Renewable Energy: Following the Supply Chain
You don't need to be in a wind-producing state to attract renewable energy companies. You don't need to be in a state with tremendous amounts of sunlight each year to attract sub-suppliers in the solar energy industry.
What you must do is position yourself as a manufacturing hotspot to attract industries that make up the industry cluster--the sub-suppliers that are required to produce windmills and solar PV arrays as well as the industries that complement these systems.
We all know that renewable energy is the future. Green energy methods are growing quickly. But their influence is not limited to the future; they impact the immediate present. The new emerging federal government promises to place a much greater emphasis on green energy solutions. Thus, more federal funding will be earmarked for the development of renewable energy infrastructures on a national basis. Economic development agencies can position themselves to take advantage of these emerging trends.
There is one key element that will help you discern how to approach this industry, and that is what I call following the supply chain. I want to discuss a few examples of this with you to help you understand what I'm talking about.
More than half the states now have mandatory requirements specifying that electric utilities generate a certain amount of electricity from renewable sources such as wind, solar, and biomass. For instance, California Governor Arnold Schwarzenegger has signed an executive order that requires utilities in his state to produce 33% of electricity from renewable energy sources by 2020.
An Example
Let me use the auto industry as an example. Many states spent a great deal of time and money attempting to attract automakers to their area. However, for the automakers to be successful, they require a large network of supportive industries. Manufacturers of tires and tie rods, sheet metal production facilities, glassmakers, plastic forming companies, transportation companies, and many more are required to create an automobile.
The same thing is happening with the emerging renewable energy sector. In order to be successful, a number of sub-suppliers and manufacturers must be in place to support the larger industry manufacturing companies. Major players have certainly emerged in the market. Of course, attracting these companies is an excellent option. I say, "Great! Go for it!" However, you must still focus on the industry as a whole.
What am I talking about? Let me show you a couple of examples drawn from both the wind and solar power industry and I'm sure you'll see my point immediately. This is following the supply chain, and it ensures that all the required parts and operations are in place. It also creates a dramatic number of new jobs.
Windmill Components
A single windmill for wind power generation requires an incredible number of parts in order to operate. Windmill manufacturers have neither the time nor the resources to manufacture all of these parts. Thus, they outsource their needs to supportive industries.
Just a few of the parts required to make a windmill operate are the blades, the rotor, the yaw motor, the supporting tower, a brake, a gear box, among many, many others. This requires that an industry cluster be in place to support the manufacturing of each windmill.
Industries that support windmill construction include foundries, plastics, machine tooling companies, wind turbine service companies, metal fabrication, fasteners, cabling companies, circuit board manufacturers, as well as bearings manufacturers and hydraulic systems manufacturers, just to name a few.
By focusing on attracting industries that already produce or can begin to produce these items, you can stimulate economic growth in the area much more quickly than by focusing on top-tier production companies exclusively.
Solar Panel Components
The situation is the same within the solar energy industry. In order for a solar power generation system to function, it must have many different parts. Batteries, copper wiring, flat glass, switchboards, sheet metal, plastic coating, plastic panels, semiconductors, cabling, and much more are required to create a single solar PV system.
This necessitates an industry cluster consisting of storage battery manufacturers, electronic circuit board manufacturers, sheet metal fabrication companies, plastic film and sheeting companies, plastic and resin manufacturers, semiconductor manufacturers, electric testing equipment manufacturers, transportation, and a whole host of other related industries.
Again, focusing on attracting sub-suppliers and manufacturers helps you build up the industry cluster that supports the full manufacture of solar panel arrays and solar harvesting systems.
Conclusion
Obviously, I feel that the renewable energy industry has enormous potential. The industry as a whole is on the verge of explosive growth and holds the potential for incredible economic development. However, even more potential for economic growth and stimulation lies in attracting sub-suppliers, in creating an industry cluster of manufacturers that complement and supply the larger manufacturers.
Economic Development Marketing has been very successful in helping states and local areas attract sub-suppliers and in developing relationships within the industry cluster. We're very excited about the developments in the renewable energy industry and see vast potential for future developments as well.
Donald Flor
Economic Development Marketing (EDM)
(800) 595-7052 (619) 585-7052
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