Economic Impact of the Austin Area Cleantech Sector

Overview

2500000000
Amount Cleantech Contributes to Austin's Regional Economy (that's $2.5 billion if you're counting)
20000
Number of Jobs the Cleantech Sector Provides in the Austin Area.
11
Projected Growth in Cleantech Employment in Austin Area by 2020

Summary

This project, commissioned by CleanTX and supported by the Austin Technology Incubator, part of the IC2 Institute at the University of Texas at Austin, and Civic Analytics, represents the first attempt at describing and quantifying the clean technology (cleantech) sector in Central Texas.

In order to develop a comprehensive definition for Austin’s cleantech community, CleanTX engaged an advisory group comprised of academics, business leaders, economic developers, utility executives, government officials, and non-profits. The resulting framework illustrates the diversity of solutions that are considered “cleantech” across a wide variety of industries:

The cleantech sector is a set of technologies and services developed across a number of industries in response to concerns about climate change, energy security, and resource depletion. Generally speaking, cleantech products or services are designed to achieve one or more of the following objectives:

  • Provide fuel or electricity with minimal environmental impact and greenhouse gas emissions throughout the entire lifecycle of that resource;
  • Increase the natural resource efficiency of existing technologies or significantly reduce their greenhouse gas emissions;
  • Drive behavioral changes that reduce the carbon and environmental footprint of an individual, organization, community, or industry.

With the above definition in mind, a data-driven, replicable methodology was designed to calculate the economic impact of this sector in the Austin-Round Rock-San Marcos Metropolitan Statistical Area (Austin MSA). Economic impact is characterized here as direct employment in the cleantech sector (jobs) and Gross Regional Product (GRP) contribution. Similar to GDP, GRP is defined as the market value of all final goods and services produced within a metropolitan area in a given period of time. The study found that the cleantech sector in the Austin region directly employs nearly 20,000 individuals and contributes approximately $2.5 billion to the region’s GDP. In addition to establishing a 2014 baseline for the size and scope of this sector in the region, CleanTX intends to update this study on an ongoing basis in order to track the evolution and growth of the cleantech economy in Central Texas.

Purpose + Goals

The successes of Austin’s technology, music, art, food, and festival industries are well known and often celebrated. Less discussed, however, are other economic sectors and convergent technologies that have arisen as a result of the region’s strong foundations in technology and advanced manufacturing. Cleantech encompasses a thriving, collaborative community of innovative professionals and businesses. Although the sector is very active in Austin, it has not been clearly defined or quantified over time, making it hard to demonstrate the impact of cleantech products and businesses on the local economy.

This challenge is not unique to Austin. In their 2011 report Sizing the Clean Energy Economy, The Brookings Institution noted, “The clean economy has remained elusive in part because, in the absence of standard definitions and data, strikingly little is known about its nature, size, and growth at the critical regional level.”i In the same publication, Brookings articulated a broad definition of the clean economy and provided economic impact and labor force data for the nation’s 100 most populous metropolitan areas for 2003-2010. In 2011, Austin’s clean economy ranked 36 out of 100 metros nationwide, with 14,554 jobs attributed to Austin’s clean economy growing at a rate of 5.3% per year. While the Brookings report is a fantastic resource, the data have not been updated since the publication’s release.

This study, conducted as a project of CleanTX in partnership with the Austin Technology Incubator and Civic Analytics, seeks to both update and nuance the results of the Brookings Institute’s 2011 effort with the guidance of an advisory group convened by CleanTX. In addition to defining the sector and measuring job- creation, this study also quantifies the economic contribution of the sector to the region (GRP).

Project Goal 1

Define and describe the cleantech sector in the Austin MSA.

Which companies and industries comprise Austin’s cleantech sector? What are the relative strengths and weaknesses of the sector? Have any niche industries or specializations developed locally?

Project Goal 2

Develop and execute a replicable methodology to estimate the sector’s impact on the regional economy.

What is the current state of activity in the sector as measured by direct employment and contribution to GRP?

Project Goal 3

Identify future opportunities for growth and development of the cleantech sector in the region.

What emerging industries can be supported by the CleanTX network of businesses and organizations? How do trends in convergent technologies as applied to the smart cities, automotive and mobility, and water management sectors relate benefit from the network inherent in the cleantech economy?

Findings

This analysis found that the cleantech sector is responsible for nearly 20,000 jobs and contributes approximately $2.5 billion to the Central Texas economy. The data also show that the sector is expected to grow significantly in the region over the next six years. From 2014-2020, cleantech employment is projected to grow 11.24% in the Austin MSA, as compared with 9.3% growth in the sector over the same period at the state level, and 6.37% nationally.

This analysis demonstrates that the cleantech sector in the Austin MSA is dominated by three industry groups: (1) Manufacturing, (2) Professional, Scientific, and Technical Services, and (3) Construction. At a more granular level, the top ten industries in the sector (listed below) represent over 50% of the jobs and value added by the sector overall. The sector is vibrant and growing. From 2014-2020, significant growth in employment is projected in all but one of the top-ten cleantech industries. Because cleantech is characterized by a diverse set of industries, jobs in this sector span a wide variety of occupations, wages, and educational and professional backgrounds. The benefits of employment gains in this sector, therefore, are shared broadly across the region.

Figure 1. Top 10 Industries by 2014 Cleantech Jobs, Austin MSA

CleanTX-Economic-Impact-Report-Figure-1

Source: Civic Analytics; EMSI 2014.4 – QCEW Employees, Non-QCEW Employees, and Self-Employed; Bureau of Labor Statistics

This report highlights a robust network of semiconductor, software, and professional services firms that function as the foundation for the cleantech economy in Central Texas (Figure 2). In addition to these employers, iconic cleantech brands such as SunPower, Nest Labs, and CLEAResult also have significant offices in the Austin region. From an energy production perspective, Austin Energy, Pedernales Electric Coop, E.ON Renewables, RES Americas, and NRG are all major local employers who promote clean and renewable sources of energy as well as energy efficiency programs.

Energy storage and energy management are both significant subsectors in the regional cleantech economy. Valence Technology, Active Power, Younicos, Draker Energy, Incenergy, and KLD Energy represent a wide range of storage solutions and applications. Siemens Infrastructure and Cities, Honeywell, Schneider Electric, and Johnson Controls all contribute to the energy management and controls conversation. The solar installation industry—Meridian Solar, Circular Energy, and Revolve Solar, among others—is also growing rapidly. In addition to established brands, the cleantech entrepreneurship community, anchored by the Clean Energy Incubator at the Austin Technology Incubator, is also vibrant. Notable graduates of the Clean Energy Incubator include Ideal Power Converters, Omni Water, Yan Engines, and Ridescout.

Figure 2. Top 10 Industries by 2013 Cleantech GRP, Austin MSA

CleanTX-Economic-Impact-Report-Figure-2

Source: Civic Analytics; EMSI 2014.4 – QCEW Employees, Non-QCEW Employees, and Self-Employed

Cleantech Ecosystem

Although Austin is often referred to as Silicon Hills, its proximity to Houston, a global energy hub, provides the cleantech cluster in the region access to both the technology and energy economies. As a result, Austin has become a fertile proving ground for novel energy solutions enabled by new technologies.

The growth and development of a cleantech cluster from a technology foundation was not inevitable. A series of consistent, thoughtful investments from both the public and private sectors over the past 15 years have shaped the local environment for cleantech innovation and investment. At this stage, the cleantech ecosystem in Austin is best described as a web of interconnected organizations that support and complement one another and the local businesses in the industry. Austin Energy, the City of Austin, the University of Texas at Austin, the Austin Technology Incubator, the State Energy Conservation Office, and the Greater Austin Chamber of Commerce have each played a pivotal role in formulating and supporting the development of this industry. Distinctive assets and events, such as Pecan Street, Inc. and the Pike Powers Commercialization Lab, SXSW Eco, and the Defense Energy Summit illustrate ongoing collaboration among these organizations. The organizations, events, and projects that characterize the current ecosystem include:

CleanTX-Economic-Impact-Report-Ecosystem

Opportunities + Next Steps

This report demonstrates the impact of the cleantech sector regionally and illustrates the relationship between cleantech and other emerging sectors characterized by convergent technologies. Below, a few of the opportunities for CleanTX to support the evolution of Austin’s cleantech cluster are identified.

CleanTX-RenewablesRenewables: CleanTX will continue to promote the development and adoption of solar, wind, and other renewable sources of electricity generation. The Austin region has a strong track record in this space and should build on existing momentum. For instance, Austin Energy has a stated goal of achieving 55% renewable energy resources by 2025, including 950 MW of solar.iv Just north of Austin, the City of Georgetown’s municipal utility announced in March 2015 that it would rely exclusively on wind and solar energy to meet all of its customers’ power needs, making it the first city-owned utility to make that leap in Texas, and one of a handful in the nation. In addition to promoting renewables, CleanTX will work with industry partners to identify and develop innovative business models and financing mechanisms aimed at accelerating the adoption of renewables by lowering the barriers to entry.

Energy Storage + “Smart Grid” Technologies: Austin has long been at the forefront of solving the technical challenges associated with distributed generation. The University of Texas at Austin is home to renowned research programs in lithium ion battery, microgrid, flywheel, compressed air storage, and fuel cell technologies. These novel battery technologies will catalyze a revolution in electric vehicle development, distributed residential/commercial storage, and utility 2.0 grid management applications. CleanTX will continue to act as a conduit for stakeholders, startups, and utilities to partner on energy storage innovation and commercialization.

CleanTX-Smart-Cities-Resilient-Infrastructure

Smart Cities + Resilient Infrastructure: This report illustrates the interconnected web of semiconductor, computer systems design, architecture, construction, and engineering firms that comprise a significant portion of the cleantech sector in Austin. More specifically, Austin tech giants such as Dell, IBM, Qualcomm, Intel, ARM, and Silicon Labs are enabling the creation of smarter cities and infrastructure through the development of more efficient chips and processors. In next-generation urban environments, distributed renewable energy will be deployed to power electricity, telecom, water, and transportation networks. Internet of Things (IoT) technology will, in turn, enable enhanced communication and resilience within and among those networks in the case of natural disasters, power outages, and other disruptions. In recognition of this opportunity, CleanTX will develop and support programming around Smart Cities and Resilient Infrastructure by creating more connective tissue among Austin’s cleantech-IT entities, urban planning associations, and demonstration projects (such as Pecan Street, Inc). CleanTX will also codify and share best practices from Austin’s experience in this sector.

CleanTX-Connected-MobilityAutonomous Vehicles + Connected Mobility: The transportation sector will also be transformed by embedded intelligence. Cars will have the ability to talk to each other, avoid collisions, manage heavy congestion autonomously, and even park and pick up passengers on their own. Although this sector is nascent, the development of autonomous and connected vehicles represents a significant opportunity to reduce carbon emissions and create greener, more efficient urban spaces. CleanTX will convene a working group to explore opportunities for the diverse players in the automotive and mobility technologies sector to collaborate. Strategic partners in the Austin region include the GM Innovation Center, Freescale Semiconductor, the Circuit of the Americas (COTA), Ridescout, MobilityATX, and Austin Energy, among others.

CleanTX-Water-ManagementWater Management: Austin is a pioneer in the development, testing, and deployment of smart grid technologies. Since 2010, Pecan Street, Inc. and the Pike Powers Commercialization Lab have built the world’s preeminent research network of energy and water customers. In response to persistent drought across the country and the water/energy nexus, local industry expertise in resource measurement and management is now being be deployed to develop a smart grid for water. This initiative is led by Pecan Street, Inc., the Pike Powers Commercialization Lab, the Energy Institute at the University of Texas at Austin, and the Austin Technology Incubator. CleanTX will offer support by hosting educational workshops and convening working groups around the theme of water management technologies and strategies for financing and implementation. 

CleanTX-Recycling-Waste-ManagementRecycling + Waste Management: CleanTX will support education, networking, and innovation in the recycling and waste management industry through educational programming, startup pitch competitions, and joint programming with the City of Austin to promote its Eco-Industrial Park.

 

CleanTX-Advanced-ManufacturingAdvanced Manufacturing: This study demonstrates the intricate relationship between the cleantech economy and the manufacturing industry in the Austin region. CleanTX will partner with the Austin Regional Manufacturers Association (ARMA) and the Austin Technology Incubator to support cleantech entrepreneurs through the prototype phase of commercialization. This partnership will also connect the cleantech community with established, large-scale manufacturers in the region who serve the cleantech market both nationally and globally. Workforce development, STEM education, and the efficient management of resources (energy, water, etc.) in manufacturing processes represent ongoing opportunities for collaboration between the two professional organizations and other community partners (such as Skillpoint Alliance).