Red State, Green City: How Austin Has Become America's Clean-Tech Hub

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Jeff Wilson for TIME

Energetic Making ethanol at Joule Unlimited's pilot plant in Austin

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This is how industry clusters build: companies come for the employees, and they in turn attract more capital, more workers and more start-ups. That critical mass of innovation is one reason SustainLane Government, a network for green business, has ranked Austin the top city in the U.S. for clean-tech incubation. Austin-based green start-ups can also count on help from the University of Texas and the city government. The Clean Energy Incubator at U.T. supports young green start-ups, providing some initial seed money and holding networking events that can connect entrepreneurs and venture capitalists. The Texas Clean Energy Park — a public-private program in Austin — provides facilities and training for the smallest clean-tech start-ups.

Clean tech, however — much more than information technology — is still dependent on direct government policy, subsidies for renewable power and regulations that mandate energy efficiency and greener buildings. And that's where Austin's progressive-leaning politics — Barack Obama received 64% of the vote here in 2008, even as Republican John McCain handily won Texas — pay off. The presence of the university, the slacker subculture of the 1990s and the influential live-music scene has helped make the city, whose unofficial motto is "Keep Austin weird," far more liberal than most in Texas. Austin has more 100%-green-powered businesses than any other city in the country, and all the municipal government's electricity comes from renewable sources. Consumers and businesses can receive handsome rebates for installing more energy-efficient appliances and photovoltaic systems — all of which means that clean-tech companies can come to the city knowing there's a built-in market for their products. "The city here does an excellent job of supporting green tech," says Bill Sims, CEO of the biofuel company Joule Unlimited, which recently opened a pilot plant in Austin.

But perhaps the single biggest factor behind the greening of Austin is an institution that in most cities stands in the way of clean tech: the utility. Because the city of Austin owns its utility — and because politically progressive Austin residents have shown support for renewable power — Austin Energy has more latitude for experimentation than most of its counterparts around the U.S.

Nowhere is that clearer than in the Pecan Street project, a pioneering smart-grid research and demonstration program based in Austin's historic Mueller neighborhood. Pecan Street is a collaboration between Austin Energy, the Environmental Defense Fund, the city of Austin and the university, with much of its financing provided by the 2009 federal stimulus bill. The study is detailing energy and water use at the residential level, gathering data that most utilities barely have a handle on. The Pecan Street project, which is also experimenting with residential solar energy and electric vehicles, aims to use that information to create a smarter and more efficient grid, one that is far less wasteful than the rickety power systems throughout the U.S. And it's something that could have only happened in Texas, where deregulation has forced utilities to compete for profits by investing in technologies that help their customers use less energy. The transition hasn't been perfect. Some consumers complain about higher costs, and there have been unexpected blackouts. But deregulation does free up utilities to experiment. "Getting this data is the first step to figuring out how to be really efficient," says Pecan Street's McCracken. "And Austin is the place where we can get that done."

With its mix of high tech and clean tech, Austin is well positioned to take advantage of the next major phase in green development: the energy Internet. Ubiquitous digital connection has helped transform the way we communicate and the way we work, but most of us are barely aware of how we use energy. The energy Internet can change that. Green software start-ups like Austin-based Incenergy have developed online energy-management systems that allow building owners to remotely manage smart thermostats, reducing wasted heat and air-conditioning. Companies like Tendril are bringing that capacity to the residential level, creating home energy networks that will enable us to control our energy use as intelligently as we now control our digital video recorders. And the Pecan Street project is the perfect place to test some of these new technologies on a connected and greener-than-average populace. "A lot of my prospective customers are here," says Jim Balthazar, explaining why he moved his clean-tech start-up Nuventix from Atlanta to Austin. "And he who has the money makes the rules."

So what could go wrong? Austin faces the same challenges the larger clean-tech sector is confronting: a drying pool of venture capital, the forbidding cost of scaling up and the uncertainties around national climate policy. But the city's biggest obstacle might be the man who lives in the governor's mansion in the heart of Austin: Rick Perry. If Perry — or just about any of the other climate-change-doubting Republican candidates on the campaign trail — were to win the White House, it's hard to see much support for clean tech surviving the budget ax. But even if that happens, Austin may well endure. This is a city that takes pride in going against the grain — and doing things itself. "I'm a native Texan, and I know about the entrepreneurial spirit here," says HelioVolt's Stanbery. "People believe that if you want to do well, you need to work hard." That's an ethic clean tech will need in the difficult days ahead.

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