Positioning Arizona for the next big technology wave: development and investment prospectus to create a sustainable systems industry in Arizona

              Positioning Arizona for the Next Big Technology
Wave: Development and
Investment Prospectus to Create a Sustainable
Systems Industry in Arizona
March 2004
Prepared by
the Battelle Technology Partnership Practice
as part of the
Arizona Statewide Economic Study
Positioning Arizona for the Next Big Technology Wave:
Development and Investment Prospectus to Create a Sustainable
Systems Industry in Arizona
March 2004
Prepared by:
Technology Partnership Practice
Battelle Memorial Institute
Cleveland, Ohio
Peer reviewed by the Arizona Department of Commerce Economic Research Advisory Committee:
Dan Anderson
Assistant Executive Director for
Institutional Analysis
Arizona Board of Regents
Brian Cary
Principle Economist
Joint Legislative Budget Committee
Lisa Danka
Director, Commerce & Economic
Development Commission
Arizona Department of Commerce
Kent Ennis
Economic Consultant
CH2M Hill
Wayne Fox
Director, Bureau of Business and
Economic Research
Northern Arizona University
James B. Nelson
Economic Development Manager
Salt River Project
William P. Patton, Ph.D.
Director of Economic Development
Tucson Electric Power
Elliott D. Pollack
Elliott D. Pollack & Co.
Tom Rex
Research Manager, Center for
Business Research
Arizona State University
Brad Steen
Chief Economist
Arizona Department of
Transportation
Marshall J. Vest
Director, Economic and Business
Research
Eller College of Business and
Public Administration
University of Arizona
Don Wehbey
Economist
Research Administration
Arizona Department of Economic
Security
Technical review by members of the Sustainable Systems Prospectus Steering Committee
This report was prepared for the Arizona Department of Commerce with funding from the Commerce and Economic Development
Commission. It will be available on the Internet for an indefinite length of time at http://www.azcommerce.com/Economic/default.asp.
Inquiries should be directed to the Office of Economic Information and Research, Arizona Department of Commerce, (602) 771-
1100.
The Arizona Department of Commerce has made every reasonable effort to assure the accuracy of the information contained herein, including peer
and/or technical review. However, the contents and sources upon which it is based are subject to changes, omissions and errors and the Arizona
Department of Commerce accept no responsibility or liability for inaccuracies that may be present. The Arizona Department of Commerce does not
endorse or recommend particular companies, products, services, or technologies, nor does it endorse or recommend financial investments and/or the
purchase or sale of securities. THIS DOCUMENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. THE ARIZONA DEPARTMENT OF
COMMERCE PRESENTS THE MATERIAL IN THIS REPORT WITHOUT IT OR ANY OF ITS EMPLOYEES MAKING ANY WARRANTY, EXPRESS
OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR ASSUMING ANY
LEGAL LIABILITY OR RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY INFORMATION, APPARATUS,
PRODUCT, OR PROCESS DISCLOSED, OR REPRESENTING THAT ITS USE WOULD NOT INFRINGE PRIVATELY OWNED RIGHTS. THE USER
ASSUMES THE ENTIRE RISK AS TO THE ACCURACY AND THE USE OF THIS DOCUMENT AND ANY RELATED OR LINKED DOCUMENTS.
To the Reader:
This Prospectus is part of a body of work known as the Arizona Statewide Economic Study, a
decennial research project undertaken to provide the foundation for development of a 10-year
economic strategy for Arizona. The Arizona Statewide Economic Study has been overseen by
the Commerce and Economic Development Commission, the body responsible by state statute
for developing the 10-year strategy.
Jointly commissioned by the Arizona Department of Commerce and the Arizona Board of
Regents, the Sustainable Systems Prospectus follows an earlier report, “Science and
Technology Core Competencies Assessment,” that identified world-class research and
development strengths in the state university system in the biosciences, advanced
communications and information technology, and a broad group of ecological sciences that
provide the innovation platform for sustainable systems.
In addition to the Prospectus, companion technology roadmaps resulting from the core
competencies report include: Advanced Communications and Information Technology (ACIT),
another joint effort of the Commerce Department and the Arizona Board of Regents (available
mid April 2004 at http://www.azcommerce.com/Economic/default.asp); and the Biosciences
Roadmap spearheaded by the Flinn Foundation (www.flinn.org). Collectively, the Sustainable
Systems Prospectus and the ACIT and Bioscience roadmaps provide the focus and strategies
needed to capitalize on Arizona universities research and development strengths in the creation
of new products, new markets and high quality jobs.
Finally, we are grateful to the members of the Sustainable Systems Steering Committee - a
team of experts from Arizona universities, the private sector and non-governmental
organizations - who gave generously of their time and effort to ensure this Prospectus was
balanced and economically justified. Their service was invaluable and on behalf of Governor
Napolitano and the Arizona Board of Regents, I thank and commend them for their dedication.
Sincerely,
Gilbert Jimenez
Director, Arizona Department of Commerce
and
Chairman, Commerce and Economic Development Commission
Sustainable Systems Prospectus Steering Committee
Co-chaired by: Wendy Vittori, Motorola Computer Group
Gilbert Jimenez, Arizona Department of Commerce
Members: Todd Bankofier, Arizona Technology Council
Adriane Brown, Honeywell
Patrick Burkhart, Arizona State University
Rob Davis, Forest Energy, Inc.
Prabhu Dayal, C*Trade
Jonathan (Jon) Fink, Ph.D., Arizona State University
Carl Fox, Ph.D., Northern Arizona University
Hanafi Fraval, Aerrock, LLC
Andrew Gordon, Arizona MultiBank
Brian Hageman, Deluge
Bob Hagen, Southern Arizona Technology Council
Dick Hayslip, Salt River Project
Gail Howard, Office of the Governor
Stephanie Jacobson, Arizona Board of Regents
Saundra Johnson, Flinn Foundation
Peter Johnston, Arizona Public Service
Sheldon Jones, Arizona Agri-business Council
Mitra Khazai, Consultant
Kim Kristoff, GEMTEK, Inc.
Noah Kroloff, Office of the Governor
Andy Kruse, Southwest Wind Power
Stephanie McKinney, Greater Flagstaff Economic Council
Rob Melnick, Ph.D., Morrison Institute
Daniel Musgrove, Universal Entech, LLC
Stephen Owens, Arizona Department of Environmental Quality
Pat Patton, Ph.D., Tucson Electric Power
Dick Pieranunzi, ST Microelectronics, Inc.
Dick Powell, Ph.D., University of Arizona
Lucian Spataro, Jr., Ph.D., University of Arizona
Michael Strasser, Ponderosa Capital
Naranjan Vescio, Environmental Systems Products
Sandra Watson, Arizona Department of Commerce
Steve Weathers, Greater Tucson Economic Council
Rick Weddle, Greater Phoenix Economic Council
Bruce Wright, University of Arizona Office of Economic Development
POSITIONING ARIZONA FOR THE
NEXT BIG TECHNOLOGY WAVE:
DEVELOPMENT AND
INVESTMENT PROSPECTUS
TO CREATE A SUSTAINABLE
SYSTEMS INDUSTRY
IN ARIZONA
PREPARED FOR:
Arizona Commerce and Economic Development
Commission and the Arizona Department
of Commerce, in association with Arizona’s Public
Universities and the Arizona Board of Regents
PREPARED BY:
Technology Partnership Practice
Battelle Memorial Institute
Cleveland, Ohio
March 2004
© 2004 Battelle Memorial Institute
FINAL REPORT
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
Battelle Memorial Institute (Battelle) does not endorse or recommend particular companies, products,
services, or technologies, nor does it endorse or recommend financial investments and/or the purchase or
sale of securities. Battelle makes no warranty or guarantee, express or implied, including without
limitation, warranties of fitness for a particular purpose or merchantability, for any report, service, data, or
other information provided herein.
Copyright 2004 Battelle Memorial Institute. Use, duplication, or distribution of this document or any part
thereof is prohibited without the written permission of Battelle Memorial Institute. Unauthorized use may
violate the copyright laws and result in civil and/or criminal penalties.
Development and Investment Prospectus
to Create a Sustainable Systems Industry in Arizona
PHASE II REPORT
PREPARED FOR:
ARIZONA COMMERCE AND ECONOMIC DEVELOPMENT COMMISSION
AND
THE ARIZONA DEPARTMENT OF COMMERCE,
IN ASSOCIATION WITH ARIZONA’S PUBLIC UNIVERSITIES
AND
THE ARIZONA BOARD OF REGENTS
Prepared by:
Technology Partnership Practice
Battelle Memorial Institute
Cleveland, Ohio
March 2004
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
iii
Table of Contents
Page
ABBREVIATIONS AND ACRONYMS...................................................................................................VI
EXECUTIVE SUMMARY.....................................................................................................................VIII
INTRODUCTION....................................................................................................................................... 1
POSITIONING ARIZONA IN THE SUSTAINABILITY ECONOMY....................................................................... 2
PROJECT METHODOLOGY.......................................................................................................................... 4
POTENTIAL AREAS OF SUSTAINABLE SYSTEMS FOCUS/MARKET POTENTIAL AND
NICHES........................................................................................................................................................ 7
SETTING THE CONTEXT: ARIZONA’S SUSTAINABILITY RESEARCH AND INDUSTRY BASE........................... 7
NATIONAL AND GLOBAL MARKET ASSESSMENT...................................................................................... 17
ARIZONA’S POSITION FOR DEVELOPMENT AND ENHANCEMENT .............................................................. 26
ARIZONA’S INFRASTRUCTURE CAPABILITIES: BENCHMARKING, GAP, AND SWOT
ANALYSES................................................................................................................................................ 31
INTRODUCTION........................................................................................................................................ 31
BENCHMARKING ANALYSIS...................................................................................................................... 31
GAP ANALYSIS ........................................................................................................................................ 42
STRATEGIC SITUATIONAL ASSESSMENT (SWOT ANALYSIS) ................................................................... 48
KEY STRATEGIES AND ACTION PLANS .......................................................................................... 61
INTRODUCTION........................................................................................................................................ 61
VISION..................................................................................................................................................... 61
MISSION .................................................................................................................................................. 61
STRATEGIC DIRECTIONS.......................................................................................................................... 62
STRATEGIES FOR ORGANIZING SUSTAINABLE SYSTEMS ACTIVITIES ........................................................ 62
ACTION PLANS ........................................................................................................................................ 65
SUMMARY ............................................................................................................................................. 118
IMPLEMENTATION............................................................................................................................. 121
INTRODUCTION...................................................................................................................................... 121
DEVELOPMENT SCENARIOS .................................................................................................................... 121
SIGNIFICANT AND CRITICAL ACTIONS FOR LONG-TERM SUCCESS ......................................................... 123
FINANCIAL PLAN................................................................................................................................... 126
MEASURES OF SUCCESS AND PERIODIC PERFORMANCE EVALUATIONS.................................................. 128
SUMMARY.............................................................................................................................................. 131
APPENDIX A.............................................................................................................................................................A-1
APPENDIX B............................................................................................................................................................. B-1
APPENDIX C..............................................................................................................................................C-1
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
iv
TABLE OF CONTENTS
(continued)
List of Figures
Page
Figure 1: Catching the Next Big Technology Waves ......................................................... 2
Figure 2: Triple Bottom Line.............................................................................................. 3
Figure 3: Project Methodology Diagram ............................................................................ 5
Figure 4: Research Strengths to Core Competencies.......................................................... 7
Figure 5: The Map Linking Science and Technology with
Products and Potential Markets ........................................................................ 9
Figure 6: Sustainable Systems Implementation Scenario—Build the Foundation......... 122
Figure 7: Sustainable Systems Implementation Scenario—Develop Niche Strategies .. 122
List of Tables
Table 1: Firms and Employment Base for Sustainable Systems
Market/Industry Segments .............................................................................. 10
Table 2: Key Developments in Energy Efficiency and Renewable Energy .................... 11
Table 3: Key Developments in Environmental Services and Equipment (water
management)................................................................................................... 13
Table 4: Key Developments in Sustainable Manufacturing and
Pollution Prevention and Recycling................................................................ 14
Table 5: Key Developments in Green Construction Materials and High-Value
Bioproducts..................................................................................................... 15
Table 6: Key Developments in Sustainable Agriculture.................................................. 16
Table 7: Key Developments in Sustainable Forest Products ........................................... 17
Table 8: Summary of National Market Trends in Sustainable Systems .......................... 18
Table 9: State and Regional Sustainable Development Competition .............................. 35
Table 10: Energy Programs .............................................................................................. 37
Table 11: Energy Benchmarks.......................................................................................... 38
Table 12: Targeted Federal Funding................................................................................. 39
Table 13: California, the Benchmark Leader.................................................................... 40
Table 14: Benchmarks in UCS Award Categories ........................................................... 40
Table 15: Registered LEED Projects among Benchmarks ............................................... 41
Table 16: Three Strategies Create Market Share Potential in
Eight Industry Segments ................................................................................. 63
Table 17: Global Market Opportunities for Arizona Sustainable Systems....................... 64
Table 18: Sustainable Systems Strategies, Actions, and Time Frames ............................ 65
Table 19: Examples of Sustainable Water Policies .......................................................... 76
Table 20: Relationships of Water Policies to Water Technology Demand ...................... 76
Table 21: Nontraditional Funding Sources ..................................................................... 107
Table 22: Federal Government Programs ....................................................................... 109
Table 23: Additional Nontraditional Funding Sources for Native Americans ............... 110
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
v
TABLE OF CONTENTS
(continued)
List of Tables (continued)
Page
Table 24: Collaborative Technologies with Identified Strengths and Weaknesses and
Contact Information ...................................................................................... 113
Table 25: Role of Strategies and Actions in Closing Arizona Gaps
in Sustainable Systems.................................................................................. 119
Table 26: Ten-Year Funding Requirements for Sustainable Systems Prospectus
(in million $) ................................................................................................ 127
Table 27: Contribution of Seven Strategies to the Proposed Success Measures
(H=high; M=medium)................................................................................... 129
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
vi
Abbreviations and Acronyms
AAGR Average Annual Growth Rate
AHA Arizona Hydrogen Association
APS Arizona Public Service
ASSIA Arizona Sustainable Systems Industry Association
ASU Arizona State University
BECC Border Environment Cooperation Commission
BPA Bonneville Power Administration
CAP Central Arizona Project
CASS Central Arizona Salinity Study
CC&Rs Covenants, Conditions, and Restrictions
CRADA Cooperative Research and Development Agreement
DG distributed generation
DHS U.S. Department of Homeland Security
DM deutsche mark
DOC U.S. Department of Commerce
DoD U.S. Department of Defense
DOE U.S. Department of Energy
DSIRE Database of State Initiatives for Renewable Energy
EDA Economic Development Administration (DOC)
EE energy efficiency
EERE DOE’s Office of Energy Efficiency and Renewable Energy
EIP eco-industrial park
EPA U.S. Environmental Protection Agency
EPS Environmental Portfolio Standards
ERC Engineering Research Center for Environmentally Benign
Semiconductor Manufacturing
ES&H environmental, safety, and health
ETIC Environmental Technology Industry Cluster
EU European Union
GCIT Governor’s Council on Innovation and Technology
GMO genetically modified organism
IEN indigenous environmental network
IP intellectual property
IPC integrated pollution control
IPP independent power producers
ITEC Inter-tribal Environmental Council
kW kilowatt
kWh kilowatt hour
LBNL Lawrence Berkeley National Laboratory
LEED Leadership in Energy and Environmental Design (U.S. Green Building
Council)
MOU Memorandum of Understanding
MRF medium range forecasts
MTBE methyl tertiary-butyl ether
MW megawatt
NADB North American Development Bank
NAU Northern Arizona University
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
vii
NGO nongovernmental organizations
NIEHS National Institute of Environmental Health Sciences
NIH National Institutes of Health
NIWWTP Nogales International Wastewater Treatment Plant
NREL National Renewable Energy Laboratory
NSF National Science Foundation
PNNL Pacific Northwest National Laboratory
PV(s) photovoltaic(s)
R&D research and development
RBIP Rural Business Investment Program
RD&D research, development, and demonstration
ROI return on investment
RPS Renewable Portfolio Standard
RTI Research Triangle Institute
RTP Research Triangle Park
S3T Sustainable Systems Science and Technology Collaboratory
SABS Saebi Alternative Building System
SAHRA Center for Sustainability of semi-Arid Hydrology and Riparian Areas
SBA Small Business Administration
SBIC Small Business Investment Company
SEP State Energy Program
SRP Salt River Project
STAR Solar Test and Research Center
SWEEP Southwest Energy Efficiency Project
SWOT strengths, weakness, opportunities, and threats
T+3M Technology plus Money, Management, and Marketing
TEP Tucson Electric Power
TRC Tradable renewable credit
UA University of Arizona
UC University of California
UCS Union of Concerned Scientists
USDA U.S. Department of Agriculture
USFS U.S. Forestry Service
USGS U.S. Geological Survey
UV ultraviolet
VNC virtual network computing
WQIC Water Quality Improvement Center
WRRC Water Resources Research Center
ZDM zero discharge manufacturing
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
viii
Executive Summary
INTRODUCTION
More than 10 years ago the United Nations held a global conference in Rio de Janeiro
that became known as the Earth Summit of 1992. Following many years of international
debate regarding trade-offs between industrial development and problems of population
growth and limited planetary resources, this watershed event resulted in a broad agenda
for action in both the public and private sectors, based largely on the “sustainable
development” concept: that is, development that meets the needs of the present without
compromising the ability of future generations to meet their own needs. Confronted with
the sustainable development challenge, the business community is recognizing that long-term
success depends not only on financial performance, but also on social and
environmental performance. Since 1992, many chief executives of major companies such
as DuPont, Intel, Motorola, Ford, and Johnson & Johnson have embraced “sustainability”
as a business imperative.
Figure ES-1: The Triple Bottom Line
The Triple Bottom Line
A “sustainable enterprise” is a company that
anticipates and meets the needs of present
and future generations of customers and
stakeholders, encompassing three
dimensions known as the “triple bottom
line” (Figure ES-1):
• Economic prosperity and continuity
for the business and its stakeholders
• Social well-being and equity for both employees and affected communities
• Environmental protection and resource conservation, both local and global.
Sustainability includes a number of critical issues related to human and ecological
welfare—climate change mitigation, pollution prevention, poverty reduction, and
protection of human rights. Stakeholders in these issues include not only customers and
shareholders, but also employees, local communities, regulators, lenders, suppliers,
business partners, and advocacy groups.
An Emerging Market
The scientific challenges are complex and daunting—to clean up our environment,
maintain our natural resource base, and reverse the effects of global warming, while at
the same time ensuring economic growth and an acceptable quality of life worldwide. All
the developed countries in the world have embarked on ambitious research, development,
and deployment programs to address these issues. Many innovative technologies are
being produced, which are fueling a growing global “sustainable systems” market, driven
in large part by the increasing need for clean energy, clean water, and reduced industrial
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
ix
pollution. For example, solar energy is now the world’s second fastest growing energy
source—at an average growth rate of 16 percent a year since 1990—and it is predicted to
expand.1 Global solar energy demand has grown at about 25 percent a year over the past
15 years, particularly in photovoltaic (PV) technologies.
Water is also turning into a booming business. Worldwide, annual industry revenues are
estimated at $300 billion, with the United States accounting for more than half of that
amount. This number is expected to grow as water becomes scarce and consumer markets
begin to mature. Water markets are emerging in Australia, Chile, and Mexico, with
expanding potential into the Middle East, Asia, and North and South Africa.2
Sustainable manufacturing is gradually entering the
chemicals, automotive, and other traditional industries; but,
to obtain a sense of where this area is heading, it is best to
look at the semiconductor industry, because it is the most
innovative industry in the world. The Semiconductor
Industry Association reported that semiconductor sales
increased 18 percent to $166.4 billion in 2003 and will rise
approximately 19 percent in 2004.3 Together with increased
performance, this industry has been very aware of
environmental, safety, and health issues and has mounted
worldwide activities to move toward “green manufacturing.”
The World Semiconductor Council represents the majority of
worldwide semiconductor manufacturing and has included
environmental needs in the International Technology
Roadmap for Semiconductors.4 Working within this
framework, the large global semiconductor companies such
as IBM, Intel, ST Microelectronics, and Motorola have
corporate level programs to make their products more environmentally friendly.
Arizona’s Opportunity
Arizona is home to these and other companies that are committed to sustainability, as
well as entrepreneurs and relevant university research core competencies that,
collectively, could form the foundation for a broad-based sustainable systems industry
creating high value jobs. The state also is a “living laboratory” for arid and semiarid
lands, which represent more than a third of developable land in the world. Arizona has
both large cities (Phoenix and Tucson) and small cities with easy access to rural
communities (Flagstaff), and a highly diverse population. With these assets, Arizona
should be able to produce a stream of knowledge, technologies, and products that address
the triple bottom line. This Prospectus is intended to help position Arizona as a leader in
this emerging area, providing products and services for the global market.
1 “Solar Power Markets Boom,” World Watch Institute,
http://www.worldwatch.org/press/news/1998/07/16/.
2 “The Rising Tide of Water Markets,” ITT Industries, http://itt.com/waterbook/tide.asp.
3 “Global Semiconductor Sales Up 18.3% in 2003,” Semiconductor Industry Association,
http://www.semichips.org/pre_release.cfm?ID=299.
4 World Semiconductor Council, http://www.semiconductorcouncil.org/.
Intel and Green Design
Intel is committed to conserving
natural resources and reducing the
environmental burden of waste
generation and emissions to the air,
water, and land. Intel focuses on
reducing the environmental footprint
of its products, processes, and
operations. Green design examples
include
• Lead-free semiconductors and
electronics
• Environmental performance and
employee safety
• Energy conservation in PCs
• Scrap wafers to solar energy.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
x
This Prospectus provides a framework for Arizona and its stakeholders, in both public
and private sectors, to invest in creating an entire new industry, both products and
services, supporting global sustainability. However, it is just a starting point for what will
be a 10-year journey that will require a sustained partnership between governments,
nongovernmental organizations (NGOs), universities, and industry. As investments are
made and programs implemented, this Prospectus will need to be changed, modified, and
updated. Finally, this Prospectus will need to be put into operation through a roadmap
and annual operating plans.
Project Methodology
This project was conducted in two phases. In the first phase, Battelle’s Technology
Partnership Practice produced the Science and Technology Core Competencies
Assessment, which was recently published.5 Four important “technology platforms” that
will best position Arizona to take greater advantage of its research universities for
economic growth were identified: advanced communications, information technology,
sustainable systems, and bioengineering.
In Phase II, Battelle was engaged to convert the opportunities inherent in the sustainable
systems platform into a prospectus that would lay out a development path and
investments needed to create a sustainable systems industry from the technology base.
As indicated in Figure ES-2, development of the Prospectus involved the following new
activities:
5 Positioning Arizona and its Research Universities: Science and Technology Core Competencies Assessment;
prepared for Arizona Commerce and Economic Development Commission, April 2003.
Progress in Sustainability as This Prospectus Was Being Prepared
• U.S. Department of Agriculture broke ground on a new Arid-Land Agriculture Research
Center in Maricopa in February 2004.
• Northern Arizona University (NAU) announced a new 100,000-square-foot building for the
College of Business Administration that will be Leadership in Energy and Environmental
Design (LEED) certified.
• Arizona Corporation Commission is considering advancing the portfolio standards for
renewable energy.
• The Forest Health Task Force is developing a more holistic approach to forest health
management and community protection for Arizona.
• The Essential Services Task Force is working on evaluating Arizona’s gasoline and
essential services and infrastructures, including electricity, natural gas, and water.
• Several communities such as Flagstaff and Prescott have developed economic growth plans
that bring in sustainability and sustainable systems.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xi
Figure ES-2: Project Methodology Diagram
• Analysis of national and international market trends, developments, and opportunities
on which to build Arizona’s future within the segments of the “sustainable systems”
industry;
• A benchmarking analysis of other states and regions that are considering elements of
sustainable systems to learn best practices and other lessons;
• An infrastructure gap analysis, through intensive university, government, and industry
interviews to determine strengths, weaknesses, opportunities, and threats (SWOT)
facing these industries in Arizona and an assessment of needs on which to build;
• Development of a 10-year vision for Arizona in this competency area; and
• Development of a set of mutually reinforcing strategies and action plans, including
resource needs, to further position Arizona in these industries.
POTENTIAL AREAS OF SUSTAINABLE SYSTEMS
FOCUS/MARKET POTENTIAL
With an immature and diverse market such as “sustainable systems,” there is, at least in
the early stages, more technology push than market pull as customers are convinced to
embrace new, potentially disruptive technologies/products. Therefore, the research base
is critical to success in creating this market.
Arizona’s Research Base
Arizona’s three universities generate, in total, approximately $500 million per year of
research and development (R&D) grants and contracts. From this combined base in
Sustainable
Systems Core
Competency
Analysis
(completed in previous
project)
Market
Analysis and
Profile
Benchmark
Analysis
Investment
Analysis
Gap and
SWOT
Analyses
Sustainable
Systems
Prospectus
A Strategy and Plan
for Development
Roll Out and
Communications
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xii
Phase I of this study, Battelle identified six core competencies that reflect areas of
research focus in Arizona meeting the following criteria: breadth, depth, reputation, and
impact on their field; competitive differentiation; ability to transcend single business
areas; and hard for competitors to imitate. These are ecological sciences, agricultural and
plant sciences, space sciences, computer modeling and simulation, electronics and optics,
and chemistry and materials.
Arizona’s strongest core competence by far is the ecological sciences. There are three
areas of world-class research and scholarship in this broad and deep competence.
Arid/semiarid lands ecology—Battelle could not find another university system that
possessed the same depth of knowledge.
Urban ecology—The Consortium for the Study of Rapidly Urbanizing Regions at
Arizona State University (ASU) is a world leader, as indicated by the extension of the
remote sensing and urban environmental systems studies to many other cities around the
world.
Hydrology and water resources—The University of Arizona (UA) is first nationally in
hydrology; add to that distinction the four water centers, each dealing with a different
problem area, and ASU’s and NAU’s contributions, and Arizona has what is arguably the
world’s biggest and best water resource portfolio.
The field of plant sciences also has two strong research areas, which could be very
powerful if integrated and linked to sustainable agriculture.
The Plant Genomics Institute at UA, led by Rod Wing, sequences plant genomes, which
can be used in crop enhancement and as models for human disease.
The Arizona Biodesign Institute at ASU, where Dr. Charles Arntzen’s group is a world
leader in development and manufacture of edible vaccines.
The remaining four core competencies support the current manufacturing clusters and
will help further sustainable manufacturing in Arizona.
Sustainable Systems Technology Platform
Technology platforms serve as a bridge between the research core competencies and their
use in commercial applications and products. The Sustainable Systems technology
platform is the starting point for this Prospectus. As shown in Figure ES-3, it is a robust
platform potentially providing many technology product opportunities that can serve
several market segments.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xiii
Figure ES-3: The Map Linking Science and Technology with Products and Potential Markets
Arizona’s Sustainable Systems Industry Base
Sustainable systems is an emerging market, which is impossible to characterize using
traditional Standard Industrial Classification data. Therefore, in an alternative approach,
the data in Table ES-1 were obtained from a combination of company interviews, the
company’s own designation, or Battelle’s analysis. They represent, conservatively, the
total number of such firms in Arizona.
Table ES-1: Firms and Employment Base for Sustainable Systems Market/Industry Segments
Potential Sustainable Systems
Total
Companies
Total
Employment
Environmental Services and Equipment 628 19,125
Pollution Prevention and Recycling 106 1,223
Renewable Energy 83 818
Energy Efficiency 54 1,462
Green Construction Materials 9 172
High-Value Bioproducts 7 205
Sustainable Agriculture and Forests 47 1,161
Total Count 934 24,166
As a conservative estimate, more than 900 companies provide sustainable systems
products/services, with an employment base of approximately 24,000 in Arizona. Most of
Foundational Applied
Sustainable
Systems
“Fusion or
Convergence”
•Wastewater cleanup
•Water purification
•Solid waste management
•Air emissions sensing
•Electronics recycling
•VOC removal systems
•Solar power
•Wind power
•Distributed generation
•Hydrogen production
•Solar roofs/HVAC
• Integrated building system
• Thermal hydraulic
engine/pump
•Water purification/ recycle
• Lead free electronics
•ZDM
•Emissions reduction
•Monitoring systems
•Rubber pavement
•Polymers/Plastics
•Concretes
•Adhesives/coatings
•Biodiesel fuel
•Edible vaccines
•Cosmetics
•Biomass
•Greenhouse products
•Wood products
Research Core Competencies
Technology
Platform
Products/
Services
Industry/
Market
Electronics
and Optics
Computer
Modeling and
Simulation
Space
Sciences
Ecological
Sciences
Materials and
Chemistry
Plant and
Agricultural
Sciences
Environmental
Services &
Equipment (water
management)
Pollution
Prevention &
Recycling
Renewable
Energy
Energy
Efficiency
Sustainable
Manufacturing
Green
Construction
Materials
High-Value
Bioproducts
Sustainable
Agriculture &
Forests
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xiv
these are small businesses, employing fewer than 30 people. Not surprisingly,
environmental services and equipment is the largest subsector, followed by a combined
renewable energy and energy-efficiency group.
Despite its small size, this is a good foundation on which to grow an industry. By way of
comparison, 10 years ago, in 1993, the employment base for the semiconductor industry
in Arizona was only about 25,000; but, today it is a major industry cluster.6
Potential for Growth
Interest is growing in sustainable systems in Arizona, despite the fact that the industry
base is relatively small. Most sustainable systems segments showed significant activity
by companies, entrepreneurs, or other advocates, producing a level of innovation that
indicates potential growth over the time period of this Prospectus. Tables ES-2 to ES-7
summarize some of the key developments, obtained from reports, Web sites, and
extensive interviews with experts from all sectors in Arizona.
Table ES-2: Key Developments in Energy Efficiency and Renewable Energy
Industry
Segment Key Developments
Energy
Efficiency
• The Southwest Energy Efficiency Project (SWEEP) study concludes that the potential for
energy-efficiency improvements in Arizona is tremendous and represents replacement of 12
500MW new power plants. Also, 24,100 new jobs can be created by 2020 in the industries
supporting energy efficiency.
• Of the 34,000 Energy Star homes built nationally in 2001, more than 8,000 were built in Arizona,
leading the United States.
• Arizona homebuilders, supported by programs from APS and TEP, are national leaders in offering
guaranteed heating and cooling costs.
• All major cities have “green” building standards.
• Communities such as Civano, campuses such as NAU, and commercial buildings in Phoenix are
all pursuing LEED designations.
• A new solar energy firm, So Cool Energy Inc., is financing new solar heating/cooling systems in
commercial buildings and schools.
• Deluge, Inc., has developed the Thermal Hydraulic Engine, the first engine to be powered only by
hot water supplied by geothermal, waste heat, or solar sources.
Renewable
Energy
• Environmental Portfolio Standard requirements are driving the three major utilities (APS, TEP,
SRP) to install solar power plants at a fast pace. Most MW generation in the United States.
• Fourteen new renewable energy projects committed through 2002—solar, wind, and biomass.
TEP long-term goal is 20% solar power by 2020.
• www.AzSolarCenter.com is getting more than 20,000 discrete hits per month, and this rate is
rising almost exponentially.
• APS Solar Test and Research Center (STAR) provides the research needs of both APS and
solar equipment manufacturers. STAR is the only facility of its kind in the United States. ASU-East
has one of the three fully accredited PV test labs in the United States.
• Solargenix has committed financing to deploy its solar thermal technology with Arizona utilities.
• C TRADE is a new company formed to develop Carbon Trade Credits for renewable energy
projects.
• American Hydrogen Association is active in Arizona. Goal of AHA is to stimulate interest and
help establish the renewable hydrogen energy economy by the year 2010.
6 Arizona Advanced Communications and Information Technology Roadmap, prepared by Battelle for
Arizona Commerce and Economic Development Commission, March 2004.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xv
Table ES- 3: Key Developments in Environmental Services and Equipment (water management)
Industry Segment Key Developments
Environmental
Services and
Equipment (water
management)
• Scottsdale Water Campus is currently the largest facility in the nation to treat
wastewater to drinking water standards using microfiltration and reverse osmosis
technologies, setting high standards for the state.
• Both UA and ASU have R&D underway to advance water management approaches for
arid/semiarid regions, e.g., DEWVAPORATION.
• CIW Services is a fast-growing local company with full engineering, manufacturing, and
service capabilities, providing high-quality water treatment products and services.
• Zeta Corporation developed the Zeta Rod, the first application of electronic treatment
technology into high-volume flows of industrial cooling water and other processes.
Table ES-4: Key Developments in Sustainable Manufacturing and Pollution Prevention and
Recycling
Industry Segment Key Developments
Sustainable
Manufacturing
• Large global semiconductor companies in Arizona, such as IBM, Intel, ST
Microelectronics, and Motorola have corporate-level programs that address workplace
environment, safety, and health issues and making their products more environmentally
friendly.
• Intel, IBM, ST Microelectronics, and others clean their process water for recharge into
the aquifer or reuse in other parts of their sites.
• Ultrapure water and water conservation are two major research topics at the UA’s
Engineering Center for Environmentally Benign Semiconductor Manufacturing.
• Gore has introduced energy-efficient systems and water conservation into all its plants,
including Flagstaff.
Pollution
Prevention and
Recycling
• The Arizona Partnership for Pollution Prevention provides a networking and mutual
help system for companies to promote hazardous waste reduction.
• Universal Entech designs, builds, and operates integrated solid waste management
systems, including transfer stations, MRFs, IPCs, and composting.
• Pantheon Chemicals provides environmentally safe, cost-efficient cleaning, lubricating,
and pre-painting solutions as viable alternatives to existing hazardous or toxic solvents
and cleaners.
• Innovative Formulations Inc. develops innovative products that are both human and
ecologically friendly.
Table ES-5: Key Developments in Green Construction Materials and High-Value Bioproducts
Industry Segment Key Developments
Green
Construction
Materials
• Several small firms are producing “green materials” for different applications, and
industry associations are promoting green products (e.g., AerRock, ELF, Polypore,
Rastra, Polylink).
• Strata International Group has developed a sustainable composite building technology
based on polystyrene coated on both sides with fiber-reinforced concrete.
• Rubber Pavement Association, Tempe, represents the rubber/asphalt industry, with 30
members worldwide and four in the Phoenix area. There are two companies in Phoenix
building crumb rubber producing plants. Several projects are underway with ASU.
High Value
Bioproducts
• GEMTEK Products is the only bioproduct manufacturer in the state. It produces
biobased cleaners, solvents, lubricants, personal care and other specialties, and
alternative fuels from soy, canola, corn, and peanuts.
• Integrated Energy Technologies is interested in salt-tolerant plants such as sea
asparagus, which is a potential source of oil as well as food. The Colorado River Delta is
a potential demonstration site.
• University research is focused on edible vaccines (ASU), cancer drugs (UA), and
nutritional products (UA). Innovative discoveries are being made.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xvi
Table ES-6: Key Developments in Sustainable Agriculture
Industry Segment Key Developments
Sustainable
Agriculture
• Cotton industry strategy to capture high-end, high-value market for quality, with a new
seed breeding program to increase both yields and quality that will demand premium
prices.
• About 85 percent of the country’s leafy green vegetables are grown in the Salinas Valley
in summer and Yuma in the winter, providing a year-round business for Dole and others.
Farmers served by SRP are in a better position than California farmers (Imperial Valley)
served by the Colorado River, who now face water curtailments.
• Arizona has three areas falling in the top three greenhouse sites in the world, and is
home to two major companies, Eurofresh and Heinz, involved in growing high-value
fruit, vegetables, and flowers in greenhouses using hydroponics.
Table ES-7: Key Developments in Sustainable Forest Products
Industry Segment Key Developments
Sustainable Forest
Products
• The Governor’s Forest Health Oversight Council is developing policy based on sound
science.
• Greater Flagstaff Forests Partnership is an alliance of 25 academic, environmental,
business, and governmental organizations in Flagstaff, dedicated to testing and adapting
new approaches to restoring forest ecosystem health in the forests surrounding
Flagstaff.
• A forest-based renewable industry is gaining momentum, and investors and
entrepreneurs are proposing new secondary wood products companies based on
emerging technologies.
• Forest Energy Corporation produces natural wood pellets and densified logs for
building heating/hot water systems, which is far more efficient than electricity production
from biomass.
Sustainable Systems Market Trends
National Markets. In terms of markets relating to sustainable systems, a major
environmental industry has emerged over the past 20 to 30 years in the United States. A
comprehensive study by the U.S. Department of Commerce placed the size of the
environmental industry by the late 1990s at $181 billion, with more than 110,000
companies employing more than 1.3 million Americans and more than $16 billion in
exports. This translates into the environmental industry being larger than paper and allied
products, petroleum refining, and aerospace, and nearly as large as motor vehicles.
By the late 1990s, however, growth of the environmental industry had leveled as
environmental regulations that created much of the market growth in the 1980s and early
1990s stabilized and no longer drove growth. Therefore, more recent market forecasts
suggest continued mixed, but generally positive performance. Table ES-8 describes
trends along the market segment lines that Battelle has selected, based on data from
various sources, including Environmental Business International,7 Business
Communications Company,8 and Clean Edge.9
7 Environmental Business International, http://www.ebiusa.com/.
8 Business Communications Company, http://www.buscom.com/.
9 Clean Edge, http://www.cleanedge.com/.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xvii
This entire market area may well receive new impetus nationally as a result of the “new
Apollo Project” just launched by a coalition of labor unions, environmentalists, and
congressional Democrats. The plan calls for a $300 billion federal investment over the
next 10 years in clean energy technology such as “green buildings,” more energy-efficient
appliances, renewable energy sources, and modernized manufacturing and
electricity infrastructure. The return on this investment is estimated at $1.4 billion in new
gross domestic product and the creation of 3.3 million jobs, as well as a net energy cost
savings of $284 billion.10
Table ES-8: Summary of National Market Trends in Sustainable Systems
Market Segment Trends
Environmental
Services
and Equipment (water
management)
• Solid waste management services grew by 3.6% from 2000 to 2001.
• Hazardous waste management services grew by 3.0% from 2000 to 2001,
but expected to fall in revenues from $2.35 billion to $2.32 billion by 2007.
Top three firms account for more than 45% of the market.
• Site remediation—4.0% AAGR.
• Advanced wastewater treatments—5.5% AAGR from $3.5 billion in 2001 to
$4.6 billion in 2006. United States is fastest growing sector with 1/3 of
market. Asia and Europe each have 20%.
• Advanced municipal water treatment technologies (e.g., membrane
filtration, ozone disinfection, UV irradiation, etc.)—23.1% AAGR.
• Air monitoring equipment and sensors—9.8% AAGR.
• Biotechnology for environmental management—8.3% AAGR; $103.5
million in 2001 and expected to record annual growth of 8.3%, reaching
$154 million by 2006.
• Emission control products will grow by 5.4% annually.
• Market for filters will grow by 4.7% annually.
Pollution Prevention and
Recycling
• Process and prevention technologies grew by 6% from 2000 to 2001.
• Resource recovery market grew by 2.0% from 2000 to 2001.
Renewable Energy • Market size for U.S. alternative power generation was 368 billion kilowatt
hours in 2001, up 1.0% from 2000 and 6.7% from 1997.
• California predicts that Renewable Portfolio Standard of 20% would create
about 119,000 person-years of employment by 2010, most in geothermal
and wind industries.
• Global solar PV market continues its strong growth, at a rate of about 20%
annually.
• Ethanol production should increase by 15% annually as it replaces MTBE.
• Wind power will expand by 79% annually and represent about 6% of the
nation’s electrical power by 2020.
Energy Efficiency • U.S. savings per household (1997) were $530.
• Since the 1980s, EE programs in Massachusetts saved $4 billion, created
more than 20,000 new jobs in EE industry, created fewer blackouts and
cleaner air, and had an estimated ROI of 2:1.
• In San Jose, California, annual energy savings today are $4.5 million.
• U.S. industrial sector energy savings projected to be 32.6% by 2020.
• U.S. commercial sector energy savings projected to be 37.3% by 2020.
• A number of national organizations and programs also encourage green
buildings (e.g., LEED), and growth is expected to be 3% annual average.
10 New Technology Week, January 20, 2004.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xviii
Table ES-8: Summary of National Market Trends in Sustainable Systems (continued)
Market Segment Trends
Sustainable
Manufacturing
No specific data, but the trend in the semiconductor industry is being reflected
in traditional metals and chemicals industries, the automotive industry, and the
biotechnology industry. Therefore, Battelle anticipates continued growth of
sustainable manufacturing and the enabling systems such as water, energy,
and toxic material management.
Green Construction
Materials
• Demand for plastic and wood-plastic composite material will grow by
13% annually.
• U.S. Green Building Council forecasts an increasing trend in green
building—up 3% in 2003.
• Use of concrete for residential housing has grown from 8 percent to
14.4 percent in past 4 years.
High-Value
Bioproducts
• Green solvents—6.0% AAGR.
• U.S. market for plant-derived chemicals will grow by 6.8% annually.
Sustainable Agriculture • Market for organic foods has increased approximately 20% per year.
Sustainable Forest
Products
• Low prices for wood products have depressed this market, although the
new housing construction sector is growing. Demand for paperboard and
panels remains relatively soft. Duties and quotas have been applied to
softwood imports from Canada, Russia, etc.
Global Markets. The global markets for sustainable products in the energy and water
sectors are more mature in other countries than the United States. Japan, Canada, and the
European Union (EU) countries are considered global leaders in sustainable development
and have shaped their policies so as to take the lead in transitioning to sustainable
systems. Three sectors exhibit high growth potential.
Renewable Energy. Solar energy is now the world’s second fastest growing energy
source—at an average growth rate of 16 percent a year since 1990—and it is predicted to
expand.11 Global solar energy demand has grown at about 25 percent a year over the past
15 years, particularly in PV technologies. The solar PV industry now globally generates
between $3 million and $4 billion in revenues and will continue to expand. Of the global
demand for solar PVs, more than 35 percent is accounted for by Japan, 25 percent by
European countries, and less than 15 percent by the United States. In 1999 alone, the
global solar market for PV systems reached $1 billion.12 PVs are now being used in most
of the industrialized countries and in more than 175,000 villages worldwide, producing
thousands of jobs and creating economic opportunities in more than 140 countries.13
Major energy companies such as Shell, BP, and Enron endorsed solar energy by investing
heavily in PVs in recent years and are planning significant increases in the solar
industry.14
11 “Solar Power Markets Boom,” World Watch Institute,
http://www.worldwatch.org/press/news/1998/07/16/.
12 “Global Solar Markets May Grow Ten-Fold by 2010,” Environmental Expert News,
http://www.environmental-expert.com/news/sep8-14/news3.htm.
13 “Solar: Jobs for Today and Tomorrow,” Solar Energy Industry Jobs, http://www.solardev.com/SEIA-solarjobs.
php.
14 “The BP gasoline station with PV panels on the roof,” Energy Saving Now!
http://energy.saving.nu/energytoday/renewable.shtml.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xix
Currently, Japan, the United States, and Germany constitute 71 percent of the world
market for solar PVs. In Germany and Japan, grid-connected applications accounted for
more than 95 percent of the world market. Gesellschaft fur Solarenergie (GEOSOL) and
Shell Solar have just announced that they will team to build what the companies said will
be the largest solar power station in the world: a 5MW power station south of Leipzig,
Germany.15 Germany has now overtaken the United States as the largest net exporter of
PV cells and modules, mostly for residential roof-mounted systems and building
integrated PVs. It also is the largest market in Europe for PVs, with market share of
56 percent in 2000.16 Japan is now the country with the most PVs installed per person.17
In 2002 alone, the Japanese solar roof program received applications from 42,838
households.18 Dynamic solar markets also have been developed in Greece, Austria,
Spain, France, Switzerland, Denmark, and Australia.
While thermal solar energy is still at the developmental state, the potential demand for
thermal solar systems is significant. Markets for thermal solar energy are emerging in
northern and southern Africa, western Australia, Asia, and the Middle East. The United
States currently leads the thermal solar industry, but Japan and the EU are becoming
America’s strongest competitors.
Continuous production improvements, falling prices, and global environmental concerns
are opening up new markets for PVs and thermal technologies, giving the countries that
own solar technologies tremendous business opportunities. The prospects for both PV
and solar thermal sectors look very good for the coming years. The global market for
solar electric technology will continue to expand and is predicted to grow to $10 billion
by 2010. While the focus is mostly on European countries, the United States, and Japan,
high growth rates for solar technologies are projected in developing countries coping with
poor utility grid systems and lacking their own solar technologies.
Energy Efficiency. The global market for energy-efficient technologies is emerging in
both the industrialized and developing world. It is estimated that, in 1999, the global
market for energy-efficient goods and services reached $105 billion.19 The energy-efficiency
markets are primarily found in the United States and western Europe.
However, demand for energy-efficient products is appearing in Latin America, Asia,
eastern Europe, and Africa. Developing countries, in general, are experiencing an
increase in energy demand due to population and economic growth, but face capital
constraints in meeting these energy needs. Energy efficiency is perceived to become a
crucial means to help meet rising energy demands. Developing countries will require
investments of more than $100 billion to meet their energy needs. Only $12 billion of
external funding is presently available, leaving a tremendous potential for energy-efficiency
products to make up for the lack of domestic funds.20 Most of the capital
requirements will be needed in Asia and countries of the Former Soviet Union. This also
15 New Technology Week, January 26, 2004.
16 “PV in Europe,” REFOCUS, May/June 2003, p. 48.
17 “Photovoltaic Industry Statistics: Countries,” Solarbuzz 2003,
http://www.solarbuzz.com/StatsCountries.htm.
18 “Solar Energy Global,” Solarbuzz, 2003, http://www.solarbuzz.com/FastFactsIndustry.htm.
19 “Global Markets for Energy-Efficient Products…,” http://www.bccresearch.com/editors/RDEC97.html.
20 UNIDO, https://www.unido.org/userfiles/PloutakM/7.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xx
means major business opportunities for energy-efficiency companies and a chance to
reduce greenhouse gas emissions as those countries pursue rapid modernization.
Water Management. As water supply and quality is becoming a global problem, water
also is turning into a booming business. Worldwide, annual industry revenues are
estimated at $300 billion, with the United States accounting for more than half of that
amount. This number is expected to grow as water becomes scarce and consumer markets
begin to mature. Water markets are emerging in Australia, Chile, and Mexico, with
expanding potential into the Middle East, Asia, and North and South Africa. Some of the
largest global water companies, such as Azurix, Suez Lyonnaise des Eaux, and Vivendi,
have expanded their business to emerging water markets. The French water giant,
Vivendi, now operates in numerous countries around the world, making annual revenues
of more than $16 billion.21
Water scarcity and poor water quality have led to the rising need for transport
infrastructure, wastewater treatment, and water efficiency technologies. Water and
wastewater treatment demand, for example, is currently at $122 billion, constituting
40 percent of the world environmental market. The market volume for irrigation is at
about $30 billion a year. Demand for micro-irrigation and low-pressure sprinkler
technologies is growing at about 10 percent and will grow even more with a rising focus
on water efficiency. Desalination of seawater and wastewater is experiencing 20 percent
growth. Desalination is particularly sought by the southern countries where water is
scarce. Currently, 13,000 desalination plants operate in 120 countries. The market,
currently worth approximately $2 billion, is forecast to grow to $70 billion by 2020.
Water treatment and disinfection technologies grow at about 10 to 15 percent each year,
with a market value of about $5 billion a year each.22
BENCHMARKING ANALYSIS
A benchmarking review of leading and competitor
regions was undertaken to identify, analyze, and draw
useful lessons from the practices of regions and
institutions that are generally comparable along certain
relevant strategic dimensions. Specifically, Battelle was
looking to
• Identify the competition
• Learn where the state stands
• Isolate the strategic issues
• Find out what works.
Based on selection criteria, Battelle settled on six domestic and two international
benchmarks: California, Colorado, New Mexico, North Carolina, Oregon, Washington,
the European Union, and Vancouver, BC (Canada).
21 “The Rising Tide of Water Markets,” ITT Industries, http://itt.com/waterbook/tide.asp.
22 Sustainable Asset Management, “Investment Opportunities in the Water Sector,” 2001 report.
Benchmark Selection Criteria
• Obvious competitors
• Commitment to
sustainability
• Home to relevant industry
sectors
• Federal labs or other
federally funded initiatives
• University Centers of
Excellence
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxi
Summary of Lessons Learned
Each of the benchmarks is a viable competitor in sustainable sectors, and several have
explicit economic development goals.
Each of the six benchmark U.S. states and two international regions has displayed an
impressive commitment to sustainability as a fundamental ethic of government and
private-sector operations (Table ES-9). Each effort has been driven by different political
forces and emphasizes different thrusts, including energy, water, pollution prevention,
and “green manufacturing.” What distinguishes several of the benchmarks is a
commitment to make developing sustainable industries a cornerstone of an economic
development strategy.
Table ES-9: State and Regional Sustainable Development Competition
State/Region
Apparent
Thrusts/Interests
in Sustainable
Sectors
Driven by
Economic
Component of
Sustainability Policy
Status of
Industry Sector
California Air quality; power
reliability; green
buildings
State government
bureaucracy over
several Governors;
grass-roots
Implicit strategy to
make an economic
virtue of regulatory
necessity by levering
the size of the market
Achieving high
national profile
Colorado Solar; green
buildings
Grass-roots;
“small is beautiful”
constituency; builders
Not yet in place Industry
dominated by retail
and grass-roots
advocacy
New Mexico Solar; green
manufacturing
Governor and
Congressional
delegation
Explicit commitment to
economic growth
Industry sector still
nascent
North
Carolina
Green
manufacturing;
farm-waste reuse;
forestry
Last two Governors
and the public
university system
So far only in the
sense of service to
existing industry
and agriculture, and
efficient use of public
resources
Strong
environmental
services sector;
others
lagging
Oregon Clean power;
watershed
management;
climate stewardship
Governor and
grass-roots
Explicit commitment to
triple bottom line
Portland emerging
as a center of
sustainable
industry trade
Washington Clean power;
power reliability;
forestry/bioproducts
Governor and grass-roots
(local public
utilities)
Explicit commitment to
triple bottom line
Northwest/BC
emerging as a
center of fuel cell
development
EU Sustainable
transportation,
industrial ecology,
environmental
management
systems
Top-down EU R&D
programs, and
bottom-up industry
networks and NGOs
Explicit component of
all R&D programs in
Sixth Framework
Industry networks
for material re-use
and trading
Vancouver,
BC
Urban sustainability Provincial and
regional
environmental
programs
Environmental
industries recognized
as key economic
driver
Fuel cells
development
influencing NW
“hydrogen
corridor”
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxii
Simply having a state energy office that investigates renewable sectors does not
distinguish the benchmarks.
Energy production and energy efficiency dominate the states’ “sustainability” plans.
Reviewing the activities of the State Energy Program (SEP) offices, it is apparent that
each (including Arizona’s) has conducted innovative feasibility studies and pilot
deployment projects in many of the 11 program areas and nine industrial sectors
supported by the Department of Energy’s (DOE’s) Office of Energy Efficiency and
Renewable Energy (EERE).23 (California does have an outsized commitment to the
vehicular/fuel program areas.) Most of the principal partnering activities sponsored by
EERE show relatively little variation across the benchmark set (Table ES-10).
Table ES-10: Energy Programs
Sources: Million roofs: http://www.millionsolarroofs.org/partnerships_statelocal/.
Clean Cities: http://www.ccities.doe.gov/coalitions_map.shtml.
Allied partners: http://www.oit.doe.gov/bestpractices/partners.cfm.
None of the benchmarks has yet fully aligned its energy programming with economic
development, but several are on the cusp.
One of the benchmarks, California, has gone well beyond minimal federal requirements
for the SEP and added substantial budgetary authority for conducting R&D (not just
deployment) of alternative energy technology. Oregon has given itself the capacity
through a public-benefit fund to address the same goals, but so far the fund is supporting
deployment and not R&D. North Carolina, New Mexico, and Washington State have all
23 The 11 program areas are biomass; building technologies (which administers the state partnerships
programs); distributed energy and electric reliability; federal energy management; vehicular technologies;
geothermal technologies; hydrogen, fuel cells, and infrastructure; industrial technologies (administers the
OIT program); solar technologies, weatherization; and wind/hydropower. The nine industry sectors are
agriculture, aluminum, chemicals, forest products, glass, metalcasting, mining, petroleum, and steel.
State/Region
Million
Solar
Roof
Non-
State
Partners
Clean
City
Coalitions
DOE
Allied
Partners
in-State
Industry of
the Future
Partnerships
$ FY03
Special
Projects to
SEP
Agency
FY01–02
Total $ to
State
from
BTS
(millions)
2002
Population
(millions)
Arizona 3 2 1 4 $689,756 $3.6 5.5
California 13 12 7 2 $3,474,630 $47.7 35.1
Colorado 5 3 5 5 $430,632 $46.4 4.5
New Mexico 1 1 0 3 $577,790 $4.2 1.9
North
Carolina
2 1 7 4 $574,996 $10.3 8.3
Oregon 0 2 5 6 $208,722 $6.2 3.5
Washington 2 1 5 3 $774,468 $25.1 6
EU Not applicable
Vancouver,
BC Not applicable
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxiii
supplemented the activities of their SEP offices with the industrial extension and outreach
functions of their state university systems; and in Washington, energy technology is
being added as a sector targeted by the technology partnership agency. None of the
benchmark states has put all the elements together, but it seems likely that one or more
shortly will (Table ES-11). For instance, Governor Richardson of New Mexico recently
announced, in his State of the State address, a bold new plan to construct a large
commercial solar power plant by 2006, and major water projects, all tied to economic
development and job growth.24
Table ES-11: Energy Benchmarks
State/Region Additions to Basic
State Energy Program
Role of State Agency
for Tech-Based
Development
Comment
California $62 million energy R&D program
(public-benefit funded)
Air quality and pollution
prevention programs with their
own R&D budgets
Minimal. Some attention to
environmental services cluster
in San Diego
Purchasing power of
California Power Authority
used to nurture alternative
power companies
Colorado None No lead agency for tech-based
development. Governor now
focusing on IT and bioscience
clusters
Advocacy community is
pushing a public-benefit
fund
New Mexico State-funded, university-managed
environmental
research consortium handles
pollution-prevention leadership
Agency has minimal
programming. Most efforts at
regional (Albuquerque) level
Gubernatorial interest
likely to redirect cluster
initiatives
North
Carolina
Department of Administration
stewards the state government
and university system pollution-prevention
initiatives
Sustainability one key thrust of
NC State Industrial Extension
Service and outreach
programming
Expansion of state-funded
biotech center to embrace
forest biotechnology
Funding available for
sustainable crop development
and waste management
through tobacco settlement
board
Environmental services
sector has long been a
recruiting target based on
R&D strengths at
universities, RTI, and
federal labs. May be
connections with existing
ag-biotech cluster
Oregon Permanent sustainability board
Energy Trust (public benefit fund,
but no R&D component)
Climate Trust
Clean Diesel initiative in pollution
prevention agency
No lead agency for tech-based
development
Likely that governor’s new
thrust may place stronger
emphasis on company
formation
Washington Strong involvement of WSU
cooperative extension in SEP
functions
Bonneville Electric Foundation as
a substitute for a public-benefit
fund
Addition of energy technology
to mandate of Washington
Technology Center
Continued emphasis on
precision forestry and
agriculture in state-supported
programs at UW and WSU
EU N/A N/A Explicit component of
Sixth Framework R&D
program
Vancouver,
BC
N/A N/A
24 http://www.governor.state.nm.us/pdf/stateofstate2004.pdf.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxiv
The benchmarks are differentiated by how they are using federal facilities—including
those in other states.
In addition to presence of an R&D fund, one of the factors that distinguishes the
benchmarks from each other is the presence of federal laboratories with capacity in
sustainable systems and the resources to participate in partnership activities that are
funded either through the laboratory itself or by headquarters operations in Washington,
DC (Table ES-12).
Table ES-12: Targeted Federal Funding
State Major Federal
Facilities Levered
How Comment
California UC-managed labs
(esp. LBNL, Los
Alamos)
The labs feed UC
research networks on
energy and environment
Not a major component of
California strategy to date
Colorado NREL Underutilized to date;
mainly collaborations with
School of Mines
State has not yet learned to
effectively leverage the lab
or its commercialization
function
New Mexico Sandia and Los
Alamos
Extensive
commercialization and
industrial service
commitments by both lab
managers (Lockheed-
Martin and UC)
To date the labs have been
worked for other clusters
(optics, microsystems), but
sustainable sectors are sure
to follow, starting with PV
and solid-state lighting
North Carolina NIEHS and EPA
labs in RTP
RTP has been marketed
to environmental service
firms
Federally supported NC
Solar Center, though not a
federal lab, has boosted
state’s visibility
Oregon EPA and Forest
Service Labs at
Oregon State
University.
BPA
Extensive university–
agency research
collaborations, including
joint use of facilities and
staff
An MOU between Oregon
University System, Oregon
Health and Sciences
University, and PNNL has
produced several joint
programs, including the
state’s first Signature
Research Center for
Multiscale Materials and
Devices, which will
revolutionize energy and
chemical systems
Washington PNNL
BPA
PNNL organizes a
bioproducts consortium,
and BPA helps fund
renewables deployment
PNNL supports a significant
environmental services
cluster in Tri-Cities and
throughout the state, and is
a major contributor to state
hydrogen and fuel cell
initiatives
EU N/A
Vancouver, BC N/A
Traditional benchmarks show California as the clear leader.
California is the only one of the six benchmark U.S. states to meet all four criteria
articulated by the Union of Concerned Scientists (UCS) for development of a renewable
energy sector—and it also is one of three in the set to have at least one formal program
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxv
targeted at industrial recruitment in the sustainable sectors, as tracked by the Database of
State Incentives for Renewable Energy (DSIRE) (Table ES-13). As a consequence,
California leads the benchmarks in most UCS award categories, with a distant second-place
performance in new renewables by both Oregon and Washington, whose efforts are
grass-roots dominated (Table ES-14). Finally, data published by the Green Building
Council show California again a dominant leader in LEED projects, followed by
Washington and Oregon (Table ES-15).
Table ES-13: California, the Benchmark Leader
State
Renewable
Standards
(UCS)
Public Benefit
Fund (UCS)
Net Metering
(UCS)
Disclosure
(UCS)
Recruitment
Incentives
(DSIRE)
Arizona X X X X
California X X X X X
Colorado X X
New Mexico X X X
North Carolina X
Oregon X X X
Washington X X X
EU N/A
Vancouver, BC N/A
Source: UCS categories: http://www.ucusa.org/energy.
DSIRE: http://www.dsireusa.org/summarytables/.
Table ES-14: Benchmarks in UCS Award Categories
Category Benchmarks in Winning Set
Most total funding for renewables California
Highest Annual Average Funding per Kilowatt-Hour
over Life of Fund
California
Disclosure required outside comprehensive
restructuring
Colorado
Most new renewables installed California, Washington, Oregon
Most new renewables planned California
Most active competitive markets California
Most active regulated and public utility markets Colorado
Source: http://www.ucusa.org/energy
Table ES-15: Registered LEED Projects among Benchmarks
State # Registered LEED Projects
California 141
Washington 52
Oregon 45
Rest not in top 10
Source: http://www.usgbc.org/Docs/About/usgbc_intro.ppt.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxvi
Implications for Arizona
As input to the strategic situational assessment, the results of this benchmarking suggest
the following general possibilities:
• Arizona should consider aligning its targets for development of advanced-technology
industry sectors with the regulatory priorities of the state.
• Arizona should consider aggressively targeting federal funding that could lead to
a strong relationship with a nearby federal laboratory or to a new federal R&D
laboratory in these areas.
• Arizona should consider making funding available for its energy office beyond
the minimum required “match” for federal formula programs.
ARIZONA’S INFRASTRUCTURE CAPABILITIES: GAP ANALYSIS
The state’s infrastructure to support a sustainable systems industry was assessed through
an inventory and gap analysis involving extensive interviews with industry executives;
economic development providers; university faculty; nongovernmental organizations;
and tribal, state, and local government leaders. In addition, several focus groups
combined representatives from these sectors. Review of secondary data and interviews
with key officials in benchmark regions also were conducted.
As a result of the study, gaps in the state’s assets were identified that focused on five
specific areas.
Research and Technology. While the three
universities have an extensive base of research on
sustainable development topics, they lack coordination
and collaboration among themselves or with industry.
Very recently, discussions have begun to remedy this
and to hopefully build a coordinated and
complementary R&D portfolio, linked to state and
industry needs. It also is clear that the university
technology transfer offices lack expertise and
experience of these market segments and are therefore
unlikely to catch the next disruptive technology.
Product Manufacturing. While Arizona is known as a manufacturing state, it is largely
because of strong semiconductor and aerospace clusters. This study did not find any
established manufacturing cluster in any of the nine segments examined. Typically, just a
few small companies are manufacturing water management systems, renewable energy
systems, or green products or bioproducts; there is no formal linkage between these
cluster nuclei.
Workforce Development. A key finding was the lack of cross-disciplinary academic
programs that would produce trained graduates for a sustainable systems industry. Even
in today’s market, demand exists for engineers trained in renewable energy, energy
efficiency, water management, and environmental remediation; and this trend will grow.
Arizona’s Five Sustainable
Systems Inventory Gaps
• Research and technology
• Product manufacturing
• Workforce development
• Business climate and
infrastructure
• Market creation
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxvii
While a large number of undergraduate programs focus on different aspects of the
environment, no program addresses the “triple bottom line” of sustainable development,
and no degrees are offered. Very few graduates have specific experience with energy
efficiency or renewable energy principles outside of those contained in traditional
mechanical or electrical engineering programs. Also, general lack of management
expertise and the poor state of the K–12 system were cited by several industry executives.
Business Climate and Infrastructure. Several key gaps were found in this area, most
notably the following:
• The impact of the state tax structure in general and property taxes in particular as they
relate to investments in sustainable systems.
• The lack of incubators and special eco-industrial parks that could nurture, as well as
promote, new sustainable technology companies.
• Very few programs that assist entrepreneurs or companies in introducing new
sustainable systems into the marketplace.
• Difficulty in securing start-up funds from private investors in the state because of lack
of interest and/or understanding of new sustainable technologies.
• Reluctance of private investors to invest in new power plants or manufacturing
facilities on tribal lands because they may not see a return on their investments.
Market Creation. Sustainable systems is an emerging market, and so the challenge will
be to move beyond the early adopter stage of the technology adoption life cycle into the
mainstream stage where significant return on investment is achieved.25 Key gaps include
the following:
• Arizona is the likely first market for most sustainable systems companies, yet there is
little public awareness of the need for and value of sustainable development.
• Arizona does not have a sustainability image, which hurts local company credibility
when selling out of state.
• Market opportunities on tribal reservations and in the Arizona-Mexico border region
are not being utilized. These areas have much in common with third world countries,
and so qualification of products and services here could well help market penetration
elsewhere.
• Markets for sustainable systems exist in the EU and some developing countries such
as China and India, but it takes a different skill set and approach to successfully
market these regions. The smaller companies making up this industry do not have this
experience.
25 Moore, Geoffrey, Crossing the Chasm, Harper Business, 1992.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxviii
STRATEGIC SITUATIONAL ASSESSMENT (SWOTANALYSIS)
Combining all the analyses—core competency, market trends, benchmarking , and inventory
and gap—enables a comprehensive review of the overall strengths, weaknesses,
opportunities, and threats facing Arizona in its efforts to position itself in sustainable systems.
Battelle looked at Arizona’s position on sustainable systems in a general way and also
examined issues and opportunities specific to industry segments.
General Strengths
The following list notes Arizona’s existing strengths, the foundation and building blocks
upon which to develop an effective strategy for advancing in sustainable systems.
General Strengths to Leverage
• All industry segments reviewed are aware of the need for sustainable practices to reduce their “footprints.”
• Sustainable manufacturing is at an advanced stage in the area’s semiconductor industry because of global
drivers.
• State and local government incentive programs and/or regulations act as powerful drivers for industry to
introduce sustainable technologies into electric power production, water management, and building and
road construction.
• The three state universities have dominant positions in R&D in many of the components of sustainable
systems. Top in water/hydrology, urban and rural ecological sciences, forest management, and
environmentally benign manufacturing.
• Entrepreneurs have innovative technologies for water purification, environmentally friendly materials, and
energy production.
• Rapidly growing urban areas and large tracts of rural and tribal lands provide opportunities for rapid
introduction of new technologies—”a living laboratory.”
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxix
General Weaknesses
In general, the following list of weaknesses in sustainable systems identifies areas in which
Arizona’s existing resources and activities are lacking.
General Weaknesses to Overcome
• Smaller firms are still are at the stage of introducing energy- and water-saving measures to reduce operating
costs or reducing/eliminating toxic materials to meet tightened regulatory standard.
• Property tax situation penalizes business investment in sustainable systems; it does not account for lower life-cycle
costs, only initial cost, which is high.
• Arizona is currently not positioned to be a major player in manufacturing sustainable systems because it has
no manufacturing clusters in the key segments. Most systems are purchased outside the state.
• The three state universities are undertaking parallel programs without much interaction or collaboration across
the state.
• University R&D programs in renewable energy and green materials areas are small. Utilities and industry are
doing most work here, focused on the near term.
• Federal funding is split between several agencies without one central coordinating point for sustainability,
presenting a challenge for funding research projects.
• There is a lack of seed and venture capital and space for new business incubation.
• University technology transfer offices do not have staff members who are experts in these fields.
• Few interdisciplinary academic programs exist to provide trained people for a sustainable systems workforce.
• No central advocate for sustainable systems industry exists in the state (closest is Environmental Technology
Industry Council). NGOs tend to be focused on natural resource protection.
• Rapid urbanization is bringing issues of pollution, water shortage, and commute times, all of which impact
“livability,” a key factor for retention and recruitment of companies.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxx
General Opportunities
Opportunities are those factors that have the potential to significantly advance the
position of Arizona in sustainable systems. Many of the key strategic priorities and
actions seek to maximize these factors for the state. Assessing Arizona’s position
identified the following opportunities.
Threats
The following key threats involve external factors that can negatively impact the
development of Arizona’s sustainable systems base.
General Opportunities to Build On
• Arizona (and the Southwest) will be a very significant market. Sectors growing and needing
products and services include renewable power, green buildings, wastewater cleanup and
recycling, and high-value crops.
• Sustainable systems products and services is a pre-emerging market in the United States, but
more mature in Europe. All indications are that it will grow over the next decade, particularly in third
world countries.
• An encouraging sign for sustainable systems manufacturing is the number of Arizona-based small
companies with novel technologies that could “leapfrog” current applications.
• Several entrepreneurs are proposing disruptive approaches to buildings and power supplies that
can build new industries.
• University strengths in sustainable systems are broad and deep and offer the potential of
developing the whole product solution for customers. Collaborations are increasing.
• Proximity to Mexico offers opportunity for joint sustainable development programs, as well as a
new market to serve, and access to sustainable trade programs of NADB and others.
• One-third of the land in the world available for development is arid/semiarid; therefore, as a model,
Arizona can lead the way into markets in the Middle East, China, Asia, and South America for
energy and water management, land use management (urbanization), transportation, agriculture,
etc.
• Arizona can demonstrate the value of integrating sustainable systems across both urban and rural
communities.
Threats to Avert
• Federal funding may be eliminated or severely cut in key areas in the future (e.g., DOE has cut
solar and wind budgets for FY04).
• With its new initiatives, New Mexico could become the “model” state in the Southwest.
• California still represents the largest market for sustainable products and could retain the
manufacturing base.
• Arizona relaxes its standards for energy efficiency, renewable power, and water conservation,
removing the initial drivers for a sustainable systems market in the state.
• Urban growth outstrips services and infrastructure, and livability declines.
• Universities lose star faculty and programs to more aggressive, out-of-state universities, paying
higher salaries.
• Venture capital availability elsewhere lures Arizona entrepreneurs out of state.
• Arizona captures the service part of the sectors but can’t build the manufacturing base, which is
the primary source of high-paying jobs.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxxi
OVERALL ASSESSMENT
Arizona has the foundation on which to develop a strong sustainable systems industry
base. A commendable level of awareness of and commitment to sustainability principles
is seen in governments, universities, industry, and NGOs, which bodes well for the
future.
The state’s industry is open to introducing sustainable systems into its operations, thereby
helping to build a local market for new products and services. The following segments in
particular are growing and need products and services: renewable power, green buildings,
water cleanup and recycling, and high-value crops. These same areas are the source of the
sustainable industry growth globally, so Arizona companies have the opportunity to
qualify their products at home before exporting them to world markets.
However, today, Arizona is not positioned to
manufacture the range of sustainable systems
that are needed for the state and that will find
even larger markets elsewhere. The following
gaps should be of concern:
• No solar power manufacturing industry
cluster, although there are several solar
companies in the state
• No green building materials industry cluster
• Fragmented water cleanup system industry
• No greenhouse manufacturing industry to
supply the growing fruit and vegetable
industry
• A forest products manufacturing base in disarray, with no large anchor company.
A concerted effort on behalf of the state and economic development groups will be
needed to rectify this situation, or Arizona could well be a net importer of sustainable
products.
Finally, these analyses suggest that seven sustainable systems “niches” are candidates for
further development in Arizona:
• Energy Efficiency/Renewable Energy—Focus on being a leader in energy-efficient
homes/buildings via management of energy, water, and materials use. Supply small
solar-, wind-, or hydrogen-powered electrical systems for homes, buildings, and
factories in distributed generation systems.
• Water Management Systems—Develop technologies, products, systems, and services
to manage water conservation from source to sink. Focus on water desalination and
ultrapure water for manufacturing processes.
• Sustainable Manufacturing—Build around water management and extend beyond
the semiconductor industry to biotech. Provide both an equipment and service
industry.
Arizona Needs to Develop Its
Manufacturing Base
• Leverage the advanced technologies in
the semiconductor companies
• Transfer technology to other emerging
industries, such as biotech
• Grow companies with “leapfrog”
technologies
• Emphasize water management
systems manufacturing
• Grow solar-power-based
manufacturing
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxxii
• Sustainable Agriculture—Expand the greenhouse-grown fruit and vegetable
industry, using advanced water control systems.
• High-Value Bioproducts—An offshoot of sustainable agriculture, whether in the
field or greenhouse, and using the same basic growing system. “Biorefinery”
examples include oils, cosmetic-grade materials, and fuels to eliminate air pollution.
• Sustainable Forest Products—Lead a renaissance of the forest products industry in
the region.
• Green Materials—Provide low-cost materials for building and road construction,
from lightweight concretes to asphalt.
VISION
The following vision is proposed for Arizona’s future in sustainable development as seen
a decade from now.
MISSION
To accomplish this vision, Arizona’s mission contains two key elements.
Sustainable Systems Vision
Arizona, building on its existing strengths, has become a premier national and international
center for “arid-lands livability,” employing sustainability principles for
• Water management, from source to sink and back again
• Harnessing the sun for power, fuel, food, and medicine
• Sustainable manufacturing and knowledge-based renewable industries, including those
based on natural resources, such as forests, agriculture, and waste products.
Arizona has policies and regulations for both urban and rural areas and a business climate
that encourages sustainable operations by all segments of society, so that industry growth
occurs in harmony with the environment.
As a result, Arizona is the model for quality of life in arid/semiarid lands and exports
sustainable systems and services worldwide, creating jobs and wealth for its citizens.
Sustainable Systems Mission
To consolidate and grow the basic infrastructure necessary for sustainable systems
industries to flourish in Arizona, building on the components already in place, namely
• Strong university/college research programs in urban and rural sustainability topics
• A receptive industry to deploy new technologies
• Active NGOs working on natural resource management
• Federal, tribal, state, and local government buildings, energy, and water programs
• Conducive geographic and environmental factors.
To sustain existing business as well as build new business, both sustaining and disruptive
innovations will be demonstrated and qualified in the growing Arizona and Southwest
markets, before being deployed globally in other arid/semiarid lands. Government has a role
in lowering the barriers to entry for disruptive technologies.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxxiii
STRATEGIC DIRECTIONS
Four key themes run through the Prospectus:
• Partnerships between governments, NGOs, universities, and industry are
essential to build the state’s sustainable economy, because each industry segment
will require incentives, investments and innovative technologies.
• The current paradigm of “use up and move on” must be changed to one of
resource management and conservation for true sustainable development to
flourish in the state.
• Urban and rural strategies for business development within the state will be
different but mutually supportive. Some of the sustainable systems industry
segments are more conducive to rural economies than urban, and vice versa.
Likewise, small businesses, employing tens of people, will underpin rural
economies, but much larger businesses, employing hundreds to thousands, are
required in urban areas to support the population base.
• Partnerships with other states and countries will be important to build early
successes, enhance reputation, and capture market share. Arizona must
capitalize on its strategic position in the Southwest, partnering with New Mexico
and Mexico, in particular.
STRATEGIES FOR ORGANIZING SUSTAINABLE SYSTEMS ACTIVITIES
A total of seven linked strategies are proposed to position Arizona as an international
leader in the sustainable systems industry as it evolves over the next decade.
Three strategies focus on specific industry niches to create the Arizona “arid lands
livability” brand. Each strategy will address needs for sustaining research and technology
development, demonstration and qualification of technologies in realistic pilot-plant
environments, and development of appropriate policies, regulations, and incentives to
encourage their adoption. These three strategies are as follows:
Strategy One: Make Arizona the “Water Management Capital” of the world.
Arizona’s challenges are a microcosm of the challenges facing over one-third of the
world’s surface, which is arid or semiarid land. Managing water, from source to sink and
back again, could be a signature for Arizona.
Strategy Two: Harness the sun for power, fuel, food, and medicine.
Arizona enjoys more than 300 days of sunshine each year, a condition that provides many
opportunities to develop industries ranging from solar electricity to greenhouse-based
crop production.
Strategy Three: Make Arizona a sustainable manufacturing “Center of Excellence.”
Arizona is home to several companies that are part of the global semiconductor industry,
which leads all industries in sustainable manufacturing—designing products for the
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxxiv
environment by minimizing water, energy, and material usage, and maximizing recycle
and reuse of waste streams. Transfer of this experience to other industries could make
Arizona the “go-to” state for future manufacturing sites.
Four additional strategies are crosscutting and address gaps that must be filled to create
the necessary infrastructure for this new industry to flourish. These four strategies are as
follows:
Strategy Four: Establish a national and international image for Arizona as the “arid
lands livability” state.
This strategy starts at the top, with gubernatorial and legislative leadership, development
of a roadmap and metrics, and an annual public forum to report and assess progress.
Other activities involve communication and outreach to citizens, development of an
aggressive recruiting program, and “branding.”
Strategy Five: Create the business infrastructure for a sustainable systems industry.
This strategy includes addressing issues such as support of entrepreneurs in starting new
technology-based companies, eliminating barriers to business expansion in the state,
addressing urban and rural population growth impacts, creating supportive state and local
policies, and developing the industrial infrastructure needed for cluster growth.
Strategy Six: Sustain and grow university and industry R&D.
The R&D capacity in universities and industry, both people and facilities, must be
maintained at the leading edge and enhanced to address the complex science, technology,
and policy issues involved with sustainability.
Strategy Seven: Develop the workforce talent pool to support the sustainable systems
industry.
Workforce development begins with grade school and continues into professional life.
Building on plans developed for the other technology platforms, Arizona must have
actions that explicitly address the sustainable systems career opportunities.
Across these seven strategies, a series of 24 actions are proposed to be undertaken by an
Arizona partnership of government, university, industry, and NGO advocates.
Table ES-16 summarizes the actions proposed under each strategy.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxxv
Table ES-16: Sustainable Systems Strategies, Actions, and Time Frames
Strategy Action Time Frame
1. Create the Arizona Water Sustainability
Consortium between UA, ASU, and NAU.
Year 1
2. Develop a partnership with New Mexico
and Los Alamos National Laboratory to
further their ZeroNet Water-Energy Initiative.
Develop over 1 to 5 years
3. Launch several “signature” water
demonstration projects to both enhance
Arizona’s image as a sustainable state and
qualify products and systems for global
market penetration. Focus initially on
wastewater cleanup and desalination.
Phase in over
1- to 3-year period;
complete by year 10
Strategy One
Make Arizona the “Water
Management Capital” of the
world
4. Develop a water policy framework that will
be a model for arid lands sustainability
throughout the world. Engage all
stakeholders.
Immediate—1-year goal
1. Form a Solar Center for education,
research, and outreach, integrating relevant
programs in the three universities, the
utilities, and industry.
Year 1
2. Develop and implement signature
demonstrations
• Renewable energy, focusing on IPP solar
power installations
• Energy efficiency in buildings and power
plants
• Bioproducts, including those derived from
sea asparagus, plant-based medicines,
and edible vaccines
• Sustainable agriculture, focused on
greenhouse-grown crops and bioproducts
• Sustainable forest products, involving a
broad platform ranging from biomass
energy and fuels to construction materials.
• 1 to 5 years
• 1 to 3 years
• 3 to 5 years
• 2 to 3 years
• 1 to 4 years
Strategy Two
Harness the sun for power,
fuel, food, and medicine
3. Develop a set of supportive policies and
incentives that will grow the solar-based
industry and measure progress
Immediate—1-year goal
1. Evolve to a ZDM state—zero discharge
manufacturing—by transferring the best
practices from the semiconductor industry
cluster
5-year plan
2. Develop and implement signature
demonstrations
• Identify semiconductor and/or biotech
manufacturing plant for demonstration of
new technologies for complete water
recycle.
• Develop a “green products” industry based
on recyclable and/or natural materials.
Phase in over 2 to 3 years;
complete by year 5
Strategy Three
Make Arizona a sustainable
manufacturing “Center of
Excellence”
3. Create a Product Development Center to
develop and “showcase” sustainable
products.
Implement over 2 years
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxxvi
Table ES-16: Sustainable Systems Strategies, Actions, and Time Frames (continued)
Strategy Action Time Frame
1. Appoint a state “Sustainability Czar,”
reporting to the Governor, and the
Sustainability Council, composed of thought
leaders.
Immediate
2. Create the Arizona Sustainable Systems
Industry Association (ASSIA).
Transition over first two
years
3. Undertake an educational and marketing
campaign to increase Arizona residents’
knowledge and understanding of sustainable
practices.
Develop in year 1,
implement year 2
4. Create a “Blue Ribbon” Panel to assess
all current state and local standards, codes,
and regulations pertaining to energy, water,
environment, land use, and construction and
to make recommendations on changes.
Immediate—1-year goal
Strategy Four
Establish a national and
international image for
Arizona as the “arid lands
livability” state
5. Market Arizona as a prime location for
companies manufacturing/servicing
sustainable systems, and develop the “arid
lands livability” label.
Immediate
Develop 5-year plan
1. Implement the recommendations of the
Governor’s Council on Innovation and
Technology (GCIT) to institutionalize the
“T+3M” model for new sustainable business
creation.
1- to 3-year plan phase
in
2. Create several strategically located
product development centers, focused on
the three segments—water, solar, and
sustainable manufacturing.
3- to 5-year phase in;
use existing buildings as
far as possible, co-located
with universities
or industry
3. Develop eco-industrial parks around
sustainable industries, e.g., green
construction materials, high-value
bioproducts, sustainable agriculture and
forest-based industries, and sustainable
manufacturing.
3- to 5-year phase in;
use existing development
plans
Strategy Five
Create the business
infrastructure for a
sustainable systems industry
to flourish.
4. Attract funding from nontraditional funding
sources such as private family funds,
international development banks, etc.
2-year phase in with
tribal demos
Strategy Six
Sustain and grow university
and industry R&D
1. Create a statewide Sustainable Systems
Science and Technology (S3T) Collaboratory
that networks scientists and engineers
across the state.
Immediate. Pilot for water
and solar; phase in rest
over time
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxxvii
Table ES-16: Sustainable Systems Strategies, Actions, and Time Frames (continued)
Strategy Action Time Frame
1. Develop a statewide workforce education
strategy for sustainable industry across the
state.
Immediate; integrate with
other similar
recommendations
2. Increase Arizona’s higher education capacity
to “grow its own” skilled workers in sustainable
systems.
5-year plan
3. Increase the number of students aware of
and prepared to enter science and technology
fields (particularly those aimed at sustainable
development).
5-year plan
Strategy Seven
Develop the workforce
talent pool to support
the sustainable
systems industry
4. Increase the number of teachers who are
competent in the use and application of
technology in the classroom.
5-year plan
SIGNIFICANT AND CRITICAL ACTIONS FOR LONG-TERM SUCCESS
Battelle recommends a phased implementation of this ambitious program. Among the 24
actions identified in this Prospectus, eight stand out as most critical to the long-term
achievement of the vision to establish Arizona as a major center of sustainable
development across several research, economic development, and quality-of-life
dimensions. These actions should be undertaken first. Grouped into three equal areas of
emphasis, these eight actions are as follows:
Organization/Management
• Sustainability Czar and Sustainability Council
• Water, energy, and sustainable product policies
• Image/Branding
Technology Demonstration and Commercialization
• High visibility “signature” demonstrations
• New business investment funds
• Eco-industrial parks and product development centers
Research and Development
• Arizona Water Sustainability Consortium
• Arizona Solar Center.
These critical actions are to some extent interrelated, particularly as they impact
Arizona’s ability to capture market share and its image/brand. The following specific
steps should be taken in the first year.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxxviii
Organization/Management
To show the state’s commitment to sustainable development, the critical first step is
appointment, by the Governor, of the Sustainability Czar (i.e., Sustainability Policy
Adviser). In a parallel action, legislative action to institutionalize the Sustainability Czar
position would be very useful to ensure continuity across administrations.
In the first six months, the Sustainability Czar should take responsibility for converting
the Prospectus into a 10-year roadmap, with annual measurable goals. It will be his/her
responsibility to champion, facilitate, and monitor progress of the roadmap.
To assist the Czar in this monitoring process, it will be important to appoint the
Sustainability Council, composed of “high-level” stakeholders. These volunteer thought
leaders, drawn from all sectors of Arizona society, will not only serve to assess progress,
provide solutions to problems, and propose enhancements, but, through their positions,
also will help communicate the message that Arizona cares about its future to the citizens
of the state.
A second major effort will be to assess all policies, regulations, and standards associated
with sustainable systems. Given the near-term needs associated with water management,
it is probably appropriate to have separate “blue ribbon” panels addressing water, energy,
and materials.26
The foregoing activities and activities described below are tailor made for regular press
releases from the Governor’s Office that will start the image-building process. However,
Battelle proposes that a statewide competition be held during the first 3 to 6 months to
select the company that will develop the Arizona sustainability image and brand.
Technology Demonstration and Commercialization
A key to the success of this Prospectus is the qualification of new technologies/products
that will create a manufacturing base in the state and the associated service sector, all
producing high-wage jobs. Accordingly, it is important to start early with a few winners,
and make sure that everyone hears about it. Recommendations for the first year are as
follows:
• Start at least two water projects—candidates are the AzMex High Quality
Drinking Water Project, Phase 0; a small-scale demonstration of
DEWVAPORATION in Phoenix; and demonstrations of new technologies in the
wastewater treatment plant in Nogales.
• Obtain a decision by an independent power producer—Solel Solar Systems,
SolarGenix, or another qualified company—to site and build a large (>1-MW)
solar plant in the state.
• Obtain the go-ahead for the biomass plant and associated eco-industrial park in
Yavapai County.
26 The Governor recently has announced that a special committee, the Essential Services Task Force, will
evaluate fuel, electric power, natural gas, and water issues.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xxxix
• Scale up the UA neopurification water technology in a semiconductor
fabrication plant demonstration.
These signature demonstrations will be largely privately funded, but state and local
support will be required in the area of help with permitting and/or providing long-term
contracts for the products. Some federal funds can also be won for R&D and
commercialization activities.
A second key area that must be attacked during the first year is availability of investment
funds for new business start-ups. In-state funding is lacking for sustainable systems
innovations, from seed to later stage investments. It is, therefore, recommended that the
state approach some of the socially responsible investment organizations identified in this
study and offer an incentive package for them to locate an office and invest in Arizona
start-ups. This recommendation is consistent with that of the GCIT.
Also, the Arizona Multibank should be encouraged to pursue creation of an investment
fund through the Rural Business Investment Program. Such a fund would be of great use
to small businesses and start-ups that want to locate in rural areas.
Finally, in the first year some progress needs to be made on establishing eco-industrial
parks and product development centers.
Research and Development
Sustaining and growing the R&D base in universities and industry is critical to the
sustainable systems future, since it is the engine for growth of businesses and jobs. Given
the image it wants for Arizona, Battelle recommends two areas of focus in the first year:
• Formation of the Arizona Sustainable Water Consortium, which will tie the
water research at UA with that at ASU, NAU, and USGS.
• Formation of the Arizona Solar Center, which is also an attempt to draw
together a number of programs in universities and industry across the state.
In both cases, the first year would be devoted to assembling the parts and creating the
program plan, developing alliances and partnerships, and identifying gaps—staff and
facilities—and sources of funding.
FINANCIAL PLAN
Table ES-17 is a 10-year financial plan and investment portfolio. This plan, which is
broken into three phases—year 1, years 2 to 5, and years 6 to 10—shows the major
investments that are required to implement the seven strategies. The investment needs are
organized programmatically around the three areas of emphasis—organization/
management, technology demonstration and commercialization, and research and
development.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xl
The following key assumptions were made in putting this investment plan together:
• Investments will need to cover the entire technology life cycle, from basic
research to commercialization and market penetration.
• Investment funds will continue to flow over the three phases as projected in this
financial plan.
• Costs of proposed programs are based on a combination of (a) estimates
provided by Arizona “champions,” (b) the collective experience of Battelle’s
Technology Partnership Practice, and (c) benchmarking similar or related
programs elsewhere.
• Sources of funds will include private financing, philanthropic funding, university
endowment, federal and state government, and industry. Details on the funding
mix need to be worked out for each initiative as part of the roadmap process.
As expected, the major expenditures are in the technology demonstration and
commercialization area, with $1.25 billion proposed for signature demonstrations over
the 10-year period. Key priorities among these investment items are the early
demonstrations that will help establish the state’s image/brand in sustainability and the
disruptive technologies that will create new companies and market opportunities.
Table ES-17: Ten-Year Funding Requirements for Sustainable Systems Prospectus (in million $)
Program Area Year 1 Years 2 to 5 Years 6 to 10 Total Three
Phases
Organization/Management
Sustainability Czar/Sustainability Council 0.5 2.5 3.5 6.5
Policy Groups/Barrier Busting Groups 0.2 1.0 1.0 2.2
Industry Association 0.2 1.0 1.5 2.7
Image/Branding 1.0 2.0 1.0 4.0
Marketing 0.5 12.0 16.0 28.5
Workforce Development 0.3 4.0 5.0 9.3
Technology Demonstration and
Commercialization
Business Infrastructure—does not include value of
the funds
2.0 8.0 10.0 20
Signature Demonstrations 50 200 1000 1,250
Product Development Centers 5 20 30 55
Eco-Industrial Parks (incremental) 10 50 100 160
Research and Development
Research Centers 1.0 14 20 35
ZeroNet Initiative with New Mexico 0.3 4 5 9.3
Collaboratory/Technical Networks 0.3 1.0 1.5 2.8
Total Projected Funding Needs 71.3 319.5 1,214.5 1,605.3
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xli
Investment Sources: While few investment sources have been confirmed at this point, it
is appropriate to lay out options for financing the various activities in this Prospectus. In
order of priority:
State funding will be required to underpin the basic organization and management of the
Prospectus as it is translated into a roadmap as part of the 10-year state economic plan
and then implemented. Also, the state will have to step up to cost-sharing the marketing
campaign.
Private sector funding must pay for the major parts of the demonstration projects,
although some federal support is possible where program and national interests intersect
(e.g., healthy forests and hydrogen fuels). Banks, industry, and venture capital are all
possible sources for demonstration and commercialization activities. Shared energy
savings programs and third-party financing also are options, respectively, for financing
energy efficiency projects and new facilities. There is a promise of a Small Business
Investment Company through the new Rural Business Investment Program, but this must
be applied for during the next six months.
Federal funding is available, not only for support of R&D (e.g., NSF, DOE, DoD, etc.),
but also for economic-development-related projects such as starting product development
centers and eco-industrial parks (e.g., U.S. Department of Commerce). Special funds are
available for rural and/or tribal initiatives.
Foundation funding will support a number of activities, including research, policy
development, and education. There are several sustainability or environmentally oriented
foundations in the United States, such as the Pew and Rockefeller family trusts.
University foundations also need to be considered.
International bank funding also is available for international projects, e.g., those
involving Mexico. The North American Development Bank is a prime example.
Commercialization returns, over the long term, will provide reinvestment possibilities for
the R&D centers to augment the federal and foundation funding.
MEASURES OF SUCCESS AND PERIODIC PERFORMANCE EVALUATIONS
As these strategies and actions are implemented over the next 10 years, it will be
important to assess Arizona’s overall progress in meeting its sustainability goals on a
regular basis.
Therefore, as a starting point, Battelle proposes three primary, high-level performance
objectives be used to help the sustainable systems initiative measure progress made
toward achieving its vision and mission.
• Arizona will establish itself as a leader in advanced water management and
solar-based manufacturing and service industries and increase its employment
in these sectors, doubling it by 2010.
• Arizona will establish at least two centers of excellence for sustainable systems
R&D through collaborations with institutions that are major participants in
existing and emerging arid lands sustainability programs, and outpace national
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xlii
growth rate in federal research funding in this area. One such center will evolve
to “national laboratory” status by 2010.
• Arizona will establish the business climate that encourages sustainable industry
growth and institutionalize the “arid lands livability” brand by 2007 through
policy and regulatory reform, broad public-private partnerships, and aggressive
outreach and communications.
The strategies contribute to the success measures, as shown in Table ES-18.
Table ES-18: Contribution of Seven Strategies to the Proposed Success Measures
(H=high; M=medium)
Success Measure
Strategy
One
Strategy
Two
Strategy
Three
Strategy
Four
Strategy
Five
Strategy
Six
Strategy
Seven
Establish leadership in
water and solar
industry sectors
and double
employment by 2010
H H M M H
Develop at least two
Centers of Excellence;
one evolves to
national laboratory
status by 2010
H H H M
Establish the business
climate for sustainable
systems industry to
flourish and the
Arizona brand by 2007
H H H H H M
Further, Battelle recommends that each objective be broken into deliverables, which can
show progress annually.
Arizona should institute a process of periodically measuring its performance in achieving
these objectives. One approach could be to prepare a “State of Arizona Sustainability
Report” with emphasis on progress made toward the success factors listed above. This
would allow the dual opportunity to focus on achievements made in the sustainable
development of Arizona in general as well as achievements made in pursuing economic
benefits through sustainable systems.
SUMMARY
The Sustainable Systems Prospectus represents a unique vehicle and mechanism to
propel Arizona into a leadership position in sustainable development, which will develop
the markets and infrastructure to encourage a new manufacturing industry to grow, create
job opportunities, and provide an attractive place to live and raise a family.
The basic elements for Arizona’s sustainable economy exist today. They include
universities with active research programs that can serve as the engine for new
technologies and products; a receptive industry that can be the first market for such
products and services; state, tribal, and local governments that are concerned about water,
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
xliii
energy, land, forests, and the environment and are willing to do something about it;
NGOs that are engaged in establishing workable policies to balance economic and
population growth with protection of the environment for future generations; and
favorable climate and geographic factors.
The purpose of this Prospectus, as much as anything, was to pull all these parts together
into one place, so that the huge asset base can be reviewed by all the stakeholders and
then appropriately leveraged into economic development. It will take a sustained
partnership between governments, industry, NGOs, and universities to achieve the
development of the “arid lands livability” label for Arizona and the associated economic
growth. New research innovations must continue as current innovations are tested and
qualified in signature demonstrations; and new policies, regulations, and incentives must
be developed to create the business-friendly environment that is so important for new
industry creation.
Some might argue that the “arid lands livability” label or brand is too confining, but it is
important for Arizona to clearly differentiate itself from other states and regions that
already have established sustainable systems industries. The state’s unique position of
having major urban growth, as well as rural area development occurring in land that is
arid or semiarid, provides the opportunity for the “branding” that will enable huge
exports, given that more than a third of the developable land in the world is in this same
condition.
All this effort takes people and money. Arizona has the thought leaders in government,
the private sector, and the NGOs to accomplish this successfully. This leadership must
come together now to convince outside investors that this program is worth the
investment. And, state government, both the Governor and the legislature, must be
committed for this 10-year journey, be willing to remove barriers, and offer
encouragement and incentives.
This Prospectus lays out the public and private investments that can make Arizona a
leader in this next technology wave—a sustainable world. To embark on this road is
probably the single most important decision for Arizona at this time. It is Arizona’s
opportunity to lose!
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
1
Introduction
Research universities are emerging as a key economic asset in today’s global knowledge-based
economy. States across the nation are increasingly seeking to leverage the science
and technology assets found at their research universities as a source of competitive
advantage. Research universities are becoming anchors for an exciting array of state
economic development initiatives involving commercialization activities, collaborative
and multidisciplinary research centers, and innovative new curriculum and educational
programs needed for workforce training.
With three public research universities generating a combined $500 million annually in
research funding, the opportunity to harness the economic potential of its research
universities persuaded the State of Arizona to embark on an ambitious program, in
partnership with the Arizona Board of Regents and the Flinn Foundation, to identify the
major areas of research and develop the technology-based economic development
roadmap that would help drive the state’s knowledge-based economy over the next
decade.
As the first phase of this initiative, in 2002, Battelle’s Technology Partnership Practice
was retained by the Arizona Commerce and Economic Development Commission and the
State of Arizona to produce the Science and Technology Core Competencies Assessment,
which was recently published.27 Battelle examined Arizona’s public research
universities’ nonbioscience areas, in particular, the physical and natural sciences. Four
important “technology platforms” that will best position Arizona to take greater
advantage of its research universities for economic growth were identified: advanced
communications, information technology, sustainable systems, and bioengineering. These
four platforms complement the three platforms identified in the Flinn Foundation-supported
Arizona’s Bioscience Roadmap: cancer therapeutics, neurological sciences,
and bioengineering; with bioengineering represented in both studies.28 Therefore, in
total, six technology platforms for Arizona have resulted from Battelle’s evaluations:
advanced communications; information technology; sustainable systems; bioengineering;
cancer therapeutics; and neurological sciences. The latter three areas became the basis for
completing detailed bioscience business plans for Arizona. Battelle, with support from
the Flinn Foundation, has assisted in the development of the plans for these three
platforms.29
Phase II of the state’s initiative, started in 2003, is to develop a full roadmap for advanced
communications and information technology, similar to the bioscience effort in 2002,
and, given its longer-term development path, a development and investment prospectus
for sustainable systems. Together with the Flinn plans, they will provide the State of
Arizona with the necessary detail and information to “catch the three technology waves”
27 Positioning Arizona and its Research Universities: Science and Technology Core Competencies Assessment,
prepared for Arizona Commerce and Economic Development Commission, April 2003.
28 Platform for Progress: Arizona’s Bioscience Roadmap, prepared for the Flinn Foundation, December 2002.
29 Strategic Plans for Developing Near-term Technology Platform Areas of Cancer Research, Neurosciences and
Bioengineering, prepared for the Flinn Foundation, October 2003.
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
2
that will shape the future knowledge-based economy—Next-Generation Internet that will
revolutionize communications; Gene-Based Medicine, including gene therapies and
tissue and organ regeneration; and Sustainable Systems that will ensure economic growth
and quality of life while protecting the environment for future generations (Figure 1).
Figure 1: Catching the Next Big Technology Waves
This effort also will enable the State of Arizona to work with industry to link technology
and talent found in the state’s public and private research organizations with the needs of
recruited firms, existing and expanding firms, and new start-ups. To facilitate this, two
steering committees were formed, composed of leaders from government, industry,
universities, nongovernment organizations (NGOs), and economic development groups, to
oversee development of the Roadmap and Prospectus and provide advice and expertise on
specific opportunities and barriers.
POSITIONING ARIZONA IN THE SUSTAINABILITY ECONOMY
This Prospectus provides a framework for Arizona and its stakeholders in both public and
private sectors to invest in creating a whole new industry, both products and services,
supporting global “sustainable development”: i.e., development that meets the needs of
the present without compromising the ability of future generations to meet their own
needs. This concept evolved from the efforts of a global conference held by the United
Nations in Rio de Janeiro known as the Earth Summit of 1992. This watershed event was
followed by many years of international debate about the sustainable development
challenge. Confronted with the sustainable development challenge, the business
community is recognizing that long-term success depends not only on financial
performance, but also on social and environmental performance. Over the past decade,
many chief executives of major companies such as DuPont, Intel, Motorola, Ford, and
Johnson & Johnson have embraced “sustainability” as a business imperative.
Advanced
Communications
Gene-Based
Medicine
Sustainable
Systems
Time
Impact
0-5 yrs
5-10 yrs
>10 yrs
Development and Investment Prospectus to Create a Sustainable Systems Industry In Arizona
3
The Triple Bottom Line
An economy is sustainable only if it respects the principles of ecology. In other words,
economic growth occurs without jeopardizing the prospects of future generations to meet
their needs. Creating such an economy is not a trivial undertaking and will take all segments
of society working in unison toward this goal. A “sustainable enterprise” is a company that
anticipates and meets the needs of present and future generations of customers and
stakeholders, encompassing three dimensions known as the “triple bottom line” (Figure 2):
• Economic prosperity and continuity for
the business and its stakeholders
• Social well-being and equity for both
employees and affected communities
• Environmental protection and resource
conservation, both local and global.
Sustainability includes a number of critical
issues related to human and ecological
welfare—climate change mitigation,
pollution prevention, poverty reduction, and
protection of human rights. Stakeholders in
these issues include not only customers and shareholders, but also employees, local
communities, regulators, lenders, suppliers, business partners, and advocacy groups.
An Emerging Market
The scientific challenges are complex and daunting—to clean up the environment,
maintain the natural resource base, and reverse the effects of global warming, while at the
same time ensuring economic growth and an acceptable quality of life worldwide. All the
developed countries in the world have embarked on ambitious research, development,
and deployment programs to address these issues. Many innovative technologies are
being produced, which are fueling a growing global “sustainable systems” market, driven
in large part by the increasing need for clean energy, clean water, and reduced industrial
pollution.
Arizona has the companies, entrepreneurs, and university research core competencies
that, collectively, form the foundation for a sustainable systems industry. The state also is
a “living laboratory” for arid and semiarid lands, which represent over a third of
developable land in the