Robert Weissbourd

The Midwest Green Economy: Past, Present and Future

The Chicago Region’s “Green” Economic

Opportunities

Delta Institute and the Graham School of Continuing Liberal and Professional Studies

January 26, 2012

Part I: Defining the Green Economy

What Exactly IS the Green Economy? First, Drivers …

Global Warming and Pollution

High Fossil Fuel Prices Demand for Environmentally Friendly

Products

What Exactly IS the Green Economy? First, Drivers …

Demand for low carbon technologies is driving growth of Clean Tech.

Demand for clean energy generation

Demand for products that reduce energy

consumptionDemand for products that reduce pollution

An Info-Tech Analogy

Like IT, Clean Tech will affect the way every company does business.

Producers Users

Segments of the Green EconomyDemand

ConditionSubcategor

y Segment

Increase Renewable

Energy Generation

Energy source Wind Solar Geothermal Biomass/Biofuels Hydro Waste Ocean/Wave

Energy storage & infrastructure Fuel Cells & Hydrogen Battery & Energy Storage Tech Smart Grid/Smart

Metering

Reduce Consumptio

n of Energy & Natural

Resources

End-use-basedE.E. Lighting E.E. HVAC

E.E. Building Products & Materials

E. E. Appliances Water Efficient Products

Audits & Retrofits Green Architecture, Design & Construction

Electric/Hybrid Vehicles

Process-based Sustainable Forestry & Related Products Recycling & Reuse Recycled-Content

Products

Systems-based Logistics Public Mass Transit Local Food Systems

Reduce GHGs & Other

Pollutants

Product-based Green Building Products & Construction Materials

Green Chemicals & Related Products Nuclear Energy

Air & Water Purification

Technologies

Systems-based Carbon Sequestration Conservation & Management

Service-based Air/Water/Sewage/Solid Waste Management

Pollution Control & Prevention

Remediation Tech. & Services

Organic Farms & Food Production

Support Services Research, Engineering & Consulting

Regulatory & Compliance

Education & Training

Green Finance

Advocacy & Policy

Broad Opportunities in the Green Supply Chain

Auto-supplier created gearbox housings product line for wind developer.

New 42,000 sq foot facility

Gearbox housings

Regional Green Strategy DevelopmentIdentify Growth Sectors

Apply established economic development strategies to green opportunities.

Analyze Regional Assets

Determine Development Needs

Develop Products and Services

sectors

The Next Economy = Green

Source: Bloomberg New Energy Finance

Expected Global Annual Clean Energy Investment

Billi

ons

of U

.S. D

olla

rs

600

500

400

300

200

100

0

200 5

201 0

201 5

202 0

202 5

203 0

“The rebuilt American economy must be more export-oriented and less consumption-oriented, more environmentally-oriented

and less fossil energy-oriented, more bio- and software engineering-oriented and less financial- engineering-oriented...”

Geothermal, marine, low carbon tech

Small hydro

Biofuels

Biomass + Waste-to-EnergySolar

Wind

Part II: Overview of Chicago’s Green

Opportunities

Identify Growth Sectors and Analyze Regional Assets: Chicago

Identify Growth Sectors and Analyze Regional Assets: Chicago

0

0

Chicago’s Opportunities in Renewable Energy

Biofuels/BiomassWind

Solar Thermal

Chicago is home to over a dozen wind headquarters and over 100 component suppliers.

Over 100 firms are participating in the IIT-led Smart Grid Regional Innovation

Cluster

Chicago has more LEED-certified buildings than any

other city.

Vehicle Electrification

Chicago’s Opportunities in Energy Efficiency

Green Buildings

Smart Grid

Energy Efficient Lighting

Building Energy Management

Chicago’s highest

specialization is in Energy Efficient

Lighting and the region has over

30 firms working in the

space.

Recy

cled

Cont

ent

Prod

ucts

Chicago’s Opportunities in Waste Remediation and Pollution Control

Green Chemicals

Water Purification and

Treatment

Orga

nic

Farm

ing

& Fo

od

Prod

uctio

n Chicago ranks #1 in the country for employment in “Air

and Water Purification Technologies.”

Chicago’s Waste to Profit Network is a national model of

“byproduct synergy,” in which

one company’s trash becomes

another’s treasure.

Part III: Examining Business Opportunity –

the Energy Efficient Lighting Sector

Illustrating a Cluster Approach to Green Economic Development

Market Analysis: Energy Efficient Lighting

Huge LED growth projected: from 7% market share in 2010 60% in 2020

30+ Chicago area companies, >1000 employees Source: McKinsey and

Company

Barriers to Market Growth

Cost to Performance Curve Product Quality Distribution barriers Confidence in Commercial Viability

  LED CFL IncandescentLight bulb projected lifespan 50,000 hours 10,000 hours 1,200 hoursWatts per bulb (equiv. 60 watts) 10 14 60Cost per bulb $35.95 $3.95 $1.25KWh of electricity used over 50,000 hours 500 700 3000Cost of electricity (@ 0.10per KWh) $50 $70 $300Bulbs needed for 50k hours of use 1 5 42Equivalent 50k hours bulb expense $35.95 $19.75 $52.50Total cost for 50k hours $85.95 $89.75 $352.50

COST SAVINGS OVER 50,000 HOURS, IN A HOME WITH 25 BULBSTotal cost of bulbs and energy $2148.75 $2243.75 $8812.50Savings to household by switching from incandescents

$6663.75 $6568.75 0

Market Dynamics: Change is in the Air

“The LED and energy efficiency markets are a big

challenge for traditional lighting businesses. They are used to being “order

takers” with repeat business every 6 months based on how many light

bulbs they know are going to burn out. If they

embrace LED, there will be no bulb turnover, no

predictable repeat sales.”

Firm interviews and industry research reveal a transforming industry.

“LEDs will drive change in the distribution model. Traditional

distributors are avoiding the LED market because it is too technical.”

“A big challenge with this market is its archaic distribution system. You need

to make same sale several times, to the architect, to the engineer, to the

building owner. There needs to be a new model.”

“I think you will see lots of new products for niche applications. To be profitable

you will have to get into these markets. You will have to have something someone else doesn’t have.”

“I’ve never seen so many new companies pop up in

so short a time. Our customer base has almost

tripled in number.” “We think the most interesting

investment opportunities in EE Lighting are on the integration side…”

Understanding the Emerging Cluster Opportunity in broader cluster made up

of: Energy efficient lighting Architecture, design and engineering Commercial building management Energy efficient HVAC Energy software and controls Energy management integration

EE Lighting Sector “Integrated Lighting and Building Energy Systems” Cluster

Strategies for ILBES Cluster Make Chicago the easiest place in the world to do

real world applied R&D on building energy efficiency. Consortium of architects, engineers, designers,

developers, property owners, property managers, energy management companies, utilities and component suppliers

Proactive “IP mining” for leading edge technologies Applied R&D networks for rapid prototyping Technology demonstration sites – Merch. Mart? Proactive relationships with venture and equity firms Public sector as lead adopters

Summary

Enormous market opportunity is rapidly emerging as demand for energy and resource efficient products and services affects how every company does business

Chicago has major competitive advantages: firms in currently “green” or related industries (particularly within strong manufacturing base); human capital; infrastructure; knowledge and technology specializations; demand conditions; etc.

In context of emerging markets and competition elsewhere, we need to compete deliberately –- build institutional capacity, business led opportunity identification and development, investment.

Robert Weissbourd

The Midwest Green Economy: Past, Present and Future

The Chicago Region’s “Green” Economic

Opportunities

Delta Institute and the Graham School of Continuing Liberal and Professional Studies

January 26, 2012