Thinking big: cleantech hubs and cleantech centres

What is there in common between jewellery shops on the Ponte Vecchio in Florence, large fish and meat markets in Chinese cities, souks and bazaars in North African and Middle Eastern urban centres, and cleantech? There are actually two things in common.

Firstly, these are all examples of industries which benefit from clustering. Business clusters form with a focus on highly specialised economic activities and sectors: thus, it made sense for artisans working with precious metals and stones to gather together on the Ponte Vecchio in Florence. It makes sense for carpet traders to concentrate in souks. It makes sense for cleantech firms to gather together in particular areas. In a previous post, I looked briefly at the role of San Francisco as a ‘Cleantech City’, and California as a ‘Cleantech State’. Particular conditions – from regulation to environment, to availability of capital and expertise – means that it makes sense for businesses to cluster.

A lot of research in business and economics has focused on the role of business clusters and their development on industry and economic activity. Harvard University Business School’s Institute for Strategy and Competitiveness is active in producing research on why clusters form, and why they matter to industry: in short, they promote competitiveness, enable the interconnectivity of a diverse range of firms and institutions, promote information flows, and enable firms to interact and form a sectoral identity.

Using a more theoretical argument, it can be argued that clusters form as a result of that physical and social process known as emergence, i.e. the way in which complex systems and patterns arise out of simple, and sometimes seemingly unrelated and possibly random interactions. In this view, business clusters ‘emerge’ as complex systems in which firms function together to form new products, services, and linkages. This is what is happening in cleantech today.

In cleantech today, several clusters are taking shape: this means that the complex interactions around the cleantech sector are being forged now, as we speak. Governments are actively involved in trying to promote the growth of cleantech clusters: as Gayathri Vaidyanathan has recently written, several governments are promoting the growth of cleantech clusters worldwide. In the US, the Renewable Energy tranche of the recent economic stimulus plan allows for $2.5 billion in government-backed renewables investment, and $37 million for small and medium-sized enterprises (SMEs) to develop cleantech products. This may not seem like much, when South Korea has recently announced plans to spend up to 2% of its GDP per annum on cleantech-related industries. This amounts to $84.5 billion a year in government funding for cleantech, and is a significant rise on the $3.4 billion already spent on cleantech product development in the South Korean manufacturing economy.

However, I mentioned above that souks and cleantech clusters have two things in common. I’ve written about the need for clustering. What is the second commonality? Well, it’s that clusters – now as in the Middle Ages – are mostly urban. Cities are in themselves complex systems in which economic, social, and cultural activity take shape. They are where the future of society is debated and shaped. Cities are also the forges in which clustering happens, and in which cleantech clusters and being born as we speak.

Again, this is not academic speculation. Urban clusters are already in existence: the Copenhagen Cleantech Cluster and Cleantech San Diego are perhaps two of the most well-known examples. In Abu Dhabi, in the United Arab Emirates, the focus has been on investment as well as clustering activities: the emirate’s Masdar Cleantech Fund has committed $15 billion to renewables development. And urban political authorities are competing among themselves to attract cleantech clustering. For example, Austin, Texas, has recently been named the US’ top cleantech incubator city. Seattle, on the other hand, is vying for position as one of the country’s renewables investment hubs. Indeed, Seattle’s geographic location is seen as promoting renewables development.This is significant, as the ‘green collar economy’ and ‘green collar jobs’ are seen by many as engines which could drive recession-struck areas out of the doldrums.

Questions remain. Will regulatory structures enable cleantech hubs and allow them to prosper, or will regulatory instability hamstring the cleantech industry? How will the prices of oil, silica, and other commodities central to cleantech affect technology development and commercialization? Political risk is also a very real factor in many clustering locations. Nonetheless, as cleantech enters its second decade as a sector defined by both growth and value, the spotlight is on clusters and cleantech centres.

By Federico Caprotti, reporting for Skipso from London