Californians are convinced green technology will lead the way out of the economic doldrums and towards a clean environment. Does the Golden State have lessons for Ireland?
CALIFORNIA HAS ALWAYS had a love affair with automobiles. Los Angeles is home to the world’s fanciest car museum. Hollywood has long had a habit of using cars to make statements, from red convertibles to stretch limousines. You notice it too with the sheer volume of cars on the roads – nearly 20 million for a population of 37 million. And the extraordinary multi-lane freeways that (literally) cement the notion into your psyche that over here the car is king.
In a way, visiting the most rapacious, gas-guzzling place in the world to learn about clean and green technology seems like going into a pub to get tips on abstinence.
But California has taken to clean and green technology with the zeal if not the temperance of the reformed alcoholic. Its philosophy is that same high technology that made Silicon Valley the centre of the global ICT industry will cure America’s addiction to oil.
Not for Californians the self-denial of Europe or any acts of contrition. Politicians and celebrities show their credentials here by driving around in a Toyota Prius or, if you are state governor Arnold Schwarzenegger, converting your Hummer to hydrogen-cell power in a typical only-in-Hollywood gesture.
But the irony of it doesn’t last long. The US and the Golden State have taken to alternative and renewable technology with a vigour and enthusiasm that is unmatched anywhere else. And since November, the inspiration is now coming from the top. President Barack Obama has allotted a tenth of the mammoth $780 billion (€604 billion) stimulus bill, designed to kick-start the moribund US economy, to green-tech projects – green energy, better energy efficiency and cleaner technology.
Unsurprisingly, a huge wedge of this $780 billion will end up in California, where the green-technology sector has exploded in recent years. Governor Schwarzenegger has gone as far as to say that green tech will be the principal solution to get California out of the terrible economic doldrums it is in at present (unfortunately, it was also a global leader in the sub-prime mortgage market).
Investors have been flocking to the green-tech sector in recent years and there are few places in the world – Germany, Japan, Singapore and the Scandinavian countries – which can compete with the mind-boggling variety of new projects that are pursued. Venture capitalists invested $1.8 billion (€1.4 billion) in Californian green-tech companies last year, almost half of all investment in the United States.
Renewables are well-established in California, a state where there are massive wind and solar farms. There are also firms working on “smart metering” and grids that help consumers use energy more efficiently by switching off appliances; they can also allow users to generate energy.
Photovoltaic power (or solar technology) is being developed also on every imaginable level here, using light rather than batteries to run an exhaustive list of everyday devices from phones to home alarms to factories.
And there is the development of sophisticated batteries that can power electric cars to have ranges of up to 200km. Or the alternative hydrogen-cell technology, adapted from the space industry, that has seen Honda pilot a hydrogen-fuelled car in LA. Chat show host Jay Leno owns one.
THE MINISTER for Communications and Energy Eamon Ryan is a long-time enthusiast of green tech as a cornerstone of Irish economic recovery. However, the stump speech at the Green Party conference which claimed that this technology would transform Irish society within a decade has sometimes seemed like wishful thinking. Ryan has been in San Francisco this week for the St Patrick’s Day visit and has criss-crossed Silicon Valley over two days to see how these ideas work in practice, in a state that’s ahead of the curve.
Yesterday he visited the Tesla motor company, which has developed an electric-powered high-performance roadster car and which will soon begin production of a four-door sedan (the ESB is an investor).
Earlier, he saw how one of the world’s biggest networking product companies, Cisco, is developing smart teleconferencing technology and more efficient networks that will both reduce energy output and provide smarter systems.
There is also a strong Irish presence in cutting-edge technology companies. Conrad Burke is the Bray-born chief executive of Innovalight which uses nanotechnology to produce liquid silicon. The new method produces highly-efficient solar power modules at a tiny fraction of the current cost. Another innovator, John Hartnett, originally from Limerick, is chief executive of G24 Innovations, a company that is personalising solar power – using the potential of the technology to replace batteries in mobile phones and radios. Both companies have attracted many millions of dollars in private funding.
Ryan is convinced that Ireland is not that far behind, and is already ahead in terms of developing such technology as smart meters. But can he stand over his claims that Ireland will have 42 per cent renewable energy by 2020; that energy efficiency will increase by 20 per cent; and that 10 per cent of the entire transport fleet will be powered by electric vehicles?
“It’s going to happen. One of the first is probably the renewable supply. I think it’s inexorably coming and I think it’s going to be the mainstream power supply in Ireland in 10 years. Solar is big here. We will concentrate on ocean, wind and biomass.
“The second thing that will come will be electric vehicles. It works with variable power supplies. It works very well. North California has taken the lead on this. It has set itself ambitious targets to convert to electric vehicles. Already the public bus fleet has changed to electric.
“The third big thing . . . is the interconnection between the internet and the electricity grid. They are two very similar networks. They are ubiquitous, they work very well together. Around our big power lines are wrapped fibre optic cables which is part of our broadband supply. The development of smart grids and networks will also be key.”
Hartnett is also a leading figure in the Irish Technology Leadership Group (ITLG), an independent group of Irish or Irish-American people involved in technology companies in Silicon Valley. An astute observer of the market, when he met Ryan on Thursday he left him in no doubt about the potential of the sector. “The financial crisis began here in the US. And the US will be the first to get out. And it will be with green tech that it will lead the world. At the very top, spearheading all the green tech, will be renewable energy. Ireland needs to be bolder than it thinks it has been with this sector. If you take renewables, you can look at it as an area where Ireland rebrands itself.”
Ryan agrees. He points to the fact that Ireland got the first wave of technology companies (such as Intel, Dell and Microsoft) and also got a lot of the second wave (Google and Facebook). He is convinced that Ireland can get a lot of action from the third wave of green tech.
“We are looking to establish Ireland as their Silicon Valley for Europe. If you look at what is happening in Silicon Valley, the main growth area is no longer traditional ICT but there is a huge increase in investments in clean technology. A lot of companies I’ve spoken to here over the last few days want to set up a base somewhere in the world. Ireland is still featuring high on the list. If we get some of the companies over, it gives us a cluster of companies in green tech, that will be very important.”
Wind is Ryan’s banker, being to Ireland what the sun is to California. He thinks the technology is already coming on stream that will allow 42 per cent of our energy needs to come from windpower. The problem of the variability of this power source – the wind is becalmed 100 days a year – can be overcome by interconnectors with Britain and France as well as by the development of windpower offshore (where there is more frequent wind). He also believes there is potential for solar, for domestic heating and for personal use.
BUT HOW CAN Ireland become a Silicon Valley? Ryan believes some companies will base Europe operations and RD in Ireland. The €500 million innovation fund will also help. But the availability of the funding underscores a fundamental difference between the approach in California and Ireland. In the US, there is a well-established tradition of venture capital (VC) funding. According to another leading Silicon Valley-based member of ITLG, Rory McIntyre, VC can bring expertise, mentoring and ongoing help to start-up companies. They also know when enough is enough, says McIntyre. “One of the things that VC community is very good at is a selection and de-selection process. They know if something is going to fail.”
A key question he has about the innovation fund is if it “has the competence to know when to invest and crucially when to stop investing. The innovation fund could hand funds to experienced venture capitalists and tell them to invest in companies that are Irish or will bring jobs to Ireland,” suggests McIntyre, whose day job is as a vice-president with Intel.
Another technology entrepreneur based in Silicon Valley, Noel Ruane of e-mail security firm Brandware Solutions, shares the view. He also says that the only way that Ireland could replicate Silicon Valley’s model would be to reward the kind of short-term investment cycle that is almost unique to northern California.
“Up and down Silicon Valley, every person working here can be traced back to another company. They were in Google and went to Facebook. Prior to that they worked in Yahoo or Sun Microsystems. How do you incentivise entrepreneurs and get them to do it in a shorter time span? Ireland could do it by tax legislation. How do you look at the start-up? What if you abolished capital gains tax for the founder and the private equity backers and VC backers? If you get an exit after five or six years you pay no CGT [capital gains tax] and do it on a sliding scale afterwards. By looking at the short-term goals, you can create a sustainable long-term business,” says Ruane.
The Minister believes it is happening already. Ryan, a little like Lincoln Steffens returning from Soviet Russia in 1919, he has seen the future and it works.