16 Dec Best US States for Green Energy Startups
By Amanda Jordan
For a green energy startup to succeed, the choice of where to put up a business is crucial. Green energy startups need access to financial capital, a strong talent pool within their reach, a good support and incubation network, the presence of clean energy markets, as well as supportive local policies.
That being said, not all states are created equal in their ability to provide an enabling environment for startups in renewable energy. So with that in mind, this article will look at clean energy state rankings on tech, policy and capital indicators to understand what the best states are to establish green energy startups.
The 2017 U.S. Clean Tech Leadership Index looks at more than 70 indicators within the three main categories that include technology, policy and capital. This state data includes numbers on clean energy generation, energy efficiency expenditures, venture capital investments, clean energy patents, among others. The state of California remains at the top of the list of top 10 states. It also has high rankings when it comes to venture investments in clean tech. Interestingly California—as well as New York and Illinois—are states with some of the highest real estate taxes, income taxes, and sales taxes in the country. However, Green Tech Media refers to academic sources that have shown that lowered tax rates do not necessitate economic development so new green energy firms should not be afraid of starting a business in a state with high business tax rates.
While Illinois may not initially seem like a good state to build a green energy startup, there are some key factors that make it an ideal location. A report from the Retail Industry Leaders Association and the Information Technology Industry Council identify Illinois as one of the top states that make it easy for companies to purchase renewable energy to power their operators.
Its neighboring state of Iowa also now gets 30% of its electrons from utility-scale wind. The structure and policy surrounding a state’s electricity market could be a deciding factor whether or not startups choose to establish a firm in the area.
Beyond that, the state also has a dedicated Department of Energy research laboratory, a clean energy accelerator, and a business school with a reputable eco-friendly MBA program. Access to quality human capital and markets should not be overlooked, nor should the available facilities for incubation and product development.
Massachusetts takes the second spot in the latest U.S. Clean Tech Leadership Index. Utility Drive notes that in 2014, Massachusetts was the top-ranking state if it was only focusing on the amount of human, academic and financial capital available. The number of world-class universities in the state, the burgeoning tech startup scene, and the amount of available venture capitalists accounts for this ranking.
Given the importance of retaining quality human capital, green energy startups should consider a business structure that allows its founders to benefit the most from the arrangement. State-formed LLCs are the best business structure for a group of founders who want to begin a startup. ZenBusiness states that the process of starting an LLC in Massachusetts is relatively straightforward. While human capital may be an asset, state policies may shift in the future. Natara Feller reminds us that the Massachusetts Attorney General is recommending a full-scale retail ban on energy suppliers to residential customers.
In 2017, Portland was one of the top cities with clean tech initiatives. This is also a reason why Oregon as a whole was ranked fourth in the Clean Tech Leadership index that same year. It is one of the top states for clean energy jobs, meaning that there are many players in the green energy business sector.
While this may dissuade people from launching a startup in a state that already employs a lot of people in the green energy sector, the community of green energy businesses can actually be enabling for firms just starting out. Building a network is important for startups to learn and grow, and there are few better places than Oregon right now.
Amanda Jordan is a freelance blogger with a passion for sustainability.