DiMasi Proposes $50 Million Program to Jumpstart Clean Energy Startups in Massachusetts; Renewable Energy Fund Would Be Slashed
On Tuesday, Massachusetts House Speaker Salvatore DiMasi will announce a proposal for a five-year, $50 million spending program designed to boost the state’s clean energy sector, mainly by providing seed grants for early-stage technologies, retraining experienced entrepreneurs from other industries to navigate the energy business, and overhauling vocational-ed programs.
Investors and executives are greeting the proposal as a breakthrough for the clean energy business in Massachusetts. But to raise money for the program, DiMasi proposes taking money away from an existing renewable energy program, funded by a surcharge on residential ratepayers’ electric bills, that supports construction of solar, wind, and hydropower facilities through grants and rebates.
The new program’s overall goal, according to several advocates of the initiative interviewed today by Xconomy, is to close gaps in the local support system for early-stage clean energy companies—gaps that currently allow too many of the state’s talented workers, and too much of its investment capital, to flow to cleantech enterprises outside Massachusetts. “To keep the growth in green jobs, we have to fight,” DiMasi said in an announcement today previewing his proposal. “Other states are rolling out the red carpet trying to steal our brain power and our venture capital. We have a natural clean energy cluster here and I intend to keep and grow it here.”
DiMasi’s plan was crafted largely by the New England Clean Energy Council (NECEC), a non-profit group formed in 2007 by a coalition of local venture capital firms, clean-energy entrepreneurs, university researchers, and service providers such as intellectual-property law firms. It would set up a Massachusetts Clean Energy Center with responsibility for three main projects: a seed grant program providing awards of $100,000 to $250,000 for proof-of-concept projects by energy researchers or small startups; a fellowship program designed to give established entrepreneurs a three-month crash course in energy technology and markets; and a “green jobs initiative” intended to help the state’s educational institutions train new clean energy workers.
The Clean Energy Center would complement and in some ways resemble the Massachusetts Life Sciences Center, which the legislature created in 2006 to foster economic development in the biotech sector and which would be the primary agency administering Governor Deval Patrick’s proposed 10-year, $1 billion life sciences investment package. NECEC members say the plan for the Clean Energy Center was also modeled, to some extent, on MIT’s Deshpande Center for Technological Innovation, which disburses technology-development grants of up to $50,000 to MIT faculty and students.
Under DiMasi’s proposal, half of the funding for the Clean Energy Center, or about $5 million per year, would come from the Bay State Competitiveness Fund—a $43 million fund that the Massachusetts legislature, under DiMasi’s leadership, set aside in 2007 using money from the state’s budget surplus. The other $5 million per year would be siphoned away from an existing program, the Massachusetts Technology Collaborative’s Renewable Energy Trust Fund. The trust fund accumulates from surcharges—about $6 per ratepayer per year—levied on Massachusetts residents’ electric bills. It’s used to support a range of projects, from consumer rebates for small rooftop solar-photovoltaic installations to seed funding for hydropower facilities and other alternative-energy projects.
The fund collected $24 million in surcharges in 2007 and spent $44 million on awards. The proposed redirection would represent a 21 percent revenue cutback for the trust fund, based on its 2007 budget.
Officials at the Massachusetts Technology Collaborative did not return calls requesting comment on DiMasi’s proposal before this story went to press. [Update 3/18/08 12:45 pm: I reached Chris Kealey, chief of staff at the Massachusetts Collaborative, who said that the agency “doesn’t typically comment on draft or pending legislation.”]
But despite the fact that half of the Clean Energy Center’s budget would come from rejiggering the state government’s existing clean energy programs, rather than from new spending, advocates say it’s a critical step for the state, which otherwise risks losing the momentum recently built up by clean energy companies. (In a report last fall, the Massachusetts Technology Collaborative said clean energy had become the state’s 10th largest industry, with a rate of growth outstripping all other economic sectors.)
“It’s incredibly exciting,” Nick d’Arbeloff, co-executive director of NECEC (and an Xconomist), says of the DiMasi proposal, which the speaker is expected to submit in the form of a House bill in the coming weeks. “It represents a whole bunch of different key players coming together to make the right thing happen for the clean energy industry.”
The activities of the Clean Energy Center—which, it’s evident, were thought out very clearly by members of NECEC before the group handed the details to DiMasi—would focus in large part around a five-year, $25 million seed grant and mentorship program for early stage technology ventures.
“What we’re going to do is award funding to early stage cleantech projects in hopes of advancing them to the point where they can be commercialized in private companies,” says Jeffrey Andrews, a partner in the technology group at Waltham, MA-based Atlas Venture and co-chair of the NECEC committee developing the seed grant program. “But the real power comes not from the dollar amounts we are giving them—which, let’s face it, are relatively small—but from the power of the community we are wrapping around these programs. Technologists left to their own devices in a laboratory are much less likely to find the right commercial applications or build the right companies, but if you give them a project mentor and make them part of a community that has access to Fortune-1000 CEOs [and] that understands what’s happening in those markets, you’re much more likely to have a company created….We’ve found this to be very effective in other seed programs in the area, including the Deshpande Center.”
But the center would have a second big component —a $2.5 million fellowship program designed to give experienced entrepreneurs from sectors such as software and telecommunications the education they need to jump into clean energy ventures. “As many venture capitalists would tell you, one of the key weaknesses of many clean energy ventures is an inexperienced team,” says d’Arbeloff. “So for this sector to grow in Massachusetts, we must provide one critical ingredient, and that is experienced entrepreneurs. An entrepreneur who has founded or co-founded a previous venture has gone through the process of thinking about how a product should be positioned, how it should be brought to market, who the young venture should partner with, how to raise capital, how to protect intellectual property, how to add to the team, how to navigate the market successfully and ultimately achieve revenue growth and success.” (Xconomist Bill Aulet has discussed in detail the issue of energy entrepreneurs here.)
The fellowship program, as d’Arbeloff and other NECEC members envision it, would be a three-month “boot camp” with three key elements: lectures and seminars on energy technology, marketplaces, and policy; a series of site visits to local clean energy companies and university and government labs (including a field trip to the National Renewable Energy Laboratory in Golden, CO); and “capstone projects” undertaken in collaboration with local venture firms or clean energy startups in areas ranging from solar and biofuels to waste energy. “At the end of this fellowship program, all individuals participating will have a good basic understanding of key energy issues and topics, actual exposure to real-world clean energy research, and real experience through the execution of a project within the sector,” says d’Arbeloff. “Last and by no means least, they will have taken their Rolodex from zero to 60 as they gain exposure to a whole host of leading players in the region’s clean energy economy.”
The final piece of the center’s mission would relate to education. Under a $2-million-per-year Green Jobs Initiative, employers in the state will first be surveyed to find out what kinds of energy-related positions are going unfilled. Then the program would assist public and private universities and colleges, including community colleges and vocational-technology schools, to develop the new curricula and degree or certificate programs needed to produce qualified workers. “It could be things like teaching workers how to deploy photovoltaics, or weatherize buildings, or engage in fermentation research for cellulosic biofuel companies, or maintain wind turbines,” d’Arbeloff explains. “The goal is not to give educational institutions every dollar they need to teach students, but to ensure that the curricula get developed.”
Compared to Governor Patrick’s $1 billion life sciences investment package, $50 million for a Clean Energy Center may not sound like much money. But Peter Rothstein, an executive-in-residence at Flagship Ventures who is co-chairing NECEC’s seed grant program committee with Andrews, says the program doesn’t have to be huge to make a difference. “We are not trying to solve everything at once here,” says Rothstein. “We are trying to address some of the biggest opportunities and gaps and needs, so that we can have a vibrant, growing clean energy cluster, starting with the early stages of technology-based innovation, where we think we can have the biggest bang for the buck.”
And since only Massachusetts entrepreneurs will be eligible for the center’s grants and fellowships, that bang should be felt right here. “There is a frightening amount of Massachusetts capital that flows out of our borders for lack of appropriate ventures here at home,” d’Arbeloff says. “I think that both the seed grant program and the fellowship program will go a long way toward ensuring that there is a very large farm team of young clean energy ventures created here in Massachusetts that can absorb that capital and keep it within the commonwealth.”
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