Sunny Day in the Renewable Range

A real nice piece of economic development news broke this morning in the Renewable Range.

The German company SMA Solar Technology AG, announced it will be opening a Denver manufacturing facility near Stapleton which is expected to employ 300 full time workers and hundreds more seasonally once it is fully staffed. SMA makes solar inverters--with a product lineup of Sunny Boy, Sunny Central and Sunny Island --that convert direct current generated by photovoltaic solar panels into the alternating current employed by the electric grid.

See here for SMA's press release announcing the decision.

Generating 300 manufacturing jobs within Denver city limits is a big deal, especially given the state of the U.S. economy and this announcement strengthens Colorado's claim to be an emerging green energy cluster. Each new green energy sector job win increases the probability of future wins due to the network effects of agglomeration.

The Post cites SMA's Chief Financial Officer about the reasons the company selected Metro Denver for the facility's location.

"[t]he [Denver] region's educated workforce; the site's proximity to
Interstate 70, rail and Denver International Airport; lower operating costs; and
the area's focus on renewable-energy research were behind the decision to locate
here."

According to The Post, the State of Colorado and City of Denver provided $3.6 million in economic development incentives to SMA.

In Germany, SMA is located north of Frankfurt along a high speed rail line. I am not too familiar with Germany, but I suspect the direct flights between Frankfurt and DIA really facilitated this decision.

Is Colorado a Renewable Energy Hub?

One of the overriding themes of this blog has been the importance to Colorado and the Denver Region's economic health of seizing the moment and becoming a center for the emerging renewable energy sectors. Up until now I have not seen any data which allows us to measure the region's progress in this regard.

The recently released report by the American Solar Energy Society, "Defining, Estimating, and Forecasting The Renewable Energy and Energy Efficiency Industries in the U.S. and Colorado," provides useful data
for understanding if Colorado is succeeding in becoming a green energy hub. According to this report as of 2007 Colorado had 91,285 renewable energy and energy efficiency jobs (10,075 in just renewable energy). In the U.S. as a whole there were 504,000 renewable energy jobs and 9.09 million total renewable and efficiency jobs.

By combining this data on renewable jobs in Colorado and the U.S. with overall data on Colorado and U.S. employment as of December 2007 (138 million and 2.3 millon non-farm jobs in the U.S. and Colorado respectively) its possible to calculate a location quotient(LQ) which shows the concentration of renewable jobs in Colorado.

One way to think about the LQ is it measures the ratio of a state's share of total national jobs in a specific industry to that state's share of total national jobs. So a LQ>1 indicates the state has a greater share of jobs in a specific economic sector than its population would otherwise warrant which means the state is a net "exporter" of the products and services produced by that sector to the rest of the nation (or world). Detroit has a high LQ in automobile manufacturing (at least for now), California has a high LQ for film production, New York in financial services, etc. So a LQ>1 means an area could be a hub or cluster for a given economic sector. Obviously having a high LQ in a growing sector is a good thing for a region's economic health but having a high LQ in a shrinking sector can be disastrous.

Based on the data cited above, Colorado had a LQ of 1.18 in renewable energy jobs in 2007. Given the string of positive job announcements in early 2008 in Colorado in the renewable sector, it seems likely to me that this ratio may have grown in 2008. However, a LQ of 1.18 only indicates a moderate level of concentration and it means Colorado has a long way to go before establishing itself as a primary alternative energy hub and there is likely to be fierce competition from other areas of the country to obtain this status.

(Photos courtesy of the National Renewable Energy Laboratory, All Rights Reserved)