T H E M E T R O P O L I T A N B U S I N E S S P L A N N I N G I N I T I A T I V E BROOKINGS

A P R O S P E C T U S F O R C A T A LY Z I N G

G R O W T H I N T H E P U G E T S O U N D ’ S

E N E R G Y E F F I C I E N C Y

T E C H N O L O G Y C L U S T E R

I N N O VAT I O N M E E T S D E M O N S T R AT I O N

ThePugetSoundeconomyisstrong—andfortunate.Ifitweren’tfordecisionsbythelikesof

BillGatesandBillBoeing,wewouldn’tbetheleadinginnovativeandentrepreneurialregion

thatwearetoday.Andwhileweareproudofoursuccess,wealsoknowthatrelyingonluckis

notaneffectiveplan.Intoday’scompetitiveglobaleconomy,restingonyourlaurelsistanta-

mounttosteppingbackwards.Instead,weneedtobestrategicinourthinkingandintentionalinouractions,

maximizingourresourcestowardensuringjobcreationandlong-termprosperityforourregion’sresidents.

WhichiswhytheProsperityPartnership—ourregion’scoalitionofmorethan350business,government,

nonprofit,labor,andeducationorganizations—hasbeensoexcitedtoparticipateintheMetropolitan

BusinessPlanningInitiative.

Tous,theMetropolitanBusinessPlanapproachtakeseverythingweknowabouttheingredientsfor

successfulregionaleconomicdevelopmentandputsitintoacomprehensive,holisticframework.Itfocuses

ourregion’scollectiveactiononhowouruniqueassetsandcapacitiesinteracttocreateprosperity,andit

enablestheidentificationofthosekeyinitiativesthatwillcatalyzeourregion’seconomy.Inatimeoflimited

capacityandfunds,businessplanningallowsustoidentifythemostpromising,bottom-lineorientedinitia-

tivestospureconomicgrowthandlong-termcompetitivenessinthecentralPugetSound.

Inparticular,weknowthatwemustconsistentlyfosternewstrengthsevenaswecontinuetonurture

existingones.Givenglobaltrends,andourmixofindustries,humancapital,innovationcapacity,and

environmentalconsciousness,thecleantechnologyindustrygenerally—andtheenergyefficiencyindustry

inparticular—isanaturalfocusasapotentialnextmajorcluster.ThePacificNorthwestisalreadyahubof

energyefficiencyactivity,withmultipleprograms,policies,andfundingstreamsthataddressthedeploy-

mentofexistingenergyefficiencyproductsandservices.Thekeyistofindthenichethatwillnotjustgrow

locally,butcompeteglobally,andbuildfromandstrengthenallaspectsofoureconomy.Oneofthecentral

findingsofourMetropolitanBusinessPlanisthehugepotentialthatthegrowingdemandfortechnologies

toachieveenergyefficiencypresentsforourregion.Tograspthisopportunitytocreateadominantnew

cluster,wemuststrengthenandcatalyzetheconvergenceofourexistingbaseofindustries,humancapital,

andinnovation.

TheBuildingEnergy-EfficiencyTestingandIntegration(BETI)CenterandDemonstrationNetworkissuch

acatalyticinitiative,carefullydesignedtosupporttheemergenceofapowerfuladvancedenergyefficiency

technologiescluster.Byallowingnewinnovationstodemonstratetheireffectivenessinreal-worldsettings,

wearefacilitatingthepipelineformoreeffective,moreintegratedsolutionstotheenergyefficiencychal-

lengesofbuildingsthroughouttheworld.Workingwithourpartnersinbusinessandgovernmentatthe

local,stateandnationallevel,welookforwardtomakingBETIanationalresourcetoincreasethedevelop-

mentandexportofcleantechnology.

Mayor Ray Stephanson Phyllis M. Wise Norman B. Rice

CityofEverettand InterimPresident PresidentandCEO

PugetSoundRegionalCouncilPresident UniversityofWashington SeattleFoundation

Phillip K. Bussey John Gardner

PresidentandCEO VicePresidentforEconomicDevelopmentand

GreaterSeattleChamberofCommerce GlobalEngagement

WashingtonStateUniversity

M E T R O P O L I T A N B U S I N E S S P L A N C O - C H A I R S

A M E S S A G E F R O M T H E P U G E T S O U N D R E G I O N

METROPOLITAN

BUSINESS

PLANNING

INITIATIVE

PUGET SOUND

1

I N N O VAT I O N M E E T S D E M O N S T R AT I O N

A P R O S P E C T U S F O R C A T A LY Z I N G

G R O W T H I N T H E P U G E T S O U N D ’ S

E N E R G Y E F F I C I E N C Y

T E C H N O L O G Y C L U S T E R

1775 Massachusetts Avenue, NW

Washington D.C. 20036-2188

telephone 202.797.6000

fax 202.797.6004

website www.brookings.edu

BROOKINGS INSTITUTION METROPOLITAN POLICY PROGRAM © 2011

To stay on the competitive edge, the

Puget Sound region must foster the

growth of new cluster opportunities.

Specifically, our region believes the

technologies that will be the backbone

of the clean technology industry gener-

ally—and the energy efficiency industry

in particular—hold exciting potential for

future job growth.

BROOKINGS

METROPOLITAN

POLICY

PROGRAM

2

the

pro

po

siti

on

METROPOLITAN

BUSINESS

PLANNING

INITIATIVE

PUGET SOUND

3

Ourproposednew Building Energy-Efficiency Testing

and Integration (BETI) Center and Demonstration

Networkisavitalingredientincatalyzingtheestab-

lishmentofaninternationallyrecognizedclusterin

energyefficiencysoftwareandautomationtechnology.

Itspecificallyaddressesthechallengesoftechnol-

ogycommercializationbyloweringtwoofthekey

marketbarriersforlocalcompanieswith“smartand

efficient”products:thevalidationoftheireffective-

nessinreal-worldsettingsandtheirintegrationwith

otheraspectsofbuildingefficiency.Morebroadly,

BETIharnessesourexistingadvantages—exceptional

strengthininformationtechnology,theenvironmental

ethosofourresidents,thelonghistoryofpolicyand

programmaticsupportforenergyefficiency,andthe

majorinvestmentsbeingmadebycompaniesandlocal

jurisdictions—tosupportahighlynetworked,innova-

tiondriven,entrepreneurialregioninitseffortsto

takeadvantageofthe21stcenturyglobaleconomy.

This innovative proposal matches regional strengths

with business opportunity. In particular, BETI will:

➤ Builduponandreinforcecomplementaryinitia-

tivestostrengthenhumancapital,innovationand

relatedindustrieslikeinformationtechnologyand

manufacturing

➤ Drawontheregion’sexistingcompetitiveadvan-

tageinthebuildingenergyefficiency(EE)sector

➤ Fillavitalcommercializationgapbetweentechnol-

ogydevelopmentandmarketadoptionbyproviding

verificationservicesforpromisingnewproducts

➤ TapintoahugeEEmarketexpectedtotop

$700billionintheU.S.aloneby2030

➤ Sustainitselffinanciallythroughfee-for-service

revenueswithinfiveyearsofstart-up

➤ Benefitfromtheleadershipofawiderangeofpub-

licandprivatesectorentitiesthatarecommittedto

makingthePugetSoundaleadingregionalEEhub

Both private and public sector leaders will benefit

from engagement in BETI:

➤ Businesseswithintheclusterorrelatedclusters

willexpandtheirefficiency,marketsandoutputs,

whileotherbusinesses—fromrealestatedevelopers

toutilities—willbeabletoincorporatenewenergy

efficiencygoodsandservicesdevelopedbyBETI,

reducingcostsandhelpingthemmeetconserva-

tionrequirementsandbuildingenergyusecodes

➤ Stateandlocalgovernmentswillreapthebenefits

ofexpandingeconomicactivityandjobs,while

maximizingtheirreturnoninvestment

➤ Federalagencieswillreapthebenefitsofexpanded

economicactivity,whilebetterachievingtheir

goalsaroundinnovationclusters,exportpromo-

tion,andgreentechnologydevelopment

T H E P R O P O S I T I O N

ThecentralPugetSoundregionisoneofthenation’smostvibrant

economies,rankingatornearthetopofthelargest100U.S.

metrosonmeasureslikeproductivity,talentattraction,andinnova-

tion.Yet,tostayonthecompetitiveedge,PugetSoundmustfosterthe

growthofnewclusteropportunities.Specifically,ourregionbelievesthe

technologiesthatwillbethebackboneofthecleantechnologyindustry

generally—andtheenergyefficiencyindustryinparticular—holdexcit-

ingpotentialforfuturejobgrowth.Capitalizingonthisopportunitywill

requirecomplementarystrategiesaddressinghumancapital,innovation,

governance,andtheroleofotherindustryclusters.

the

big

pic

ture

BROOKINGS

METROPOLITAN

POLICY

PROGRAM

4

T H E B I G P I C T U R E

PugetSoundiswell-positionedforfuturesuccessinthe“next”

Americaneconomy.

LEADING THE NATION. The Puget Sound met-

ropolitan area is a recognized leader in regional

economic competitiveness.In2008,theregion’s

percapitaproductivity(measuredasper-worker

grossmetropolitanproduct)reached$100,233,fully

35percentabovethenationalaverage,anditsjob

growthof11percentbetween2002and2008was

morethandoublethenationalrate.Itisalsoatop-10

metroexporter(whencomparedtothe100largest

U.S.metros),hometoahighly-educatedpopulation,

andahighlydiverseeconomydevelopedoverdecades

inknowledge-intensivefieldslikeinformationtech-

nology,aerospace,cleanenergy,andlifesciences.

Asaresult,PugetSoundhasweatheredtheGreat

Recessionbetterthanmanyotherpartsofthecoun-

tryandispoisedtoleadinthenexteconomy.

LOOKING FORWARD. Continued economic prog-

ress will require expanding beyond the region’s

current industry base to drive future growth. While

ITandaerospaceremaintop-performingregional

industriestoday—andlargeregionalclustersliketrade

andlogistics,tourism,andthemilitaryhaveremained

relativelyconstant—theregionmustidentifythose

nextopportunitiesthatwilldrivejobcreationintothe

future.EE,alongwiththeinteractivemediaandglobal

healthsectors,isagrowinginnovationclusterthat

hasthepotentialtomeetthoseneeds.

FOCUSED ON THE NEXT ECONOMY. National

trends point to a post-recession economy that will

be lower carbon and increasingly innovation- and

export-oriented. WhilePugetSoundisalreadywell-

positionedalongtheselines,itisalsoproactively

workingtoboostitsfutureprospectswithinthese

contours.Energyefficiencytechnologyisastrong

exampleofthekindsofindustriesthatwillsucceed

inthefuture,andtheregionalreadyhassignificant

strengthinthissectoruponwhichtobuild.Puget

Soundisalsoenhancingitsregionalinnovation

systemtobettersupportcommercializationofnew

technologiesandtobetterattractanincreasingshare

ofnationalventureinvestments.

TARGETED APPROACH. In the “next” economy,

the energy efficiency niche has great potential to

be a new high-value growth sector and regional

economic driver for Puget Sound. Outofapproxi-

mately22,900cleantechjobscurrentlyintheregion,

40percentarealreadyinfieldsrelatedtobuilding

EE,spanningallmajorindustryaspects.Giventhe

region’sconsiderableassetsinIT,greenbuilding

andretrofitting,andprecisionmanufacturing,Puget

Soundwillturnthisexistingstrongconcentrationinto

aleadingregionalexportsectorandakeysourceof

futurejobcreation,focusedparticularlyonenergy

managementsoftware,services,andtechnologies.To

helpcatalyzethegrowthofthistargetednichecluster,

PugetSoundwillcreateBETItotest,verify,andfacili-

tatethecommercializationofnewEEtechnologies.

5

the

ven

tureT H E V E N T U R E

TheproposedBuilding Energy-Efficiency Testing and

Integration (BETI) Center and Demonstration Network will

allowEEinnovatorstotest,evaluate,andintegratepromisingproducts

andservicesbeforelaunchingthemtomarket.

DESIGNED FOR IMPACT. Withparticularfocuson

energyservices,energymanagementsoftware,and

informationandcommunicationstechnology-enabled

integratedsystems,BETIwillhelpcommercializenew

products,growcustomerbases,increasemarketpen-

etration,andultimatelyspurregionalbusinessgrowth

andattraction.Itssuiteofserviceswillfocusontwo

mainactivities:

➤ Laboratory testing and integration: Acontrolled

facilitywillsimulateavarietyofbuildingtypes

andoperationssouserscanverifytheeffective-

nessofnewbuildingenergymanagementsoftware

andautomationtechnologiesandtesthowwell

variousproductsandinstallationdesignswork

together

➤ Field demonstration and testing: Anetworkof

ownersandoperatorsofdiversebuildingtypes

(residential,commercial,industrial,andinstitu-

tional)willprovideopportunitiesfordemonstrating

theperformanceofnewtechnologiesovertime

under“realworld”conditions,verifyingtheir

energysavings

Inaddition,BETIwillensurethatitsclientsare

connectedtopotentialcollaborators,aswellasthe

servicesthatwillallowthemtoaddressawidevariety

ofrelatedbusinessissues:

➤ Facilitated Industry Collaboration: Intra-industry

interactionacrossPugetSound’smanyexisting

EE-relatedtradeassociations,consortiums,and

REVENUES (cash only, excludes in-kind) 2011 ($) 2012 ($) 2013 ($) 2014 ($) 2015 ($)

RestrictedStateAppropriation 5,500,000

FederalGrants 3,500,000

Otherdonations/grants 150,000 1,250,000

BETI-generatedfeesandincome 1,125,000 3,165,000 4,770,000 6,515,000

ResearchGrants 150,000 375,000 500,000

RentsandMarkingCo-OpIncome 105,000 105,000 105,000

TOTALREVENUES 150,000 11,375,000 3,420,000 5,250,000 7,120,000

EXPENSES (cash only, excludes in-kind)

Legalandconsultantfees+PSRCstaff 118,000 90,000 10,000 10,000 10,000

BETIstaff 386,208 663,000 663,000 663,000

RevolvingLoanFundcapitalization 1,500,000

FacilitiesBuild-out+Rent 1,325,000 1,050,000 1,050,000 1,050,000

LabEquipment,Maintenance 4,000,000 200,000 200,000 200,000

BETILabContract+NetworkCosts 1,100,000 2,500,000 3,250,000 4,455,500

Otheroperatingexpenses,includingweb 785,000 1,526,000 1,526,000 1,526,000

TOTALEXPENSES 118,000 9,186,208 5,949,000 6,699,000 7,904,500

NETOPERATINGGAIN/LOSS 32,000 2,313,792 (1,779,000) (449,000) 215,000

BETI FIVE-YEAR PRO-FORMA BUDGET SUMMARY

BROOKINGS

METROPOLITAN

POLICY

PROGRAM

6

How BETI fills gaps along the technology commercialization pathway

BETI will serve this space

MARKET ADOPTION

Continuous product improvement feeds back through the process

NEW ENERGY EFFICIENCY/TECHNOLOGY IDEA

Developed by:•ResearchUniversities

•Businesses•Entrepreneurs

Select Puget Sound Assets:•UWandWSU

•ExistingITandmanufacturingindustrybasedandassociatedtalent

TECHNOLOGY DEVELOPMENT

Conducted using:•Incubators/accelerators

•Commercializationassistance•Privateinvestment

Select Puget Sound Assets:•UWC4C

•McKinstryInnovationCenter•NWEnergyAngels

•RobustVCnetworks

TECHNOLOGY PROOF OF CONCEPT AND INTEGRATION

Tested and achieved via:•Laboratorytesting

•Modeling/simulation•Collaboration

TECHNOLOGY TESTING IN SITU (TO DETERMINE

RESULTS IN REAL-WORLD USE)

Tested via:•User-occupiedbuildings

ofvarioustypes

Stakeholders

Users/clients

Members

Partners

Services

Laboratorytesting

andintegration

Fielddemonstration

andtesting

Facilitatedindustry

collaboration

BusinessAssistance

Accessible Resources

Labandnetworktestingfacilities

Industryoutreachandprogramming

Specificprogramsandevents

Eligible Users

Potentialusersvettedbyapplicationevaluatingprevi-

oustestingattemptsandproducts’marketreadiness

Productsandservicesvettedbyaselectioncommittee

ofBETIstaffandboardmembers

Allusers/clients,members,partners

Allusers/clients,members,partners

Fees/Costs

Fee-for-serviceonaslidingscalebasedonclient’s

annualbudget

Varyinglevelsofannualdues

Alacartepayments

Fees/Costs

Fee-for-serviceonaslidingscalebasedonclient’s

annualbudget

Fee-for-service;Arevolvingloanfundmayalso

beusedtocoversomecoststhatusesprojected

energycostsavingsforpayback

Alacartepayments

Alacartepayments

researchnetworkswillhelpmotivatedifferentbusi-

nesses,researchers,utilities,andotherplayersto

worktogethertoaddresssharedtechnicalchal-

lengesandmarketopportunities

➤ Business Development, Commercialization, and

Regulatory Assistance: Referralstoresourcesfor

financing,businessplanning,regulatoryassistance,

exportpromotionandotherserviceswillfacilitate

thecommercializationofnewproductsandser-

vicesbyBETIusers

BETI FEE AND SERVICE STRUCTURE

METROPOLITAN

BUSINESS

PLANNING

INITIATIVE

PUGET SOUND

7

ADDRESSING MARKET BARRIERS.BETI’s

serviceswilltackletwomajormarketbarriersthat

inhibitregionalEEentrepreneursfromsuccessfully

launchingnewproductsintothemarket.First,BETI’s

performanceverificationanddemonstrationservices

willhelpalleviatethefirstbuyerchallengesthatresult

whenbuildingownersandoperatorsareuncertain

hownewandemergingenergyefficiencygoodsand

willactuallyperformin“real-world”conditions,and

thuswithholdinvestment.Second,BETI’sintegration

serviceswilladdresstheneedforimprovedtechnol-

ogyintegrationsothatinnovatorscanidentifyand

improvehownewEEgoodsandservicesinteract

withthewholecomplexsystemofdesign,materials,

software,andoperationsthattogetherdeterminea

building’senergyefficiency.

FOCUSING ON IMPLEMENTATION.BETIwill

operateinthePugetSoundasapublicentity,gov-

ernedbyaboardoftheregion’skeypublicandprivate

stakeholders.Aleansix-personmanagementstaffwill

handleoperations,whileahiredmastercontractor

willprovidetheobjective,reliabletechnicalexpertise

tomanagelabandfieldtestingservices.BETIwill

sustainofficeandlaboperations,staff,andcontrac-

torsonself-generatedrevenuesfiveyearsafterinitial

implementationfundingissoughtandgainedfroma

mixofprivatesponsorshipsandstateand

federalgrants.

SEIZING MARKET OPPORTUNITIES.

BETIwillenablePugetSound’sEEinnova-

torstomakegreatstridesintappinginto

theindustry’shugeandgrowingmarket

potential.McKinsey&Company’sJuly

2009“UnlockingEnergyEfficiencyinthe

U.S.Economy”reportestimatedaneedfor

domesticinvestmentof$520billionthrough

theyear2020totakeadvantageofthefull

potentialoftheenergysavingsavailableto

thiscountry.Moretargetedprojectionsindi-

catethatby2030,thetotalU.S.EEmarketis

expectedtotop$700billion,upfrom$300

billionin2004.Specifically,theU.S.market

forbuildingautomationandcontrolstechnol-

ogyisprojectedtogrowto$6.8billion.

GlobalestimatesforsomeofPugetSound’s

primarytradingpartnersindicatehuge

internationalmarketpotentialaswell.Forexample,

HSBC’s“SizingtheClimateEconomy”reportfrom

September2010projectsa$59billionbuildingenergy

efficiencyindustryintheEuropeanUnion,$58billion

inChina,$24billioninIndia,$10billioninJapan,and

$9billioninBrazilin2020.

BRINGING TOGETHER ALL THE STAKE-

HOLDERS. BETI’sserviceswillbeavailableto

individualsororganizationswishingtotestand/

orverifypromisingnewEEinnovations,including

researchers,start-upbusinesses,establishedproduct,

service,andsoftwareproviders,andnationaland

internationalcustomers.Inaddition,BETI’sindustry

outreachandprogrammingactivitieswillinvolve

potentialmemberentitieslikethePacificNorthwest

NationalLaboratory(PNNL),theUniversityof

Washington(UW),WashingtonStateUniversity(WSU),

regionalutilities,energyservicecompanies,thebuild-

ingtrades,cleantechinvestors,andlarge-scaleEE

companies/integrators.BETIwillalsoinviteparticipa-

tionfrompotentialpartnersinterestedingrowingthis

nichecluster,suchasstate,regional,andlocalgovern-

ments,commercializationorganizations,workforce

developmentprograms,militaryfacilities,andbanks

andinvestmentfirms.

BETI will help the region capitalize on numerous market opportunities

GREEN BUILDING

$140 BILLION(2013)

RESIDENTIAL BUILDINGS

$39 BILLION(2004)

SMARTGRID

$15.8BILLION (2015)

ENERGYMGMT SYS

$6.8 BILLION(2020)

APPLIANCES &ELECTRONICS

$68 BILLION (2004)

COMMERCIALBUILDINGS

$51 BILLION (2004)

INDUSTRIAL BUILDINGS

$75 BILLION(2004)

Market size

of EE sector

Source: American Council for an Energy Efficient Economy, Pike Research, Lux Research

the

team

BROOKINGS

METROPOLITAN

POLICY

PROGRAM

8

T H E T E A M

BETIboastsanimpressiveleadershipteamcommittedto

propellingtheproposalfromconcepttoreality.

LEAD PROJECT MANAGEMENT.PugetSound

RegionalCouncil(PSRC),whichservesasbothcentral

PugetSound’smetropolitanplanningorganization

andregionaleconomicdevelopmententity,isrespon-

siblefororganizingBETIandgettingitofftheground.

PSRCalreadycapablymanagesadeepportfolioof

region-wideeconomic,transportation,andlanduse

activities,andgeneratessignificantstakeholder

supportandinputonpriorityregionalinitia-

tivesthroughits350-memberstrongProsperity

Partnershipcoalition.

PROJECT CO-CHAIRS. Averyexperiencedgroup

ofregionalleadersrepresentativeofBETI’sbaseof

stakeholdersdirectedthedevelopmentoftheBETI

proposalandremaininvolvedinoverseeingitsimple-

mentation.Theyincludelocalelectedofficials,the

presidentoftheUniversityofWashington,andheads

ofboththeGreaterSeattleChamberofCommerce

andtheSeattleFoundation.Withtheperspectivesof

theseinstitutionsrepresentedinBETIplanning,the

proposalisalreadygeneratingbroadregionalbuy-in.

PROJECT STEERING COMMITTEE. Forty

representativesfromindustry,community,andthe

workforceandeconomicdevelopmentfieldsserved

ontheBETIprojectsteeringcommittee,helpingto

ensuretheproposalisgroundedinmarketand

implementationrealities:

•Battelle/PacificNorthwestNationalLab

•BoeingCompany

•CityofEverett

•CityofSeattle

•CypressVenturePartners

•EnerG2

•GreaterSeattleChamberofCommerce

•KitsapCounty

•McKinstryCompany

•MicrosoftCorporation

•NorthwestEnergyEfficiencyCouncil

•PortofTacoma

•PugetSoundEnergy

•SeattleFoundation

•SeattleNorthwestSecurities

•ShoreBankEnterpriseCascadia

•SnohomishCountyPublicUtilitiesDistrict

•SouthSeattleCommunityCollege

•U.S.Navy

•UniversityofWashington

•Verdiem

•WashingtonStateDepartmentofCommerce

•WashingtonStateUniversity

•WorkforceDevelopmentCouncilofSeattle-

KingCounty

the

ask

METROPOLITAN

BUSINESS

PLANNING

INITIATIVE

PUGET SOUND

9

T H E A S K

Business,regional,state,andfederalleadersallhaveastake

inBETI’simplementation,andhaveimportantrolestoplayin

helpingensureitssuccess.

BUSINESS.ForbusinessesintheEEindustry,

BETIwillprovideauniquesuiteofservicesnot

availableelsewhere,helpingcompaniesattainvital

productperformancedataneededtosecurebuyers

fortheirproductsandservices.Forthosebusinesses

inrelatedfields—fromutilitiestorealestatedevelop-

ers—BETIwillfacilitatethedevelopmentofproducts

thatwillhelpmeetconservationgoalsandbuilding

energycodes.Tosupporttheseoutcomes,these

businessescan:

➤ Investstart-upfundingtosupportBETI’sinitial

operationsandprogramdevelopment

➤ BecomecustomersofBETI’sfee-for-service

programs

➤ Provideboardleadership

REGIONAL CIVIC AND GOVERNMENT

LEADERS.ForPugetSoundleaders,BETIcan

ultimatelyenhancefutureeconomiccompetitiveness

forthewholeregionbyboostingentrepreneurship,

jobcreation,exportpotential,andenergysavings.

ToadvanceBETI,theseleaderscan:

➤ CoordinateBETI’sactivitieswiththeirrelated

EEpolicies,programs,andinvestments

➤ Seedarevolvingloanfundtohelpfinancereal-

worlddemonstrationsofbuildingEEinnovations

➤ AllowtheirfacilitiestobeusedintheBETI

demonstrationnetwork

STATE GOVERNMENT.ThroughBETI,thestateof

Washingtoncancontinuethegreatmomentumand

organizationalcollaborationdevelopedduringthe

region’srecentbidfortheDepartmentofEnergy’s

EnergyEfficientBuildingSystemsRegionalInnovation

Cluster(E-RIC)grantawardandsupportgoalsout-

linedintheCleanEnergyLeadershipCouncilstrategy.

Inparticular,thestatecan:

➤ AppropriatefundstoconstructBETI’sfacilities

andpurchaseneededequipment

➤ ConnectBETItootherstateEEinitiativesaimed

atretrofitsandweatherization

➤ OpenstatebuildingstoparticipateintheBETI

demonstrationnetwork

FEDERAL GOVERNMENT. BETIoffersfederal

leadersawaytoaddressnationalgoals,suchassup-

portingregionalinnovationclusters,doublingexports,

bolsteringcommercializationsupportstructures,and

producingbuildingsthatuselessenergy.Tosupport

BETI,federalpolicymakerscan:

➤ Betteraligntheeffortsofthemanyagen-

ciesthatBETI’sstrategycaninvolve(e.g.,the

EconomicDevelopmentAdministration,theSmall

BusinessAdministration,theInternationalTrade

Administration,andthedepartmentsofEnergy

andDefense,amongothers).Thisincludesgreater

federal-levelinteragencycoordinationtodeliver

integratedresponsestothesekindsofopportuni-

ties,aswellasregion-levelfieldofficecoordination

toprovidea“one-stop”forregionalimplementers

➤ Providemoremulti-agencyfundingopportunities,

likethefederalE-RICcompetitionbutwithmore

modestgrantamounts

➤ Improveenergyefficiencyexportpromotiondata

trackingandtechnicalassistance

➤ OpenfederalbuildingstoparticipateintheBETI

demonstrationnetwork

the

retu

rns

BROOKINGS

METROPOLITAN

POLICY

PROGRAM

1 0

T H E R E T U R N S

BETIwillresultin1,000newjobsfortheregionby2020,and

$140millioninannualeconomicimpact—areturnoninvest-

mentofalmost18:1.

WiththeU.S.marketforbuildingautomationand

controlstechnologyprojectedtogrowto$6.8billion

by2030andwithacommensuratemarketinterna-

tionally,theoverallmarketopportunityis$14billion.

Therefore,areasonableassumptionofa1percent

increaseinmarketshareforthePugetSoundregion

by2020wouldresultina$140millionannualeco-

nomicimpact.This1percentgrowthisinlinewith

HSBC’sestimationthattheUnitedStatesasawhole

willincreaseitsglobalmarketshareintheenergyeffi-

ciencyindustryfrom20percentin2009to21percent

by2020.

BETI’simpactcomesfromtwosources.Firstisthe

directimpactthatBETIserviceswillhaveonits

clients’abilitytoexpandtheirmarketshare.Second,

morebroadly,isBETI’sroleinestablishinganinter-

nationallyrecognizedenergyefficiencysoftwareand

automationtechnologyhubintheregion,whichwill

attractnewcompaniesandnewinvestmentwhile

facilitatingincreasedexports.

COMPANY EXPANSION, CREATION, AND

ATTRACTION. Atfullscale,BETIwillbework-

ingwithapproximatelyadozenclientsatanyone

time,rangingfromlargecorporationsdoingmultiple

buildingteststosmallentrepreneurswithmore

limitedscale.Onanannualbasis,thismeansthat

24to48newtechnologiesarebeingvalidatedand

sentintothemarketplace.Forexistingcompanies,

BETIserviceswillallowforanexpansionofstaffto

supporttheincreasedmarketsharetheycanexpect

fromhavingasignificantmarketadvantageover

theirnon-validatedcompetitors.Forentrepreneurs,

BETIdemonstrationwillallowthemtoconverttheir

ideasintoviableproducts,spurringnewfirmcreation.

Finally,astheinternationalbrandofthisregionalclus-

tergrows,nationalandinternationalcompanieswill

wanttorelocatehere,bothtocollaboratewithothers

aswellastoaccessBETIservices.Overall,theimpact

ofthisbusinessexpansion,creation,andattraction

willresultina10percentincreaseinourregion’s

energyefficiencyindustry,generating1,000newjobs

forourregion’sresidents.

INVESTMENT ATTRACTION. Byhelpingitsclients

refinetheirproductsandimprovetheirreadinessfor

marketlaunchandsuccess,BETIwillboosttheoverall

attractivenessofitsclientstopotentialinvestors.

Infact,byhelpingtobrandthePugetSoundasan

internationalhubforthedevelopmentofthiskindof

technology,morecapitalwillflowtotheregion’sEE

industryingeneral,astopcleantechinvestorscome

lookingfor“thenextbigthing.”WhileWashington

stateattracted$200millionincleantechventurecapi-

talin2008,Californiaattracted$3.5billion,andso

wecanexpectasignificantshiftfromcurrentregional

levels.Aconservativeestimatewouldbeatleasta

25percentincreaseinregionalEEventurecapital

investment,oranadditional$50million.

EXPORT PROMOTION. Approximately75percent

ofsalesgrowthfromBETIclientswillcomefrom

domesticmarkets,duetoproximityandeaseofdoing

business;commensurately,around$100millionof

theeconomicimpactofBETIwillbefromU.S.sales.

However,throughacombinationofBETIsupportand

relatedlocal,stateandfederalactivity,weforeseea

25percentincreaseininternationalsalesofenergy

efficiencysoftwareandautomationtechnologyby

localfirms.Again,thesecompanieswillbemorecom-

petitiveintheinternationalmarketbecauseofthe

third-partyvalidationoftheirproducts.Topmarkets

forinitialexportwillbeCanada,France,andGermany,

aswellasJapanandSouthKorea.Washingtoncur-

rentlydoes$17billionintradewiththesecountries,

andsoa$40millionincreasefromEEtechnology

salesisareasonableassumption.

chal

len

ges

METROPOLITAN

BUSINESS

PLANNING

INITIATIVE

PUGET SOUND

1 1

I M P L E M E N TAT I O N C H A L L E N G E S

InpursuingBETI,stakeholderswillhavetosuccessfullynegotiatea

numberoffactors.

COMPETITIVE LANDSCAPE. NearlyallU.S.

regionsarevyingforsomeroleinthecleanenergy

economyandmanyoftheseplacesalsohavepar-

ticularstrengthsintheenergyefficiencyniche.For

example,SiliconValleyboastsalargenumberof

EEcompaniesandaninternationally-admiredinno-

vationecosystem;Denverhasastrongcleantech

industrybaseandislocatedincloseproximitytothe

DepartmentofEnergy’sprimarylabforenergyeffi-

ciencyresearchanddevelopment;andPhiladelphia

istherecentwinnerofthepotentiallycatalytic

$122millionE-RICgrantfromtheDepartmentof

Energy.However,thePugetSoundcancompeteinthis

landscape,giventhestrengthofitsexistingEEindus-

tryprofile,itsnationalreputationasagreenleader,

andtheBETIplantofacilitatethevalidationandmar-

ketadoptionofnewenergyefficiencytechnologies.

INDUSTRY CHALLENGES.Anumberofaspects

uniquetotheEEsectormakeeconomicdevelopment

engagementinthisspacedifficult.Forstarters,the

sectorisextremelyfragmentedacrossavarietyof

players,includingbuildingowners,designers,technol-

ogydevelopers,andutilities.Further,theuniqueness

ofresidentialandcommercialbuildingsmeansthat

structureshavefewcommonfeaturesthatcanbe

upgradedatscale,andfinancingtoolsforretrofitsare

stillinshortsupply.Nonetheless,theEEmarketisa

growthmarket,anditsstandoutsegmentsalignfavor-

ablywiththePugetSound’sindustryassets.BETIwill

directlytacklesomeofthesechallenges,facilitating

collaborationandloweringthetechnologicaluncer-

taintythatservesasadisincentiveforinvestment.

POLICY UNCERTAINTY. AlthoughEEisapriority

forfederal,state,andlocalgovernments,andpublic

andprivateutilities,theprograms,policies,andincen-

tivestheyoffervarygreatlyacrossplaceandtime,

makingitdifficulttobuildscale.Furthermore,theend

offederalfundingflowsforEEthroughtheAmerican

RecoveryandReinvestmentAct(akaARRAorthe

2009“stimulus”bill)createsuncertaintyaboutthe

leveloffuturefederalcommitmentinthisarena.One

wayBETIaddressesthepublicpolicychallengesisby

explicitlyconnectingwithprivatesectorstakeholders

whohavemarketincentivestoengageinEEdem-

onstrationandtestingandwhohavetheresources

tosustaintheBETIeffortinthelongerrunwithout

publicsubsidies.Atthesametime,BETIwillmaximize

theimpactofwhatlimitedpublicinvestmentcanbe

madeinEEtechnologydevelopment.

the

rig

ht

idea

BROOKINGS

METROPOLITAN

POLICY

PROGRAM

1 2

T H E R I G H T I D E A I N T H E R I G H T P L A C E AT T H E R I G H T T I M E

Overall,theproposedBETIhasallthepiecesinplace

tosucceed.

THE RIGHT IDEA. Buildingsareresponsiblefor

40percentofallprimaryenergyuseintheUnited

States,andpolicyleadersashighupastheenergy

secretaryhavesaidthatreducingU.S.buildingenergy

consumptionprovidesoneofthefastest,cheapest,

andmostdirectroutestohelpingmeetU.S.andworld

greenandcleanenergygoals.PresidentObama’s

BetterBuildingInitiativecatalyzesthisefforteven

further.Againstthisbackdrop,BETI’svalueproposi-

tionisclear:Theprovisionoftesting,demonstration,

andbusinessassistanceservicestoPugetSoundEE

innovatorswillhelpthemtakeadvantageofnational

andglobalmarkettrendstobettergrowthisregional

cluster,turnitintoamajorexportsector,andbrand

theregionasleaderinthisindustryniche.

THE RIGHT PLACE. ThePugetSoundisrecognized

asaleadingregionintheinnovationeconomy,having

supportedthebirthandincrediblegrowthoftechnol-

ogy-drivenheavyweightslikeMicrosoft,Boeing,and

manyothers.Theregionalsohasconsiderableexperi-

enceinplanningandexecutingregionalinitiatives.

Moreover,theregionboastsanarrayofassetsthat

canbedeployedtohelpimplementBETI,including

progressiveutilities;strongresearchcapabilitiesat

UW,WSU,andPNNL;majormilitarybaseswithorders

toreduceenergyconsumption;relatedlargeindustry

clustersinITandmanufacturing;andawell-devel-

opedinternationalbusinessinfrastructurecapableof

sellingenergyefficiencygoodsandservicestothe

world.

THE RIGHT TIME. Trendspointtomajorgrowthin

thenationalandinternationalenergyefficiencymar-

ketsoverthenextcoupleofdecades,andthepolicy

environmentgrowsincreasinglyfavorableofgreen

buildingpursuits.IntheU.S.alonetheenergyeffi-

ciencysectorisprojectedtoexpandto$700billionby

2030,upfrom$300billionin2004.Withthisindustry

sectorreallypoisedtotakeoff,pursuingBETInow

isasmartstrategyforhelpingtopositionthePuget

Soundattheforefrontofstakingaleadershipclaim

inthisnichebeforeanyotherregionfullyestablishes

itselfasaregional,national,orinternationalenergy

efficiencyhub.

PH

OT

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Y:

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A B O U T M E T R O P O L I TA N B U S I N E S S P L A N N I N GThisprospectusisapartofalargermetropolitanbusinessplanninginitiativeledbytheMetropolitan

PolicyProgramatBrookingsincollaborationwithBrookingsNon-ResidentSeniorFellowRobert

Weissbourd.ThreeregionalbusinessplansandassociateddocumentswithmetropartnersinNortheast

Ohio,MinneapolisSaintPaul,andthePugetSoundregionhavebeendeveloped.Eachplansituatesthe

currentmarketpositionofthepilotmetro;detailsemergingregionalstrategiesforgeneratingmetro

prosperity;andadvancesadetaileddevelopmentinitiativeinonepressingareathatpromisestodeliver

successfulmetrogrowthinanextAmericaneconomythatismoreexport-oriented,lower-carbon,more

innovation-fueled,andopportunityrich.Thesebusinessplansalsosolicittailoredresponsesfortheir

achievementfromfederal,state,andlocalleaders.

A B O U T T H E B R O O K I N G S - R O C K E F E L L E R P R O J E C T O N S TAT E A N D M E T R O P O L I TA N I N N OVAT I O NThisispartofaseriesofpapersbeingproducedbytheBrookings-RockefellerProjectonStateand

MetropolitanInnovation.

StatesandmetropolitanareaswillbethehubsofpolicyinnovationintheUnitedStates,andtheplaces

thatlaythegroundworkforthenexteconomy.Theprojectwillpresentfiscallyresponsibleideasstate

leaderscanusetocreateaneconomythatisdrivenbyexports,poweredbylowcarbon,fueledbyinnova-

tion,richwithopportunity,andledbymetropolitanareas.

A C K N O W L E D G M E N T STheMetropolitanBusinessPlanninginitiativeinPugetSoundwouldnothavebeenpossiblewithoutthe

projectmanagementprovidedthePugetSoundRegionalCouncil,includingSherryAmbrose,JoanChen,

ChrisEndresen,andEricSchinfeld,andthewritingandresearchassistanceprovidedbyMichaelLuis.

TheinitiativealsobenefittedfromthemanyPugetSoundleaderswhohaveprovidedvaluableinputto

thiswork,includingtheprojectco-chairs:MayorRayStephanson,cityofEverettandPSRCPresident;

PhyllisWise,InterimPresident,UniversityofWashington;JohnGardner,VicePresidentforEconomic

DevelopmentandGlobalEngagement,WashingtonStateUniversity;NormanRice,PresidentandCEO,

SeattleFoundation;andPhilBussey,PresidentandCEO,GreaterSeattleChamberofCommerce.Special

thankstothecityofSeattleforfundingthedevelopmentofthebusinessplan.

ProjectconsultingwasprovidedbyGretchenKoskaroofRWVentures,andMarkMuro,SarahRahman,

andKenanFikriatBrookings;thoughtfulreviewwasgivenbyBrookings’BruceKatz,AmyLiu,and

JulieWagner;andgenerousfinancialsupportwasprovidedbytheJohnD.andCatherineT.MacArthur

Foundation,theGeorgeGundFoundation,theHeinzEndowments,theF.B.HeronFoundation,the

RockefellerFoundation,andTargetCorporation.

Brookings,inparticular,alsothankstheMetropolitanLeadershipCouncil—abipartisannetworkofindi-

vidual,corporate,andphilanthropicinvestorsthatprovideitfinancialsupportbut,moreimportantly,are

trueintellectualandstrategicpartners.Whilemanyoftheseleadersactglobally,theyretainacommit-

menttothevitalityoftheirlocalandregionalcommunities,arareblendthatmakestheirengagement

evenmorevaluable.

The Brookings Institution is a private non-profit organization. Its mission is to conduct high-quality, independent research and, based on that research, to provide innovative, practical recommendations for policymakers and the public. The conclusions and recommendations of any Brookings publication are solely those of its author(s), and do not reflect the views of the Institution, its management, or its other scholars.

Support for this publication was generously provided by the Rockefeller Foundation.

Brookings recognizes that the value it provides to any supporter is in its absolute commitment to quality, independence and impact. Activities supported by its donors reflect this commitment and the analysis and recommendations are not determined by any donation.

F O R M O R E I N F O R M AT I O N

Thisinvestmentprospectusisadistilledversionofafull-length,

fullydocumentedregionalbusinessplanthatcanbefoundhere:

www.prosperitypartnership.org/businessplan.htm

EricSchinfeld

ProgramManagerforEconomicDevelopment

PugetSoundRegionalCouncil/ProsperityPartnership

eschinfeld@psrc.org