Lean green? Eco-Business eluding L.A.

Where's the green?

For years, local politicians and business leaders have touted the L.A. area, with its tough regulations and environment-conscious residents as a major center for innovative environmental or green technology companies.

But a recent report from a local economic research institute questions this conventional wisdom and has local environmental industry watchers and advocates scratching their-heads.

The report, produced, for the Los Angeles Department of Water & Power and the Los Angeles Workforce Investment Board, found fewer than 300 green technology companies in Los Angeles County. It also analyzed several industries with environmental aspects and said that the region stacks up poorly against the state and nation.

"When compared to the U.S. economy, Los Angeles is under-represented in every major industry with major green technology components," concluded the report from the Economic Roundtable.

The report cited the long-term decline in the region's manufacturing and aerospace sectors as the major culprit; these sectors traditionally have generated significant spin-off technologies and services from which environmental firms have sprung up.

The Economic Roundtable is a non-profit public policy research organization in downtown Los Angeles that, through its affiliation with the Weingart Institute, focuses its research mostly on poverty, homelessness and other social issues.

Lead author Dan Flaming said that the 289 firms tallied in the study may not represent the complete total of companies in the environmental arena, but said these were the companies in a dozen general industry sectors whose primary product or service focuses on the environment.

Flaming said he and his co-authors sifted through several databases, including a previous Department of Water & Power study, to locate the 289 firms. "Some companies, especially very small start-ups, may have slipped under the radar, but this is definitely not a situation where we're only looking at the tip of the iceberg. We believe we have found most of the significant companies."

Other environmental industry watchers disagreed.

"The numbers do appear to be low," said Grant Ferrier, publisher of the Environmental Business Journal in San Diego, Which tracks environmental companies in a broad spectrum of industries. "It may be that in Los Angeles, many environmental companies do not make it on to the standard industry classification lists."

Ferrier said that a lot of firms based outside the county send engineering or cleanup teams into the area on a project-by-project basis and might not have been picked up.

Also, several very large locally-based engineering firms--particularly Jacobs Engineering Group, Parsons Corp. and Tetra Tech Inc., all based in Pasadena--have significant environmental divisions. But because these are not the main focus of their business, they were not included in the study.

Little support?

Whatever the actual number of firms, the Economic Roundtable study went further, using data from the U.S. Census Bureau to compare the concentrations of green technology firms in Los Angeles County with concentrations for California and the nation. In virtually each industry sector analyzed, the percentage of local environmental firms lagged percentages seen at the state and national levels.

The irony, Flaming said, is that given the region's leadership in environmental regulations--especially in air quality and alternative-fuel vehicles there is a huge demand for green technologies in Los Angeles.

"We've neglected an opportunity to capitalize on this market that we've created with our regulations," Flaming said.

The region's political leadership agreed that more could be done to boost the green sector.

Nancy Sutley, deputy mayor for energy and the environment for L.A. Mayor Antonio Villaraigosa, said the new mayor's administration believes strongly in encouraging the growth of the industry.

"We don't dispute that green technology companies have not been a strong part of the local economy. But we do see this as a great and growing sector for L.A.," Sutley said.

Sutley said Villaraigosa's vision for a "greener L.A." could go a long way to help. "If companies see L.A. as a greener market, they will be more willing to invest in green technology operations here."

She pointed to several steps the mayor has taken. The first is setting a benchmark for the Department of Water & Power to have 20 percent of its power portfolio coming from renewable sources by 2010. "That will require tremendous investment in renewable energy technologies like solar, landfill gas, etc. ... We want much of that new investment to go to local companies."

Likewise, Sutley said that the mayor's goal of greening the Port of Los Angeles should also encourage investment in alternative fuel technologies. The mayor also wants to set up incentives for builders of private sector projects to construct "green buildings." And she said city departments now have marching orders to purchase more recycled and green products.

However, sometimes the best intentions and incentives offered by local agencies may not be enough.

Take the South Coast Air Quality Management District, which has a five-point bonus (out of 100 possible points) in its bid process for locally-based firms. While some local companies like Monrovia-based AeroVironment Inc. and San Dimas-based AC Propulsion Inc., have managed to obtain significant contracts from the AQMD to make alternative-fueled vehicles, agency spokesman Sam Atwood said that the bonus system doesn't work in situations where few, if any, local firms bid.

"Much of our air pollution problems now come from mobile sources. A lot of the work to reduce those emissions is focused on vehicle engines and a lot of the engine manufacturers simply aren't based in Southern California. They are based in Detroit and the Midwest," Atwood said.

Local challenges

However, some local business owners in the sector say the bigger issue remains a lack of support.

"This region is only mildly supportive of the type of business we do," said Malcolm Currie, a former Hughes Aircraft Co. chairman and chief executive who founded Currie Technologies Inc., a Chatsworth-based maker of electric scooters and bicycles that was one of the 289 firms tallied in the Economic Roundtable study.

Currie, who is now vice chairman of the company, is still bitter about his firm losing out on a lucrative $1.9 million loan from the Department of Water and Power to develop electric scooters and battery stations. In 2003, the Water and Power commission approved the loan to a Hawaiian company, Personal Electric Transports Inc., which filed for Chapter 7 last month in U.S. Bankruptcy Court.

Another locally-based firm in the study has received more favorable treatment from local public sector agencies--at least initially. Solar Integrated Technologies Inc., a manufacturer and installer of photovoltaic roofing panels to capture solar power, received substantial federal, state and local economic incentives tour years ago to set UP a plant in South L.A. The Department of Water and Power even kicked in a rebate program for customers who installed Solar Integrated's panels on their homes or businesses.

"We got great support from everybody," said Jon Slangerup, the firm's chief executive. DWP officials said the rebate program for solar panels was overwhelmed as 500 people signed up within weeks.

"We offered a very aggressive rebate program of $6 per watt saved and the response outstripped our budget allocation, not just for one year but for several years," said Gary Gero, director of energy efficiency and renewable solutions for the DWP. The agency is now preparing to bring the program back with a lower rebate rate of about $3.75 per watt saved.