Wednesday, August 06, 2008


August 4, 2008 10:00 AM PDT

San Jose: Hub for a green-tech gold rush?

SAN JOSE, Calif.--Could the self-proclaimed "capital of Silicon Valley" become the world's center for clean-tech innovation?

Mayor Chuck Reed unveiled a 15-year plan in October to "green" San Jose. Of the city-greening road maps from mayors around the nation, his is among the most ambitious. Reed wants the city's 974,000 souls to get all electricity from renewable sources by 2022 (affording five more years than former Vice President Al Gore's similar yet scoffed-at challenge for the nation). And Reed aims to add 25,000 green jobs, keep all waste out of landfills, and renovate 50 million square feet of office space to green standards.

Scroll down for a short video of the interview.

CNET sat down with Reed last week at his office, which towers 18 stories above city hall, to learn about early progress toward greening the 10th-largest U.S. city, which sits in a state with the world's 10th-largest economy.

Reed hopes the world will look to San Jose first for innovation in clean tech.

Mayor Chuck Reed hopes the world will look to San Jose first for innovation in clean tech.

(Credit: Elsa Wenzel/CNET)

Q: What progress has been made so far with your Green Vision goals?
Reed: We have 15 years. They're going very well, as we have a lot of private sector interest and buy-in from the public, and in terms of the clean-tech jobs that have already been generated.

We're already starting to see the fruits of that as solar companies are expanding in San Jose, moving to San Jose. I've been meeting with Silicon Valley CEOs to make sure that if they're expanding, that it's in San Jose.

We want to make sure that, as with NanoSolar,SoloPowerStionSVTC, and Underwriters Laboratories, that we're getting those opportunities. This stuff happens rapidly and if you're not paying attention, people will pick up and move around the world. We're talking to other solar companies now.

That part is going very well. The industry is still doing well, notwithstanding the uncertainty of the solar tax credit that Congress is not yet able to pass...

The job creation side of it, I think, will be one of the easier goals. If you do the math, with less than 1 percent of the world energy market growing at 30 percent per year. You can grow at 30 percent for many, many years, in a market that is measured in trillions. That's pretty exciting. If we can just capture the market opportunity here, we'll have 25,000 tech jobs relatively early.

What are some benefits you're able to offer to companies to keep them here, especially given the uncertainty of the renewable energy tax credits?
Reed: First of all, they want to be here. This is Silicon Valley, innovation capital of the world. It comes with a built-in bias. What we can do as a city is to assure (companies) that when they decide to grow, move, or expand, that we can do it in a time frame that works with whatever they need, that our permit processing, our approvement permits, our industrial tools inspection program, all those things will happen on their time frame, quickly, with limited bureaucratic hassle.

We also have available millions of empty square feet left over from the (dot-com) boom and bust. Because we have a lot of real estate available, we're still competitive in a world market on real estate in ways that we are not very competitive, say, in labor costs.

Aren't real estate costs relatively high here?
Reed: Actually, in a world market, we're substantially cheaper than other places in the world, in Europe and Asia. The places we're competing with for innovation centers, real estate isn't cheap but it's modestly priced. That's a plus. Companies have to deal with headaches of doing business in California. It's not cheap to manufacture anything here. We're probably at a 40 percent disadvantage to some of the competing states on the costs of manufacturing and who knows what it is to other places in the world.

But we're talking about companies where the labor cost is a relatively small part of their manufacturing process. So our thin-film solar printing solar guys, NanoSolar and SoloPower, for example, are actually creating manufacturing jobs here. We want to be close in that distance from innovation to production to be short. They want to be here, and their labor costs are not so much a part of their total costs.

(Due to the soft dollar), exporting has been good for companies that are in the export business.

If you look at Germany, for instance, being the world's solar capital, how can San Jose and the United States overall work to beat them and other regions that may already be ahead of the game?
Reed: They're certainly ahead of us on market size and what they've done, but where we are the best in the world is in innovation. There are tremendous opportunities on conservation and innovation in the production of energy to bring the costs down.

Unfortunately, we've given them a head start, so we have to make up some ground. This problem with the solar tax credit in Congress is not helpful. We're counting on the magic of Silicon Valley. Venture capital people are doing the same thing, pouring money into it.

What do you think will happen with the tax credits?
Reed: I believe they will be extended. Both houses of Congress have voted to pass them, in different forms, unfortunately. It's just not gonna happen soon enough. We already have companies laying people off because you just can't guarantee at least on the larger commercial installations that they'll be installed and operational by the end of the year.

Worst-case scenario if it doesn't happen?
Reed: If it doesn't happen, our installation companies, and the market, will stall, especially on the residential. There's no doubt about that. The manufacturers will discontinue charging ahead because they're selling to Japan, Germany, and Spain as well as the U.S. market.

I don't know how long it'll stall the market...In part, it depends on the innovation and how we bring the costs down.

What do you anticipate will happen with the coming administration in Washington and how do you hope the new president will help to support your goals in green tech? 
Reed: The campaigns of both the candidates sort of look like they're in the same place in clean tech. Both of them understand the power that clean tech can feed to the U.S. economy. Whichever person wins, we're going to have some of the same kinds of policy changes made from the current administration. I think you'll see it in a cap-and-trade system.

It's all very general and far out there in the future. It's hard to sort out where it might go, when you get down having to make budgetary decisions on things like renewable energy tax credits and how do you pay for them, and what do you do with oil? That's part of the fight. The solar industryand wind industry have had to take on big oil and the entrenched way of doing things.

That hasn't always been the case with Silicon Valley. A lot of the innovation here has been created with new products, new markets that weren't having to take on an industry to move ahead. Did the Internet have to take on television and radio? Not really.

There's this incredible infrastructure built up around petroleum, and we've got to rebuild a completely different infrastructure and spend a lot of money to implement wind and solar. When it gets down to the tough decisions about where do you spend the money and use the tax credits, there may be differences between (John) McCain and (Barack) Obama. So far, both of them look very promising.

Gov. Arnold Schwarzenegger has called you the "green mayor." What kind of support do you see from his administration if clean tech is to continue charging ahead in California?
Reed: The governor has been a leader on this. A.B. 32 greenhouse gas legislation and his million solar roofs program are leading the way. We've said we're going to do 100,000 of his million solar roofs here. We're tagging onto that and state tax credits.

We're working together with his staff on economic development--and on things like, can we get (electric sports car maker) Tesla (Motors) to locate here in San Jose?

Are other companies on your wish list to be located here?
Reed: All solar companies. There are several others we're talking to, but I can't disclose who they are. Any solar company that needs to expand is a solar company we want to talk to.

Many regional leaders and business leaders say that in the past decade or so, they've filled a gap that has been left by Washington in terms of leadership in renewable energy and the clean-tech sector in general. The U.S. Conference of Mayors has played a visible role. How do you see your role and the role of other mayors changing, perhaps, again with a new administration? Will your work be easier, harder?
Reed: I think our role in San Jose is to do research and development work necessary to demonstrate to the world that you can do these green things when you don't have money. Almost all cities are in some sort of budget difficulty, it seems, on a permanent basis.

While we have these big, bold goals, we don't have a big pot of money. We're figuring out how to do it on other people's money. As we figure that out to make it easier for all these companies, that's what we're going to share and demonstrate to other mayors and cities. As they say in Silicon Valley, invent what you have to and copy the rest.

We've had good support from the current administration, from the Department of Energy. We're aSolar America city. We have a small project, the Electronic Transportation Development Center, a small grant from the Department of Commerce.

With this new industry, clean tech, with solar and wind, there are a lot of bureaucratic and legal hurdles, so we have bills going through state legislature that make it possible for us to try these things, like our plug-in hybrid stations that we want put on our light poles, the development agreement we have with Coulomb, there are some bureaucratic hurdles we have to go through.

What are some hurdles? 
Reed: Every light is not metered, so we pay a per-unit to PG&E. If we change the nature of the streetlights, we have to negotiate a new per-unit price.

There are restrictions on what we can do with electricity in terms of reselling it. Are we selling it to Coulomb, to the end user? Can we do either of those? Who pays for it and how does it get built? That's what we'll do in this two-year contract.

Once we've got the package solved, we can give it to every other city and say, "You don't have to reinvent the wheel. Here's the wheel," just as they've done in Berkeley with their program trying to make it possible for financing districts for solar.

What do you think about Project Better Place--now called Better Place--which is trying to establish infrastructure for electric cars, plug-ins, in a different way, with battery-charging and swapping stations? Mayor Gavin Newsom has expressed a wish for San Francisco to be the first to try out that infrastructure model. 
Reed: One of the things I've learned is that government needs to be technology neutral and facilitate this. Exactly how we'll do with electric cars, I don't have an opinion. If it means swapping batteries is the most cost-effective way, let's do it. It really depends on where battery technology goes. What does it cost? That solves one of the problems when you run out of juice, but a hybrid also solves that problem.

What kind of car do you drive? 
Reed: I have a Prius. I got it April 1. It drives like a car. Nothing amazing about it other than it gets 44 miles per gallon. It's a car, folks, you'll like it. More head room and leg room.

As for potentially having cleaner cars for government employees, how do you see that working out? 
Reed: One of our goals is to convert our entire fleet. About a third of our fleet includes everything from CNG (compressed natural gas) to biodiesel to hybrids. As we roll over old vehicles into new vehicles, we're moving in that direction so that all of them will be converted. We do operate a CNG station at the airport. We're working on our taxi fleet to get them converted to CNG. We're getting hybrids. I don't know if we have anybody running on french fry grease.

Do you foresee electricity becoming the next dominant "fuel?" 
Reed: We hope so. You could make a compelling case that is the best way to get off of petroleum, to convert these vehicles to electricity. We're gonna have this hybrid bridge for quite a while. There's certainly a large market for people who drive less than 40 miles per day.

What do you think for the potential of bike rental stations or electric bike rentals? A company called Intrago is testing this. It's kind of like in Paris where you can rent a manual bicycle, only these are electric. Do you see something like that working in San Jose? 
Reed: I can see how that would work on a corporate campus or a campus where people can pick up a bike. If you can ride the train and then have a bike available, it certainly makes it a lot more feasible for people to ride the train or bus.

One area of the clean-tech sector is in toxic clean-up and bioremediation. Is that something you'd like the region to focus on, given that there's been pollution over the years from semiconductor manufacturing? 
Reed: That's not one of our big goals. Most of the remediation and clean-up work here in the Valley is behind us. The real money that drives that kind of thing has already been spent. Lots of places are still under remediation, but it's all very passive and systems are in place.

We certainly have nanotechnology companies and biotech companies that might be doing something in those areas but as a growing market, I just don't think it's there. Thankfully, I think that era is behind us, I hope. Nationally the money that's being spent on clean-up has shrunk.

Solar is a big focus but how might wind and other renewables play a part?
Reed: We have companies in our incubator spaces that are into wind.

The other thing that's interesting is that, OK, people think it's about solar and wind. But it's also about energy conservation, and efficiency is by far the most fruitful area in the short run.

One of my favorite examples is a controller. Fairchild Semiconductor, one of the oldest companies in the Valley, is in the energy conservation business. This controller will save 40 percent of the electricity for an electric motor...Everybody's in the energy conservation business, it seems. It's another whole other opportunity for technology.

And, of course, we have the world's most efficient solar cell from SunPower, and then Bloom Energy with a fuel cell. Now the interesting thing about both of these products? These are both Mars project spin-offs from NASA, which is very handy to have here locally.

Whether fuel cells will win, or solar will win--or will it be a combination of fuel cells and solar? Because you know, you can run the fuel cell backwards. With solar, you can change the direction of the flow into the fuel cell. Does that solve the storage problem when solar doesn't work in the middle of the night? Maybe. Smarter people than me will figure it out.

Do you anticipate big deals with utilities for big solar plants
Reed: Probably not. We don't have the territory here. We also don't have as much heat and sun as in the desert. Transmission is a difficult problem. We are working on some transactions here for a demonstration project for large-scale solar. Whether or not we'll be able to put it together, I don't know.

The economy is still growing in clean tech. We're not shrinking...Companies are making money and the market is really good.

Even with a recession?
Reed: Even with a recession. They're hiring. There are jobs.

And in terms of green jobs and environmental justice, what kinds of jobs do you foresee expanding? At what levels? How do you create a lasting base of jobs that aren't just one-time deals, like installing solar panels? What do you do once all the solar panels are up? 
Reed: One of the things that has us excited are the opportunity for green-collar jobs...We're gonna have many, many, many, many years for just solar installation alone...Our manufacturing jobs, like the thin-film printing places, are putting in real manufacturing jobs, green collar jobs. They're not just hiring scientists and engineers; they're manufacturing jobs.

And anything having to do with our solar industry here means those installations have to happen here. You can't outsource them. So there are a lot of opportunities for the kind of jobs that we lost when the boom went bust, getting some of those back.

What lessons might the clean-tech sector and leaders like yourself learn from the dot-com bust? Some see a green-tech bubble. 
Reed: Well, these are real companies with real products. That's a big difference.

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