Striking local oil | Drilling down to create an energy-efficiency cluster would boost Maine's economy
“Charting the Course” is written by GrowSmart Maine, a Yarmouth nonprofit that promotes and encourages new ways of thinking about Maine’s future. This issue’s column is written by Christian McNeil, GrowSmart’s communications director.
At the turn of the last century in Beaumont, Texas, oilmen tapped the first gusher at Spindletop, the legendary field that launched Texas’ oil industry. In its most productive years, Spindletop produced over 4 million gallons of oil every day. It also led to the creation of hundreds of new oil firms, and laid the groundwork for a multi-trillion-dollar cluster of industries that is based in the Gulf Coast of Texas to this day.
Maine doesn’t have the salt dome geology that cultivated Texaco, Gulf Oil and other titans of the 20th-century energy industry. Instead, we have the oldest building stock in the nation, a cold climate and transportation infrastructures that are almost exclusively geared towards inefficient, oil-burning vehicles. We’re one of the most oil-dependent states in the nation, which means Maine households and businesses export billions of dollars every year to Houston boardrooms and overseas emirates.
Fortunately, a growing cluster of Maine businesses and entrepreneurs is emerging to transform these problems into grand opportunities. Because our buildings are so old and inefficient, relatively simple and low-cost renovations can yield tremendous savings. There’s more oil to be salvaged from our drafty buildings than there ever was in Spindletop.
According to a recently released report from Opportunity Maine, efforts to weatherize and improve electrical efficiency in all of Maine’s homes and businesses would leverage over $4 billion in savings over the course of a decade. Weatherizing every building in the state wouldn’t be cheap, but Opportunity Maine’s calculations suggest that the 10-year return on investment would be over 300%, and the labor-intensive projects would employ thousands of workers in high-wage construction jobs. Add to that the fact that these projects are remarkably low-risk investments — everyone pays utility bills — and it’s clear Maine is sitting on a massive investment and economic development opportunity.
Changing policy
These opportunities are already becoming new businesses and jobs. Maine’s industrial clusters are collections of similar firms that share infrastructure and talent pools. While individual firms in the cluster compete with one another, each business also benefits from its proximity to a community of similar firms.
Because clusters are typically composed of fast-growing small and mid-sized businesses, and because they take advantage of shared resources at low costs, GrowSmart Maine’s “Charting Maine’s Future” report identified cluster-based economic development as a key growth strategy for our state. Addressing Maine’s energy inefficiency could develop a leading new energy-conservation cluster, composed of new firms and a retooled work force focused on efficiency.
This oil conservation industry is just getting started, though, and before it can rival the world’s oil extraction industry, there are some policy challenges to address. One of the most significant is transaction costs: Oilmen in Texas merely had to drill a hole in the ground to make their profit, but Maine’s energy-efficiency cluster has to squeeze the resource in dribs and drabs from thousands of separate building owners. Because the potential profits from each individual building are so small, it’s difficult to obtain up-front financing for these projects on a case-by-case basis.
In order to help this emerging industrial cluster thrive, then, Maine’s energy policies must change to create economies of scale. Instead of financing efficiency projects one house at a time, we should create energy-efficiency rating standards and investment mechanisms that would allow investors to finance efficiency projects in thousands of buildings at a time. And just as we support Maine’s boatbuilding cluster with specialized workforce training programs, Maine needs to begin developing its energy-efficiency work force by retraining contractors and code enforcers.
The Legislature this month is considering a slate of bills, including one from Opportunity Maine, that attempt to address these issues. Ideas under consideration include increased efficiency standards, creating new public bonding authority for energy-efficiency investments and creating a new “energy-efficiency utility” — an entity that undercuts traditional energy prices by creating energy conservation opportunities instead of energy production facilities.
The emerging energy-efficiency cluster will generate hundreds of new businesses and thousands of new jobs and will be a recovery financed not from trade imbalances with China or artificial credit speculations, but from the environmentally friendly savings we make for ourselves in our homes and workplaces.
Christian McNeil can be reached at christian@growsmartmaine.org.
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