With targeted investment in companies and policies focused on improving energy efficiency, Minnesota’s energy sector could grow to support 26,000 jobs a year, according to a new report.

Created by the American Jobs Project, the report points out that the state has more than 450 companies in the sector that have developed a “robust” supply chain.

Minnesota is one of 16 states the American Jobs Project has studied to determine their strengths in the clean energy economy and to provide a roadmap for building on that expertise.

The work is supported by the the JPB Foundation, the Fung Institute, Incite Labs, the Berkeley Energy and Climate Institute and the Center for Information Technology Research in the Interest of Society.

The report concludes that “Minnesota is well positioned to benefit from rising global demand for energy efficiency products given its base of 450 companies, leading research universities with expertise in energy efficiency technology, strong innovative workforce, and attractive business climate.”

Tiffany Wong, the report’s co-author, said Minnesota was selected for a chapter in the broader study because it is a national leader in clean energy policy and has an existing base of businesses and workers involved in energy efficiency.

“Minnesota has plenty of opportunities to grow energy efficiency employment and there’s an industry to support it,” she said.

The American Jobs Project, Wong pointed out, has looked at other Midwest states in prior reports. The organization looked at smart buildings and solar in Michigan, solar and wind in Iowa, energy storage in Illinois, wind and manufacturing in Ohio.

University of Minnesota Energy Transition Lab Executive Director Ellen Anderson, who contributed to the report, said it describes a pathway for the state to grow jobs in an emerging sector.

“It reinforces that we have done a great job on energy efficiency in Minnesota, but it suggests that we shouldn’t rest on our laurels and there’s a lot more progress we could make if we take stock and continue to innovate,” she said.

The jobs that could be created through a focused effort are “well paying” and offer opportunities for employment to underserved communities, she added.

Creating a cluster

The report proposes that business “clusters” can create greater economic development and that Minnesota has a strong history in energy efficiency, with 450 companies employing roughly 9,000 people.

“As national demand for energy efficiency increases, Minnesota’s energy efficiency cluster could grow to serve a larger portion of national demand than it does currently,” the report’s authors state. “Creating local demand for products sends a market signal to businesses, encouraging investment in new facilities and employees.”

One of the recommendations offered is the creation of an energy efficiency association in Minnesota to support the work of businesses such as Honeywell and 75F while encouraging the incubation of new companies.

The report points to an energy efficiency cluster in Michigan and clean tech clusters in North Carolina and Colorado as potential models. Each of them create public-private partnerships to foster advanced energy solutions, bolster new and existing businesses and create new jobs.

“Having all the actors and players at the table will create a more robust industry,” Wong said.

The report offers eight other policy recommendations:

Continued building benchmarking. While Minneapolis was the first city in the Midwest to institute energy-use benchmarking for buildings, the report suggests every structure in the state — both commercial and government owned — should have to report. Such a move could lead many building owners to improve efficiency without any government mandates.

Improve combined heat and power (CHP) policies. The report states Minnesota has “confusing” standby power rates and “inconsistent” interconnection policies that hinder CHP rollout. The state has 3,000 megawatts of potential, yet only a handful of projects are now underway.

Establish a “fund of funds” to improve investment. This strategy would have the state invest in venture funds that would in turn invest in energy efficiency companies in Minnesota. The money must be spent on state firms and the investment held for five years. Illinois and Utah have both seen success with these types of programs.

“Offer working capital loans for small clean energy operations.” Minnesota could lend money directly to businesses or encourage more private loans through loan guarantees.

“Develop degree and certificate programs on high-performance buildings.” The state’s two university systems could play a large role in creating programs that would meet the growing need for expertise in construction and renovation of energy efficient buildings.

“Establish an industrial assessment center (IAC) to increase access to efficiency training and technical assistance.” The U.S. Department of Energy has been promoting IACs as a way to reach small and medium-sized manufacturing firms with free audits and efficiency recommendations.

“Develop employee engagement and retention strategies to support Minnesota’s changing workforce.” The state has struggled to retain and recruit minority employees, as well as move them into the workforce. With an aging workforce, Minnesota needs to more strongly tap its younger and more diverse workforce with training and education opportunities.

“Target foreign direct investment to expand the state’s energy efficiency value chain.” The report suggests targeting foreign companies in the energy efficiency sector to make direct investments in in-state companies or to open an office or plant in Minnesota.

All of the recommendations would work to develop a bigger energy efficiency market for Minnesota, Wong noted, but she said stakeholders cited the problem of access to capital as a major challenge.

“Access to capital was a big barrier to business growth,” Wong said. “Increasing that access will help grow the energy efficiency sector in Minnesota.”

Frank is an independent journalist and consultant based in St. Paul and a longtime contributor to Midwest Energy News. His articles have appeared in more than 50 publications, including Minnesota Monthly, Wired, the Los Angeles Times, the Minneapolis Star Tribune, Minnesota Technology, Finance & Commerce and others. Frank has also been a Humphrey policy fellow at the University of Minnesota, a Fulbright journalism teacher in Pakistan and Albania, and a program director of the World Press Institute at Macalester College. Frank covers the state of Minnesota.