There is a great deal of buzz in the economic development community about the potential for alternative energy initiatives to have significant, positive impacts on states and local economies.  This buzz has been escalated by several recent factors.  First, concern over the environment has spread from being an issue primarily pursued by environmental interest groups and activists to being pursued widespread among business and citizens.  Second, the recent increase cost of traditional fuels, most notably oil and gas, has negatively impacted the fiscal bottom-line for consumers and business alike.  This has called in to question many investments and business models based on a continuation of low cost or even “cost stable” traditional energy.  Third, the passage of the American Recovery and Reinvestment Act at the federal level promises significant funding and support to governments and businesses for alternative energy programs, R&D, and commercialization.

All of this renewed and increased attention has both business and governments scrambling to find ways to convert the attention into economic opportunity.  However, to make the most of the economic development opportunities the state and local economic development community and policymakers need to avoid jumping into the latest trend or chasing the latest grant or subsidy, without a focused strategy based on both short and long term opportunities.  The following are important issues to consider for increasing chances for economic development success.

Strategies and initiatives should be tied to existing strengths and assets.  This includes existing strengths in R&D, infrastructure, and workforce.  Doing so will increase the chances that initiatives can be implemented in the near-term and sustained over time because the underlying foundation to be built upon is already in existence.  It also increases economic use of past and current investments in these underlying assets and avoids the cost of building without a foundation 

Strategies and initiatives should also be tied to opportunities and assets in a state or region’s non-energy economic sectors including in advances in technologies and commercialization in those other sectors.  This creates not only direct economic impacts but also indirect impacts and “spinoffs” to other sectors.  For examples, if done properly, biomass energy development can help create markets and efficiencies in the forestry and agricultural related sectors and wind energy can increase the market for composite manufacturing.

Economic developers and policymakers must also understand that there is likely no one perfect alternative energy solution and they should avoid putting all their eggs in one basket.  Some solutions which may seem ideal are still very far to market in need of technological solutions or improved economic models.  In the meantime there are solutions which may not be the long-term environmental ideal but lessen our dependence on out of state, out of country fuels, technologies, and products.  Adhering to this advice means policymakers should support but not become overly aggressive in trying to pick winners as entrepreneurs and market will ultimately decide what is feasible.

Finally, solutions should not be based on long-term subsidies.  Subsidies can help jump start and support a nascent technology or business model but are not the long-term answer as over the long-term they skew consumer and business behavior towards inefficiencies.

In summary, there are plenty of economic development opportunities that renewed interest and investment in alternative energies present.  To make the most of these opportunities, the economic development community along with state and local policy makers should avoid jumping into the latest trend or chasing the latest grant without a strategic focus based on existing economic assets.