Arizona's economy once rested on the foundation of the five C's - copper, cotton, cattle, citrus and climate. Then came the sixth C - construction and other industries that bolstered employment such as semiconductors and aerospace. More recently, economic developers have been seeking to diversify Arizona's economy by promoting new economy stalwarts such as bioscience and information technology.
And most recently, another sector has emerged to generate excitement - sustainability.
Although the segment is still in its infancy in Arizona, industries such as solar and wind power, "green" building, forest products, water management and environmental services are increasingly viewed as offering potential for growth and high-paying jobs that are not likely to be shipped overseas, at least not in the near term.
"The only limitation on future growth will be whether we can be first to market with new products and services," said Jay Golden, assistant professor in the School of Sustainability at Arizona State University. "That will be the competitive advantage for our state's economy. That is what will attract the venture capital and innovators to this region."
ASU is doing its part. In addition to creating a School of Sustainability and Global Institute of Sustainability, ASU students and faculty are conducting research in many related fields including solar technology improvements, fuel from algae and other exotic sources, and new building materials that conserve energy. Some of that research figures to spawn new companies with potential to grow and support private-sector jobs.
The sustainability sector's potential in Arizona was perhaps symbolized most dramatically two weeks ago when Arizona Public Service and a Spanish company announced plans to build the world's largest solar electricity generating plant near Gila Bend.
Also, sustainable business was identified as an industry cluster that has the best prospect for long-term growth in the East Valley in a study by Moody's Economy.com for the East Valley Partnership.
"Green building has tremendous potential for growth over the long term ..." the study said. "Demand is clearly rising for green homes, extending demand for local technology-producing industries as well."
The Valley has attracted the first sustainable building conference sponsored by the National Association of Industrial Office Properties, which will be held March 12-13 in Glendale. The state was chosen for the conference because "there is a lot going on in Arizona," said Kathryn Hamilton, association vice president.
Two projects that participants will tour are the Papago Gateway Center in Tempe, a LEED-certified (Leadership in Energy and Environmental Design) office and research building with cutting-edge energy-efficient features; and Northsight, Scottsdale's first new-construction office building to achieve LEED Gold certification.
SCOTTSDALE COMPANY GROWS
American Solar Electric, a Scottsdale-based designer and installer of photovoltaic systems, is an example of how many companies in the cluster have been expanding.
The company has grown from about 10 employees three years ago to 50 today, and the number of solar systems it installs has grown from about 100 three years ago to more than 300 anticipated this year, said Matt Shannon, the company's marketing director.
"We are doing nearly one every day," he said.
Residential installations represent most of its business, driven by rebates offered by utilities that help to offset the cost.
"Commercial is still in the early adopter phase," he said. "The residential market has gotten to a more mature stage."
Residential customers cite the desire to save money on their electricity bills and to make an environmental statement as their reason for installing the systems, he said.
But a threat exists to the company's growth - the expiration of federal solar tax incentives scheduled at the end of this year. So far, Congress has not voted to extend them.
Shannon said the loss of the tax breaks may not have a major impact on the residential market, but it would hit big projects such as plans to "solarize" the ASU and University of Arizona campuses. The universities have requested proposals to install solar panels on many of their buildings to supply a portion of their electricity needs, and those projects will depend on tax credits, he said.
Despite the growth of some companies, Arizona still has a long way to go to become a sustainability-industry hub, said Barry Broome, president of the Greater Phoenix Economic Council, which recruits businesses to Arizona.
He said the state so far has been unable to recruit many solar companies because it lacks a strategy to attract the industry. He cited the decision by SCHOTT AG, a German company, to build a solar manufacturing plant near Albuquerque instead of Arizona because New Mexico offered more inducements. That represented the loss of a $100 million investment and 350 jobs.
Arizona needs to be involved in the engineering, design and manufacturing of solar technologies as well as the generation of solar electricity to become a real power in the industry, Broome said. So far all Arizona has really been able to show is that it can use its abundant sunshine to become a solar electricity producer, he maintains.
"But (solar power plants) aren't the job generators," he said. "That's only the tip of the iceberg."
Broome thinks Arizona needs to shoot for planned federal research labs in the solar and sustainability fields. To do that, the state needs to develop a solar strategy to match more comprehensive efforts in California, Oregon and New Mexico, he said.
Arizona already has a pro-business climate and a work force with experience in the semiconductor industry that can be easily transferred to solar technology, he said.
"The ability to combine talent and a good business environment with a solar strategy could put Arizona in the catbird seat," Broome said.
Another positive trend is that investors are increasingly interested in putting money into solar and other renewable energy ventures, Golden said. He said venture capital investments in the United States targeted at renewable energy companies increased from $468 million in 1999 to $2.4 billion in 2006.
"That's one of the greatest increases in a single sector ever," he said, but he added that Arizona isn't getting its share of the money. Like Broome, he said the state needs a more coordinated effort to promote innovation.