In the country's seventh largest city, political leaders are betting that green energy and smart grid technology will stimulate economic growth for decades to come.

“San Antonio has the opportunity to seize a mantle that no city in the U.S. holds today: To be the recognized leader in clean energy technology,” Mayor Julian Castro said Monday.

“By building a critical mass around research and development that will grow and attract the brainpower of the 21st Century, San Antonio can be for the new energy economy what Silicon Valley is to software and what Boston is to biotech,” Castro said while announcing an investment-and-incentives package that attracted five clean tech companies to the Alamo City.

San Antonio’s “New Energy Economy” plan includes a six-year, 100% tax abatement for a SunEdison 30-MW solar farm and incentives for the corporate relocations of smart grid firm Consert, LED lighting company Green Star, and ColdCar USA, an electric truck manufacturer.

Also in the package is a 200-MW power purchase agreement (PPA) for clean-coal electricity from Summit Power Group. Summit will manufacture compressed CO2 for oil recovery, urea fertilizer and sulfuric acid at a West Texas facility that promises to capture 90 percent of carbon dioxide and 95 percent of mercury and sulfur, officials said.

Doyle Beneby, CEO of city-owned utility CPS Energy, has said the companies could generate 230 jobs within three years and up to 1,000 jobs by 2015.

“Some may say, ‘Isn’t this risky? What if the political winds change and traditional, non-clean sources of fuel come back in favor?’” Beneby asked during the event Monday at the University of Texas at San Antonio.

In a state that is unapologetically proud of its fossil fuel economy, San Antonio and its pursuit of clean energy are boldly independent, especially at a time when an onshore oil boom, located in the nearby Eagle Ford Shale, has created many jobs in South Texas. Valero, the country’s largest independent refiner and one of San Antonio’s favorite employers, spent millions in a failed effort to challenge California’s clean air laws.

San Antonio may have some competition from a seemingly unlikely neighbor. Political leaders in Houston, home of many oil and gas companies, are also attracting clean energy companies recently, according to Reuters.

The Alamo City’s leaders recognize that an emphasis on renewable energy will have its skeptics.

“We choose to believe that the real what-ifs are: What if the air is so clean in San Antonio in 2018 that the instances of respiratory illnesses go down dramatically (and) what if thousands of new energy economy jobs are created?” said Beneby, who was hired last year after the utility’s previous leadership failed to push through a nuclear expansion at the South Texas Project.

Castro credited Beneby with recruiting the clean tech companies. The deal, the mayor said, highlights the “nexus of sustainability and economic development” because it will help CPS reach a goal of 20% renewable energy by 2020.

Some 859 MW of electricity, about 10% of CPS Energy’s capacity, comes from renewable sources, mostly wind, now. The U.S. Department of Energy (DOE) named CPS Energy and Denton Municipal Electric as co-recipients of the 2011 Public Power Wind Award.

CPS hopes to install Consert’s energy management software in 140,000 homes by 2015. The company announced its move to San Antonio from Raleigh, NC, after completing a successful CPS Energy pilot program involving 1,000 homes. CPS also plans to retire about 900 MW of coal power by 2018.

“This is exactly what utilities all around the country should be doing instead of considering costly and futile investments in pollution controls for outdated and harmful plants,” said David Power, deputy director of Public Citizen Texas.

CPS Energy is also considering proposals for a 50-MW solar power plant and related manufacturing facility. San Antonio is home to Texas’ largest solar farm, the 14-MW Blue Wing Solar Project, which was also nominated for the 2011 Excellence in Renewable Energy Readers’ Choice Awards. CPS Energy also offers a feed-in tariff program for solar installations. The pilot FIT pays 27 cents per kilowatt-hour for installations that produce 25 to 500 KW.

Castro hopes clean energy will enable the Alamo City to remain in “attainment” for Environmental Protection Agency (EPA) clean air regulations. He said that San Antonio is the only large city in the U.S. to meet “attainment” by meeting Clean Air Act standards.

The decommissioning of the J.T. Deely coal-fired power plant by 2018 is expected to improve air quality. But environmentalists fear that progress could be hampered by emissions from hydraulic fracturing and truck traffic if South Texas’ oil-and-gas boom expands as predicted.

“The policy makers and the community leaders in San Antonio are very concerned about the high pace of development causing the metro area to go into non-attainment,” said David Burnett, director of technology at Global Petroleum Research Institute at Texas A&M University.

In the meantime, advocacy group Solar San Antonio has been working to avoid such a scenario by making residential solar more accessible through loans from local banks. Beneby said the expansion of utility scale solar will also meet clean air goals.

“There will be plenty of room for us to grow our solar portfolio,” he said.

Through a PPA, SunEdison will install 30 MW of solar power at three 10-MW sites, including a water recycling facility. The company has committed $300,000 to build an education center for school-age children and another $300,000 for research and development with UTSA and its Institute for Conventional, Alternative and Renewable Energy.

SunEdison CEO Carlos Domenech (pictured top, right) said San Antonio’s approach has the potential to inspire a new generation of renewable energy projects across the country. He said cohesion among the city, community and municipal utility led to rapid development unseen in other U.S. markets.

“The other thing that is unique is the linkage to the university, which provides an opportunity to create a long term R&D effort,” Domenech said.

CPS Energy’s rates are among the lowest in the state, so the PPA is not mandated by a renewable portfolio standard.

“It really is a self-started initiative that has a new era of energy and jobs as a platform, and that really is different,” he said.