. and the West Michigan Strategic Alliance.

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