Thursday, July 16th, 2009
Indy: Good Economic Development – Energy Systems Network
Indianapolis is among the top performing Midwest cities on a number of measures. For example, it has the fastest population growth of any metro area over one million people and it is also among the best performers in terms of employment. It can be tempting to view this as a product of good circumstances or good luck – state capital, center of state, only large city in state, Eli Lilly, etc. And all of those are important to the city’s success to be sure. But I think it misses a lot of the flat out good decisions that good execution that have contributed, particularly in the economic development space.
I’ve highlighted some of these before, but I thought I’d start out another mini-series with more good examples.
First, I recently noted how many cities mistake real estate development for economic development. Indy hasn’t been immune to the lure of the large publicly subsidized real estate project. But when Indy has done it, it has generally been in the service of some greater strategy that paid off, such as amateur sports and events, not just a random series of “next big thing” projects.
This strategy created the Wholesale District, probably the best such revitalized multi-use district of any Midwest peer city and one of the top in the country. The city has a mall, an arena, stadium, convention center, and 4-5,000 hotel rooms all in a small area, combined with tons of restaurants and bars, along with some offices, residential space, and other destinations like the Mexican Consulate. Everything feeds on each other synergistically. This environment has been very attractive to events, creating a business that, as Gov. Daniels recently noted, is a “cash cow” for the state.
Just as one specific example, the new Lucas Oil Stadium. The Indy Star ran a recent article on all the events that it booked (as well as some challenges). What I found amazing about this is that notorious stadium critic Prof. Mark Rosentraub at the University of Michigan actually had some decent words to say about it. “In this economy, to be honest, I think Lucas is doing an amazing job.” And, “This was an investment in human capital to use the Downtown as a linchpin to attract highly skilled workers for Eli Lilly, banks, insurance companies, the kinds of workers we will need in the 21st century. When the economy is in good shape, these facilities will work.” This is from the guy who literally wrote the book on why stadiums are a bad investment.
Moving on, I wanted to go out on a limb and highlight something I think is a good strategy even though it is just getting started and hasn’t paid dividends yet. That is the new Energy Systems Network, the new economic development initiative focused around green tech.
I’ve long criticized the “me too” economic development strategies every single city and state seem to have in the hot sectors du jour: life sciences, high tech, green industry, and advanced manufacturing. It’s not so much that these are bad sectors to go after, but a completely generic, undifferentiated and unfocused strategy for a location with no competitive advantage just isn’t going to cut it. Alas, that’s what most of these are.
But when you look at this Energy Systems Network, a few things stand out. Once, it is largely a private sector led iniative. It’s another project of the Central Indiana Corporate Partnership. Now that, in itself, is not unusual as most cities have such a corporate vehicle that is the main backer of economic development. But here it looks like most of the investment is going to be coming from private companies pursuing actual products, not a government boondoggle fund.
The ESN is focused, looking at a few specific subsectors: wind and solar power, hybrid/plug-in vehicles, second generation biofuels, distributed power generation, and systems integration. Now, lots of people are chasing wind and solar, but for that one, so what? Power generation using those technologies is not a winner take all type industry like so many others that feature major clustering effects. And Indiana is doing well. Where nominally progressive states like Wisconsin are slow out of the gate with wind power, Indiana something like 14th in the country in it, and was number one in increasing its wind power capacity last year, with many more projects in the pipe.
As for vehicles, local companies have joined forces to collaborate on two initiatives. The Hoosier Heavy Hybrid group is looking at building more efficient trucks and something called Project Plug In is looking at a large scale pilot for plug-in vehicles and smart grid technology in Central Indiana. Could both of these fail? Of course. Entrepreneurial ventures frequently do. But that’s ok. And at least these guys are looking at specific things they want to do, not just a bunch of pie in the sky dreams. And there is a base of expertise to work from.
I do think corn based ethanol is bad energy solution, but given that Indiana has a large agricultural base, excluding that probably would have been politically impossible.
On the whole however, you see something here that is reasonably focused and looks at where Indiana can apply its expertise not to take over the world, but to get its fair share of the pie. And they are trying to do it with actual products. Compared to the marketing based initiatives you often seen in the econdev world, the contrast is clear.
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Aaron M. Renn is an opinion-leading urban analyst, consultant, speaker, and writer on a mission to help America’s cities thrive and find sustainable success in the 21st century.
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One not-so-small factor you didn't mention: Volvo has put EnerDel lithium-ion batteries, made in Central Indiana, into its plug-in hybrid car. We're actually out front in that race, and it's partly because of the ignition-systems and power management legacy suppliers (Delco, Remy, Delphi). That GM wants Delphi's Kokomo electronic engine management capability back in house is significant.
On wind energy: Boone Pickens canceled his project because the cost of collection and transmission lines would have been horrendous to run from the plains of the Texas panhandle to places where demand actually exists. (Panhandle to Dallas is 400 miles or so.)
There's noplace in Indiana where wind is strong (basically the I-65 corridor from Lebanon to Lake County) more than 90-100 miles from Chicagoland or Indianapolis, and it's already well-served by existing grid. Advantage, Indiana.
So wind availability turns out to be only a small part of the economic equation. Existing infrastructure in the Rust Belt is actually an advantage in this case! (One would think Michigan could also jump in, at least the west coast of the state. But maybe the cottagers wouldn't want their views ruined.)
"One would think Michigan could also jump in, at least the west coast of the state."
Jump in? The state has two large wind farms in the "Thumb" area along Lake Huron:
http://www.mlive.com/news/bay-city/index.ssf/2009/01/newest_wind_farm_spinning_in_t.html
A large wind farm is also planned for the west side of the state near Ludington:
http://www.ludingtondailynews.com/news.php?story_id=45179
The state has identified four areas best suited for wind power, including the Thumb and west coast:
http://www.michiganpolicy.com/index.php?option=com_content&view=article&id=500:wind-energy-turbines-an-emerging-sector-of-michigans-economy&catid=39:energy-and-environment-policy-briefs&Itemid=138
This page highlights some earlier wind power efforts in the Traverse City/Mackinaw area dating back to the 1990s.
http://www.urbanoptions.org/RenewableEnergy/WindElectricityForACity.htm
I'm not convinced. Both examples of good practice seem muddled. However, I'd like to know more about stadium boondoggles and the attraction of talent. It's a losing proposition now, but how does turn that around in the future?
Many green jobs are in places like ethanol refineries in the great plains, or involve constructing new HV lines between wind farms and population centers. In spite of all the hype, green is one of the worst econ dev strategies for any city/metro, because it has a limited need for college educated urban workers.
Jim, I don't expect this energy thing to be a home run. But I also don't think the answer is to swing for homers. Cities need to be going for lots of diverse singles.
As for the stadium and talent, that's Rosentraub's view and I don't rate it very highly. But, the revitalization of the south side of downtown was clearly done right. How many cities the city of Indy have an actual mall that isn't on the verge of death? Now Circle Centre has its challenges to be sure, but it's a very different situation than say what happened in Columbus.
The events business, enabled by the stadium, provides the extra support needed to keep these downtown entertainment ventures around. This has to have some civic benefit. I just had dinner with a guy in Palatine, Illinois who mentioned what a great time he had in Indy at a conference he attended there.
There's a long way to go with downtown Indy yet, but the Wholesale District was done right.
David,
I disagree almost completely. Most importantly, economic development can't just be about jobs for the educated. The majority of the people don't have college degrees. What are they supposed to do for a living?
The economic struggles of those who aren't part of the educated elite, and the resulting two tier society, will hold any city back. Not least of which because those people will oppose many progressive efforts at city betterment because they will rightly conclude there is nothing in it for them.
I've said it a million times, there can't be a prosperous Indianapolis, without a prosperous Indiana. CICP and others realize this, which is why all of their initiatives do double duty as both city and state initiatives. To the extent that rural areas and smaller manufacturing towns are able to share in economic success and see their economic success linked with the overall metropolitan economy of Indianapolis, that is a good thing.
David, ethanol refinery jobs are green in the sense of money, not the environment. They're about the farm lobby and about Iowa's first in the nation caucuses, and nothing else.
"David, ethanol refinery jobs are green in the sense of money, not the environment."
No doubt this is true. But this view ignores one benefit of ethanol which is that it provides an alternative fuel source for foreign petroleum products. While it's not a major source of fuel, those measures that can help reduce our demand for foreign oil (ethanol, conservatation, etc.) can benefit the US, especially in the area of foreign relations with hostile states who control the petroleum we purchase.
That's not an environmental benefit. It's a questionable foreign policy benefit, one that trades lower oil imports for a global food crisis.
"It's a questionable foreign policy benefit, one that trades lower oil imports for a global food crisis."
That's a bit of hyperbole. The US has been including ethanol as part of the gasoline mix in the gas used for automobiles for a number of years without creating a global food crisis.
anon, Alon is right.
Corn-to-ethanol schemes rely upon tax incentives. The "green" aspect is a sham, as it takes lots of water, fertilizer, and energy to grow, harvest, transport, and ferment the corn. Agricultural production uses lots of herbicides and pesticides that are implicated in water-quality degradation. Whether there is a net energy gain is questionable.
In the meantime, ethanol-driven corn demand drives up the cost of corn as an input (animal feed, corn syrup) which rolls right through the grocery store as higher prices for almost all engineered food (i.e. bagged, boxed or canned goods with sweeteners added), beef, pork, and chicken.
If/when scientists produce a scalable cellulosic ethanol-production system, THEN it could lead to something like energy independence.
"If/when scientists produce a scalable cellulosic ethanol-production system, THEN it could lead to something like energy independence."
I wasn't advocating ethanol as the path to energy independence. But it's already part of our energy mix, has been for at least a couple of decades, and by some measure reduces what would be even greater dependence on foreign oil. It also managed to be used for the past couple of decades without causing a global food crisis as Alon stated. The same criticisms you made against using corn for fuel can and have been made against using corn for food, especially for feeding cattle for beef. Also, I've yet to see any evidence that ending the production of ethanol for fuel will have any significant impact on food prices.
"Also, I've yet to see any evidence that ending the production of ethanol for fuel will have any significant impact on food prices."
The evidence is to the converse: starting large-scale corn-ethanol production drove prices up: go to http://www.wikinvest.com/commodity/Corn