When I step out of the Kendall Square subway stop in Cambridge, MA, on my way to work, it’s hard not to be reminded what a hub for innovation it is. During a short walk, I pass dozens of tech and life sciences companies packed into what’s become the midtown Manhattan of Cambridge.
Having covered energy and cleantech, I also know there’s a sprinkling of energy and water-related startups around here as well. So when the Massachusetts Clean Energy Center came out with its annual industry report, it made me wonder how “clean energy,” however it’s defined, compares to the area’s pillar innovation industries of tech and biopharma.
The answer was surprising, although there are some important caveats (more on that below). The Mass CEC report found that clean energy employs 88,000 people, compared to 57,000 in biopharma last year, according to figures from the Massachusetts Biotech Council (MassBio). Technology, meanwhile, employs more than 209,000, or about 6.5 percent of the state’s workforce, according to the Mass Technology Leadership Council (MassTLC).
But dig into the numbers a little bit, and a few important differences between energy and other innovation-driven industries emerge.
Historically, energy companies drilled oil or generated power, but energy has become far more high-tech and diverse, as a number of local companies demonstrate.
1366 Technologies, for example, has developed a low-cost solar production technique based on materials science and manufacturing research from MIT. Gridco Systems is bringing power electronics and data analytics to the electricity grid so that power flows can be managed and controlled like data on the Internet. And there are probably dozens of companies working on energy efficiency in buildings using digital technologies.
But when you look at the types of jobs clean energy has generated in the state, quite a few are in areas that are not normally considered technology. Twenty four percent of the clean energy jobs are in installation or maintenance—jobs, such as installing HVAC systems and lighting, weatherizing homes, and installing solar panels.
To be clear, these are great jobs but they’re very different from science and engineering jobs, such as programmer or drug researcher positions. The average salary for the 57,000 biopharma workers is high—more than $125,000, according to MassBio. The MassTLC’s annual report for 2014 noted that the average tech sector job pays $116,000.
Sources: MassBio (R&D and Manufacturing only), MassTLC (estimated 2010 and 2011), Mass Clean Energy Center (projected 2015).Also, how jobs are counted makes apples-to-apples comparisons tricky. MassBio is deliberately conservative in how it counts employees and focuses on manufacturing and research and development activities in the state. According to one study done by the Dukakis Center for Urban & Regional Policy at Northeastern University, the Massachusetts life science industries in 2012 employed more than 113,000 when all related fields are included, such as R&D, manufacturing, and universities and hospitals. Nationally, Massachusetts has the most biopharma jobs with a higher concentration than New Jersey or California, the Northeastern report found.
Another difference between energy, tech, and biopharma is that “clean energy” spans a number of industries. Clean energy was once synonymous with renewable energy—solar, wind, hydro, and so on—but the term “cleantech” now encompasses energy efficiency, batteries, biofuels, grid modernization, and even water. A number of sustainability-minded entrepreneurs are being drawn towards food as well.
The technology industry, by contrast, is more uniform—or at least more clearly defined. HubSpot may not compete with Microsoft or Amazon or iRobot (at least not yet), but tech companies are all providing software, hardware, and services to consumers and businesses.
Perhaps the biggest difference between clean energy and other innovation-driven industries is the dependence on regulations.
In the late 2000s, Massachusetts passed a number of laws favorable to cleantech startups that require utilities to use renewable energy and implement energy efficiency measures. And a number of the state’s energy startups have received federal money, in the form of ARPA-E grants. 1366 Technologies is expected to tap a loan from the same program that funded Solyndra, the government-backed solar company that famously failed.
Massachusetts was able to pass those laws and get the government behind efficiency and renewable energy, but that’s clearly not the case in many other states, where fossil fuel industries have more sway.
There are still plenty of obstacles to the state’s burgeoning clean-energy ecosystem, including a lack of funding for early-stage ventures and difficulty in finding talent, according to the Mass CEC report. Also, Massachusetts governor Deval Patrick, a clean energy booster, will be leaving office next year, notes research firm Clean Edge which ranks the state number two after California in its cleantech leadership index.
But for other states hoping that innovative energy companies can contribute to their economies, the vibrant cluster in Massachusetts is a positive sign. Together, energy companies contribute $10 billion to the state’s economy and employment in the sector has jumped more than 40 percent since 2010. If nothing else, the growth of the Massachusetts clean-energy scene shows how a cluster of companies—funded by investors and enabled by policymakers—in one region can build momentum.
