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BUSINESS REPORT: Arizona Is Challenging Its Homegrown Innovators

By Donna Clapp
From the March/April 2012 issue

When it comes to business growth, the state of Arizona is serious about creating and rewarding innovation. In fact, in 2012 the Arizona Commerce Authority (ACA) put it’s money where it’s mouth is by creating the largest financial prize of any state for innovation by offering grants between $100,000 and $250,000 to winners of the Arizona Innovation Challenge. The challenge advances innovation and technology commercialization opportunities in Arizona by supporting early stage ventures in Arizona’s targeted industries of renewable energy and sustainability, bio and life sciences, electronics, information technologies, aerospace and defense and advanced manufacturing. Arizona technology businesses are the state’s engine for economic transformation through wealth and job creation. The Arizona Innovation Challenge is an investment in the minds of talented entrepreneurs in Arizona and around the world.

Arizona FAST FACTS

  • Population (2010): 6,392,017
  • Largest Cities (2010): Phoenix, 1,445,632; Tucson, 520.116; Mesa, 439,041; Chandler, 236,123
  • Targeted Industries: Science & Technology, Aerospace & Defense, Renewable Energy, Small Business & Entrepreneurship
  • Key Incentives: Quality Jobs Program, R&D Income Tax Credit, Job Training, AZ Innovation Accelerator Fund, AZ Innovation Challenge Program, Recovery Zone Bonds
  • GDP (All Industry 2010): $253.6 billion*

*Bureau of Economic Analysis, U.S. Department of Commerce

The ACA doubled its commitment to the Arizona Innovation Challenge for 2012. Initially funded at $1.5 million, the ACA will commit $3 million to the program, creating two rounds of competition ($1.5 million in award money for each challenge). This first round of competition hopes to select anywhere from six to fifteen companies to receive $100,000—$250,000 each. The Arizona Commerce Authority received more than 300 company applications for the second Arizona Innovation Challenge—nearly tripling the amount received last year.

“The ACA is not surprised we received so many applications this year,” says Don Cardon, president and CEO of the Arizona Commerce Authority. “Arizona is a breeding ground for start- ups. Ideas are percolating in garages and labs across our state. This program helps turn those ideas into reality. With the addition of Silicon Valley Bank to the state, Arizona is well on its way to becoming a hotbed for entrepreneurial activity.”

Start-ups receiving awards will be required to commercialize their technology solution and generate revenue within one year of the award. All companies will receive significant feedback generated from the evaluation process and a seasoned panel of evaluators, be invited to partner with commercialization resources across Arizona, and will be evaluated for eligibility in other ACA incentive programs like the Angel Investment Program.

The 2011 Arizona Innovation Challenge received more than 100 proposals, awarding eight companies grants. Jim Butler, president and CEO of HJ3 Composite Technologies and a 2011 Arizona Innovation Challenge Winner said, “It was very fortuitous that the grant application came around. That allowed us to accelerate our plan to get the marketing set up, the sales, and all of our final kits and materials from what would have taken about eighteen months down to about six.”

The ACA is strongly committed to investing in start-ups and fostering entrepreneurship in the state. Start-ups are the lifeblood of Arizona’s economy and serve as a prime engine of economic growth. Arizona ranks fifth in the U.S for business start-ups and saw a 57 percent increase in entrepreneurial activity since 2008. Through a suite of programs, including the Arizona Innovation Challenge, the ACA is providing valuable tools to help small businesses and start-ups advance in our economy and ultimately ignite job creation in the state.

“Ultimately, we want the best ideas to come here and start their businesses,” says Cardon.

In addition to this challenge, the ACA secured $18.2 million from the U.S. Department of Treasury’s State Small Business Credit Initiative for the Arizona Innovation Accelerator Fund. This money will help spur lending to Arizona’s small businesses and foster business expansion, capital investment and job creation in Arizona. This five-year program will provide small businesses (less than 500 employees) anywhere from $50,000 to $2 million for working capital, inventory, equipment purchases, workforce expansion and property improvements.

“Start-ups make up the fabric of our great state,” says Governor Jan Brewer. “Technology-driven entrepreneurs now have a central location to receive valuable information and guidance on how to start their companies, grow their existing businesses and ultimately, create higher-paying jobs.”

Becoming A Global Leader In Renewable Energy

In November 2011, Phoenix welcomed a major international solar conference, the Solarpraxis’ PV Power Plants USA 2011 to their city. The two-day conference, which provides an important link between European and North American solar markets, brought together more than 200 experts from around the world to discuss the current market and future of the solar industry.

“Arizona is taking a global approach to its role in the renewable energy industry,” says Cardon. “Having Solarpraxis choose Arizona over a number of other states as the home for this conference shows the international appeal and highlights Arizona’s leadership role in this growing industry.”

“Solarpraxis chose Arizona because the state has extremely supportive business development agencies which have been very helpful, which is equally important for photovoltaic (PV) manufacturers and PV project developers,” says Solarpraxis Conference Manager David Gaden. “The support Solarpraxis received from the state, coupled with Arizona’s dedication to developing the solar energy market, is priceless.”

According to the 2009 Renewable Energy Book, produced by the US Department of Energy, this sunny state consistently ranks among the top five states in solar energy (also known as photovoltaic energy generation). Fueled by aggressive, new business incentives, Arizona is quickly a global leader in renewable energy technologies, and the ACA is committed to achieving Governor Brewer’s goal to solidify Arizona’s position as the solar capital of the world. Arizona has embraced renewable energy not only through the attraction of technology producers to its natural “test bed,” but also through successfully creating a culture and environment supportive of renewable energy generation.

The state’s Renewable Portfolio Standard (RPS), as well as its proximity to the substantial California market, are among many factors that continue to bolster demand for generation. The state is home to the world’s two largest solar companies—First Solar and Suntech—the U.S. military’s largest solar plant and the world’s premier photovoltaic testing laboratory. With more than 100 significant solar energy businesses already located in the state, Arizona has established itself as one of the world’s preeminent locations for solar industry expansion.

“Arizona has been an ideal location for First Solar to grow its business, including our new factory under construction in Mesa that will add 600 associates to our local workforce,” says Maja Wessels, Executive Vice President of Public Affairs for Tempe-based First Solar. “Arizona offers an attractive business climate, a talented workforce and boundless potential for clean solar energy.”

“The U.S. solar industry has the opportunity to double in the coming year. Arizona and the ACA are committed to being a part of that growth,” says Cardon. “Arizona is armed with business opportunities and tax incentives which make us the leading contender in renewable energy.”

Arizona is focused on attracting all kinds of renewable energy companies, not just solar. In recent months, Arizona has experienced significant growth in the renewable energy marketplace. Companies are taking advantage of tax incentives, a pro-business climate, a specialized workforce and more sunny days than any other state in the country. In fact, in a two-day time period in October 2011, the ACA announced that two major renewable energy company’s had chosen Arizona for expansions.

Maxwell Technologies Inc., a San Diego-based clean technology company that manufactures ultracapacitors, announced a new industrial facility in Peoria, AZ. The company will create 150-200 new jobs over the next three years with a capital investment of $26 million.

“Ultracapacitors are enabling many diverse applications and supporting breakthrough and disruptive technologies, including solar and wind energy and hybrid vehicles,” says Barry Broome, president and CEO of the Greater Phoenix Economic Council. “We believe Maxwell Technologies is uniquely positioned to capitalize on the growing energy sector in the U.S. and are working to bring more innovative companies like them to the Greater Phoenix market.”

Since 2010, when the Renewable Energy Tax Incentive Program was enacted, Greater Phoenix has seen nearly a dozen renewable energy companies move or expand in the region, including some of the industry’s biggest companies like First Solar, Abengoa, Suntech Power Holdings, Rioglass, Gestamp Solar Steel, Power-One and Saint Gobain. All told, the region’s renewable energy cluster has spurred nearly $2 billion in private investments and more than 6,000 jobs.

Two days later the ACA announced that another renewable energy company chose Arizona for expansion. Clear Energy Systems, a manufacturer of portable electric generation systems, is expanding its operations in Arizona, and plans to invest $10 million to launch its new Genesis 1000 power generation system in Arizona. This move is expected to create 225 high-wage jobs over the next three years.

Clear Energy Systems’ Genesis 1000 is a transportable one-megawatt power generation system fueled by natural gas and other spark ignited fuels such as biogas. The unit is one-third of the size and one-fifth of the weight of comparable units, and has lower operating costs. This state-of-the-art technology has many practical uses such as oil exploration, mining operations, and balancing utility power plant loads. Because the unit is portable, it can be transported to generate energy during emergency situations such as natural disasters.

“Clear Energy Systems is pleased to announce its commitment to Arizona as part of its facilities expansion and the company’s launch of its new Genesis 1000 power generation system,” said Tony Carmen, president and CEO of Clear Energy Systems at the announcement. “We thank Governor Brewer, the Arizona Commerce Authority and the Greater Phoenix Economics Council (GPEC) for their efforts in making our decision to launch our new product in Arizona the right choice for Clear Energy Systems.”

One of the newest renewable energy announcements occurred in December 2011, when Magna International Inc. announced that its Cosma International operating unit will strengthen its manufacturing presence in the renewable energy market by opening a manufacturing facility in Phoenix, AZ. The new 166,000-square-foot facility will produce metal structures and roll-formed components and systems for the photovoltaic (PV), concentrated photovoltaic (CPV), and concentrated solar power (CSP) solar markets. At the start of production, the company expects to create approximately 50-60 full-time new jobs.

Incentives Ignite Renewables

Arizona is offering a bevy of new business incentives designed to spur the growth of renewable energy companies, including:

  • Up to 10 percent of capital investments may be designated as a refundable income tax credit
  • Grants of between $100,000 and $250,000 to winners of The Arizona Innovation Challenge, a $3-million state program which supports early-stage ventures in renewable energy and sustainables, among other sectors
  • U.S. Small Business Credit Initiative supports Accelerator Fund, provides start-ups with less than 500 employees up to $2 million for working capital, equipment, workforce expansion
  • Up to $1.5 million in reimbursable grants to train employees.

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