Part 4: Pittsburgh, From Rust Belt Loser to Clean Energy Leader
This is the fourth and final article of a four part series chronicling highlights from my seven-city tour, Energy Innovation Across America. The first stop was a tour of Salt Lake City’s energy innovation ecosystem, which can be found here. Highlights from my tours of five Department of Energy National Labs can be found here. And my policy discussions with leaders of the Midwest energy innovation ecosystem can be found here. My goal was to meet energy innovators from across the country and bring their stories and perspectives back to Washington. For a brief introduction to the series, visit here, and for information on the Millennial Trains Project, see here.
Ask the average American about what they feel Pittsburgh, PA represents and you’ll likely hear some typical responses: Steelers football, blue-collar middle class workers, steel mills, and coal plants. If anything, Pittsburgh is considered the quintessential rust belt city – historically focused on manufacturing and industry, but one that has fallen on hard times since the 1980’s when strong foreign competition shuttered plants and stopped offering job opportunities. That’s certainly some of the images I had in the back of my head while traveling to Pittsburgh as part of the Millennial Trains Project. Counter to this image though, Pittsburgh is remaking itself by leveraging its regional strengths in education and healthcare and making strategic investments in innovation capacity. It’s now one of America’s leading centers of regional innovation and a model of state innovation policymaking.
Remaking the Regional Economy through State Innovation Policy
In the 1970’s and 1980’s, Pennsylvania was a state in rapid decline. Once a hub of U.S. manufacturing in areas such as steel and textiles, it quickly turned into a service-dominated economy. Pennsylvania lost 350,000 manufacturing jobs in the 1980’s alone. This industrial change was felt all over the state (and country), but it was particularly damaging to Pittsburgh. The most relevant comparison of Pittsburgh’s economic hardships then is to Detroit’s troubles since the start of the recent Great Recession. As Detroit begins to rebuild its identity and reconstruct its economy, it will likely look to its southeastern neighbor for best practices on how to survive and even thrive in a new economic environment.
The key to Pittsburgh’s revival has been smart innovation policies. With old industry dying off or falling on hard times, new industries and companies needed to rise from the rubble. To spur new development, then-Pennsylvania Governor Dick Thornburgh proposed the creation of the “Ben Franklin Partnership Challenge Grant Program for Technological Innovation” in 1982. The idea was for the state government to establish regional technology centers to seed-fund new research, start-ups, workforce training efforts, and technology incubators. Some individual piece of an innovation ecosystem already existed – universities, federal research, and so on – but a strong policy piece was needed to bring it all together or the state was be ill-prepared to climb out of its economic hole.
By 1985, the Ben Franklin Technology Centers were incorporated as non-profit, independent entities and broadened its approach to be involved more in economic development, including venture investing in emerging companies using a mix of public funds and foundation support. One of the four regional centers, branded as Innovation Works, is located in Pittsburgh and covers all southwestern counties.
The Ben Franklin Technology Centers’ innovation reach is truly extensive. It works with Pittsburgh’s premier universities (Carnegie Mellon and University of Pittsburgh in particular) to identify promising research to support its transfer to market. AlphaLab, Innovation Works’ incubator for ICT start-ups, provides a 20-week business development program for entrepreneurs. It provides seed-funding to early-stage technology companies. And Innovation Works leverages the regions manufacturing history by supporting small manufacturers and collaborating with regional manufacturing centers of excellence to develop internationally competitive production technologies and supply chains.
In the past decade, Innovation Works has put more of a focus on clean energy because of the region’s traditional competitive advantages. Its manufacturing experience provides a strong production and engineering background for solar, wind, nuclear, and clean coal technologies. The region’s natural resources, such as coal and waterway access, provided additional energy expertise. The Department of Energy also sites part of one of its National Labs in the Pittsburgh region – the National Energy Technology Laboratory (NETL) – which conducts advanced research in fossil fuel technologies. To bring it all together, Innovation Works also received $10 million from the state government to advance early-stage energy technologies. In other words, the Ben Franklin center is acting as a hub for driving clean energy innovation.
Capitalizing on Pittsburgh’s Clean Tech Boom with Policy Reform
The result of Innovation Works’ focus – and the focus of the city of Pittsburgh in general – on energy innovation is its status as an emerging clean tech hub. According to the Brookings Metropolitan Policy program, as of 2010, Pittsburgh was ranked in the top 25 in the United States for its clean economy growth. Its fastest growing industry segments included solar PV, pollution reduction technologies, and green buildings.
For its part, Innovation Works is building a robust stable of clean energy start-ups that are growing in the region. For example, Propel IT has developed breakthrough software that helps commercial trucking fleets – a transportation mode ill-equipped to decarbonize through other priority methods, such as electrification - maximize their fuel efficiency. TharGeothermal, a Carnegie Mellon spin-off, is deploying cost-effective, toxic refrigerant-free geothermal heat pumps to decarbonize existing HVAC systems. And it’s assisting SolePower, a new start-up bringing to market its unique shoe technology, which harvests energy from walking to charge portable electronics – a breakthrough for the developing world with no access to energy.
With Pittsburgh’s many clean energy successes though, it still faces barriers to advancing innovation. Many start-ups continue to find it difficult to access capital for scale-up, which is a pervasive issue impacting energy innovators across the country, particularly those trying to bridge the valley-of-death.
But more unique to Pittsburgh are its problems working with its National Lab NETL, which many start-ups find to be “of zero use.” A common criticism is its convoluted management structure that fails to lend itself as a flexible interface with entrepreneurs and start-ups looking to collaborate. In other words, start-ups have no idea where the “front door” of the Lab actually is. And for those that stumble their way through the front door, antiquated collaborative agreement vehicles between the Lab and industry often take so long to finalize, many companies in the region both large and small find little benefit. As a result, NETL is typically viewed as an inward looking research institution rather than a Lab aggressively trying to move new ideas into the regional market or providing technical support to emerging companies. The National Labs play a vital role in the United States research ecosystem, but they also play a key role in its regional economic development because of its ability to interact with the local market. There is no better way to get new ideas out of the laboratory and through commercialization.
A Poster Child for Smart Regional Innovation Policy
Pittsburgh should be seen as a poster child of smart state and regional energy innovation policy. They’re working hard to seed early-stage research, provide flexible tools for start-ups to grow, and ensure that its public and private innovation institutions are well connected. In many ways it goes back to Governor Thornburg and state policymakers’ decisions to make smart public investment through Innovation Works, the Ben Franklin Centers, in regional innovators, researchers, and start-ups. Pennsylvania hasn’t been afraid to take the risk and it is reaping the benefits, most recently in clean tech.
Pittsburgh is also, in many ways, a poster child for the need for smart federal policy reform. The National Lab system offers the U.S. strong competitive advantage in science and innovation– research institutions other countries look to the Labs as the gold-standard. But for regional economies, the fruits of that research and investment are sometimes difficult to tap. Reforming the National Lab system is long overdue and federal policymakers need to find quicker, cheaper, and better ways innovators like those in Pittsburgh can collaborate. As I’ve argued before, the private sector is unwilling and often incapable of making investments in research and technology development like those made at the Labs and universities. Their role and value is unquestioned, but it’s time for the Labs to be outward-looking and there’s no better place to start than in Pittsburgh.
Matthew Stepp is a Senior Policy Analyst with the Information Technology and Innovation Foundation (ITIF) specializing in climate change and clean energy policy. His research interests include clean energy technology development, climate science policy development, transportation policy, and the role innovation has in economic growth.
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