Accelerating Development of Charlotte s Energy Cluster. Summary May 2012

Transcription

1 Accelerating Development of Charlotte s Energy Cluster Summary May 2012

2 Project motivation and core questions Context Charlotte s profile today 17 th largest city in the U.S. 7 th nationally in Fortune 500 HQ Charlotte s energy sector 200+ businesses ~20,000 employees Growing reputation as an energy hub Challenges Complex environment for energy companies Increasing energy hub competition from other regions What should Charlotte s energy cluster aspire to be? What does a successful energy cluster mean for the city? What does energy mean for Charlotte? How competitive is Charlotte? Where should we focus? Who owns the vision?

3 What is an industry cluster? Linked companies and industries Clusters are a collection of linked industries, with several companies in each industry Across value chains A cluster is a geographically proximate group of companies and associated institutions in a particular field, linked by commonalities and complementarities Michael Porter, HBS professor Range of institutions Clusters extend down to supply-chain channels, and laterally to manufacturers of complementary products Clusters can include government agencies and other institutions universities, vocational training, trade associations

4 What do clusters look like? Hollywood Global hub of movie production, theatres, television and music recording studios, editing, lighting, and postproduction companies North Carolina furniture 70,000 jobs in furniture manufacture, design, engineering, retail, marketing, warehousing, and transport Silicon Valley Collection of established computerrelated companies, technology start-ups, research centers, and venture capitalists Italian leather Famous shoe companies; suppliers of footwear components, machinery, moulds, design services, tanned leather

5 Why are clusters important? 28% U.S. cluster share of employment Industry clusters drive prosperity 38% 97% U.S. cluster share of wages U.S. cluster share of patents

6 What makes clusters successful? Cluster structure defines the environment for growth Coordination mechanisms and programs create competitive advantages Increasing cluster diversity Competition Increasing cluster strength Low growth No growth High growth Moderate growth Reasons for cluster success Collaboration Access to public goods Increased productivity and growth opportunities Faster-paced and better-directed innovation Stimulation of new business formation

7 What can the energy cluster deliver for Charlotte? Past 5 years Cumulative job growth over the last five years Net change in jobs Future circa 2020 (potential) Annual job growth by 2020 Net change in jobs 5,000 18,000 4,500-8,500 Energy cluster -22,000 Charlotte Energy clustergenerated Charlotte Energy cluster generates 25-50% of job growth and $40-70 million/year in incremental state and local tax revenue by 2020

8 Approach to identify competitive clusters 1 Energy cluster strength High employment concentration in energy-related sectors 2 Energy subsector diversity MSAs with high employment concentration in more than one energy- related subsector 3 Energy employer company diversity Assess MSA s multiple-sector employers and their energy focus 4 Energy momentum and support MSAs with cluster initiatives, strong innovation assets, or positioned in high growth sectors Short list of competitive clusters

9 Recommendations 1 Take a more active role in shaping energy policy 2 Cultivate the energy cluster s innovation ecosystem 3 Develop a regional workforce to close the skills gap 4 Launch an industry-led cluster coordination group

10 1 Take a more active role in shaping energy policy Lack of clarity on energy policy curtails employment and investment Executive perspectives from across the energy spectrum Every day we re looking into the future. What gives us pause is policy and politics Paul Bowers, CEO Georgia Power Congressional inaction has put at risk the [renewables] market momentum of the last several years, as well as significant private investment. Arno Harris, CEO Recurrent Energy [D]elay of these regulations will simply add to the investment uncertainty, continue to keep capital on the sidelines. John Rowe, Chairman and CEO Exelon If we got an extension [to the wind tax credit] in the next couple of months, we'd be able to build some or all of those projects If it gets extended at the end of the year, it is too late. Paul Bowman, VP of Development E.ON Climate and Renewables NA [O]ur energy industry needs to be able to plan over ten-, twenty-, even thirtyyear time horizons. Political considerations based on two- and fouryear electoral cycles are a significant hindrance to long-term planning and investment Rex Tillerson, Chairman and CEO Exxon Mobil

11 2 Cultivate the cluster s innovation ecosystem The energy cluster has a huge opportunity in upgrading its innovation ecosystem Innovation is the key to sustainable prosperity Labor and natural resource cost advantages can dissipate 90% of the variation in the growth of income per worker is the result of innovation Differences in patenting intensity account for 30% of the variation across regions in average wage Clusters foster knowledge exchange among firms, colleagues, rivals, and knowledge institutions like universities foster entrepreneurship by enhancing the range and diversity of firm creation, generating more ideas for startup companies, and reducing the costs of starting a new business -Brookings Institute

12 3 Develop a regional workforce to close the skills gap A national skills gap is hindering growth across industries Unemployment and job vacancies Job vacancies have been rising but unemployment remains stubbornly high Millions Job openings Unemployed Obstacles to growth Percentage of responders Finding qualified people Managing growth Accessing capital Sluggish economy Other 10

13 3 Develop a regional workforce to close the skills gap A skilled workforce is a key differentiator for cities trying to attract firms Most important for success over 3-5 years Percentage of responders Most important geographic consideration Percentage of responders Skilled workforce 68 Access to qualified talent 28 Product innovation 48 Lower cost environment 26 Inc. market share 38 Regulation environment 19 Low cost producer 29 Access to customers 18 Customer service Sales outside U.S Education/research proximity Access to materials 2 2 Supply chain 21

14 4 Launch an industry-led cluster coordination group Common structural elements in successful clusters Full-time staff of 23 includes a dedicated CEO, six vice presidents, five directors and 11 other staff members Dedicated CEO and Staff Industry-led organizations in mature clusters all have a dedicated CEO and full time staff Industry Leadership Most cluster organizations have strong industry presence on the board of directors Industry represents 2/3 of the Board, chaired by a Boeing executive Government Board Officers and Directors; started the SVEDA initiative, a regional partnership of local city officials Government Involvement Each cluster has at least one prominent public-private partnership (a cornerstone of current White House policy) and groups with government Board members Stakeholder Engagement Organizations maintain tight links to nonindustry stakeholders (e.g., educational institutions, venture capitalists and nonprofit foundations) Board Chair is a venture capital partner; Presidents of Duke and UNC, and the Chancellor of NC State, sit on the Board

15 How far will Charlotte go as an energy cluster? Phase 3 Phase 1 Phase 2 Seed point from natural strength Typically a highly ranked institution performs leadingedge research A highly visible leader creates an entrepreneurial culture A university produces a related startup and/or A large corporation locates a facility in area Clustering catalyzed by move-ins More corporations locate facilities in area to tap talent Successful startups grow larger and spawn new startups A university occasionally produces related startups Critical mass of virtuous cycle Organic growth outpaces corporate relocations Entrepreneurs come primarily from corporations Support infrastructure develops: VCs Professional services Suppliers