Innovation Clusters: Drivers of Cutting-Edge Technologies for Our Energy Future

Innovation takes teamwork. Sometimes that teamwork takes the form of companies, universities, or state and local governments collaborating together in novel ways. This can also occur through an “innovation cluster,” or a “regional center of innovation,” in which stakeholders come together to solve common problems. Recently, there has been increased focus on innovation clusters for energy projects. Substantial state and federal funds are being allocated toward developing energy innovation clusters due to their many benefits, including the creation of inventions and processes that will improve the nation’s energy efficiency.

Innovation Clusters Generally

There are many examples of successful innovation clusters. The classic innovation cluster is Silicon Valley. There, Stanford University computer science researchers have joined with venture capital, series stage investors, and experts in software design and market penetration. Together, they have created a unique hub of software research and development where creativity and innovation abound.

Innovation clusters gain momentum from already existing know-how in the particular community in which the cluster forms. A prime example is Silicon Valley’s Southern California cousin, the San Diego Regional Innovation Cluster (SDRIC). The SDRIC is based on an abundance of military technology in the surrounding area. The SDRIC developed due to the world’s largest Marine Corps Base’s location in Twentynine Palms, Calif., and one of the largest U.S. Navy bases, the Naval Base San Diego, being located nearby. This concentration of military activity prompted the SDRIC to develop in San Diego State University, where it promotes and develops defense technologies.

The SDRIC has helped San Diego County small businesses succeed in selling products and services in the C4ISR (command, control, communications, computers, intelligence, surveillance, reconnaissance) areas. These businesses now thrive in the defense and homeland security marketplaces, specifically, in the areas of cybersecurity, autonomous systems, and renewable energy. The confluence of a need for these services, a concentrated supply of technology providers, consumers who are hungry to buy the product, and a nearby university willing to support the creative minds driving the process has resulted in an upward spiral of development.

Innovation clusters are not exclusively located in the U.S. According to a report by the European Commission’s Enterprise and Industry Directorate-General titled “Innovation Clusters in Europe: a Statistical Analysis and Overview of Current Policy Support,”over 2,000 innovation clusters exist in more than 30 countries and span a range of industries. The reach of each cluster varies according to its location’s market conditions, technology, and geography.

Successful Innovation Clusters — What’s the Magic Formula?

An innovation cluster’s attractiveness lies in its ability to draw talent, based on its compelling opportunities for coordination, mutual advancement, and improvement. While there is no single formula to spark an effective innovation cluster, the online journal Science Progress identifies five factors that are the minimum essential for an innovation cluster’s successful formation:

  • A comparative regional advantage for the specialized focus area;
  • Venture capital for investment in start-up companies, research and development, and nurturing ideas at their conceptual level;
  • Physical locations available for social interaction and networking;
  • The ability to attract and entice the best and the brightest leaders of the particular industry to join the specialized talent pool; and
  • Dedicated facilities, enabling these leaders’ developments to be born.

Governmental and quasi-governmental initiatives are now available to support innovation clusters’ proliferation. The Brookings Institution suggests the following guidelines to afford the best chance of success for accelerating cluster development.

First, cluster initiatives should only be attempted where organic elements exist in an area that can be catalyzed. Trying to create an “artificial” cluster in an area devoid of these natural elements is not recommended. The inorganic nature of an artificial cluster may cause it to wither and die.

Second, decision makers need to make objective assessments about the nature, competitive prospects, and specific needs of different regional industry concentrations. They also need to implement a measure allowing tracking of the cluster’s performance.

Third, procedures must exist so that neither policy conflicts nor redundancy occurs between the different levels of government involved. This approach allows synergistic opportunities to be captured.

Fourth, a modest approach regarding cluster execution strategy must be taken. This approach ensures that an appropriate support level, obstacle removal, and public and quasi-public goods are provided.

Fifth, state policy makers should target investments strategically to advance clusters important to that state.

California’s Bold Steps to Promote Energy Innovation Clusters

California, a state that’s generally at the forefront of renewable energy and energy conservation matters, is funding and promoting its own innovation clusters through the California Energy Commission (CEC). Earlier this year, the CEC announced almost $15 million in funding for three energy innovation clusters: a Central Valley Innovation Cluster, a San Diego Innovation Cluster, and a San Francisco Bay Area Innovation Cluster. More recently, the CEC issued a request for proposals (RFP) for a Los Angeles Regional Innovation Cluster. The hope is that these innovation clusters will foster an interlinked community among start-up energy companies, universities, and investors that will stimulate intensive interaction and collaboration, promote entrepreneurship and competition, and enable sharing of facilities to accomplish these objectives. A designated cluster manager will oversee the performance of the projects selected.

California sees value in energy innovation clusters: they will assist the state in reaching its statutory energy goals. This plan meshes well with California’s vision of leading other states in efforts to create a more reliable, resilient electric grid–– one that incorporates distributed energy resources. Creating energy innovation clusters that support and encourage breakthroughs in cleaner, safer, and more affordable uses of energy is good for California’s residents. It also benefits California’s investor-owned electric utilities (IOUs), including Pacific Gas and Electric Co., San Diego Gas and Electric Co., and Southern California Edison Co. in their respective service territories insofar as the winning project’s innovations and the IOUs’ collective interest in developing energy innovation clusters is a powerful catalyst for the creation of a more resilient electric grid and a more energy efficient future.


Innovation clusters enable synergies and opportunities to evolve where they otherwise would not exist. Organic collaborations between business and scientific leaders in an area already well-suited to a particular market sector enable ideas to be converted into reality, accelerate development, and spur economic growth.

As government investments in regional energy innovation clusters illustrate, the cluster model promises to drive inventiveness and economic growth. The vicinities in which these clusters are located will benefit. The world will benefit, too, when it utilizes the exported technologies developed within these clusters. Indeed, the innovation cluster concept is one that rightly deserves to be elevated within the realm of public consciousness so that it can gain widespread public buy-in and the heightened level of support it deserves.

The views expressed in this article are those of the authors and do not necessarily reflect the views of Drinker Biddle & Reath LLP.

Lead image credit: Jitze Couperus | Flickr

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Kim Diamond is an energy lawyer in Drinker Biddle & Reath LLP’s New York City office, specializing in renewable energy and pooled energy financing transactions.  She is a thought leader in the renewable energy space, with her extensive scholarship on wind energy and other alternative energy topics being cited by the U.S. Court of Appeals for the Seventh Circuit and others.  She is Co-Chair of the American Bar Association’s Special Committee on Congressional Relations for the Section of Environment, Energy, and Resources.  In addition to being Wind Vision Ambassador for the Wind Energy Foundation, Kim is also Chair of Women of Wind Energy’s (WoWE’s) New York/New Jersey Chapter.  She is an honors graduate of the University of Michigan and Cornell Law School. Paul Gelb is an energy lawyer in Drinker Biddle & Reath LLP’s Los Angeles office, specializing in cleantech development, environmental litigation, and cases involving complex business issues.  His experience includes representing large renewable energy companies in landmark cases that have set the standard for various novel, cutting-edge topics.  Paul is a cum laude graduate of Columbia University and Columbia Law School.

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