SAN DIEGO -- A small company that developed a $1 billion wind farm works out of a pink-hued building near the Pacific Ocean here. Down the hill, an investment firm decides how to spend $6.5 billion on energy ventures. Two traffic lights away sits a company that is building one of the world's largest wind projects.
Renewable power developers, biofuel researchers and clean technology entrepreneurs have flocked to this coastal city, making it a growing hub of energy-sector interests.
Despite the region's higher costs, companies here find multiple draws. There are myriad research institutions with top experts, access to the desert and Mexico for wind and solar farms, and San Diego's inviting weather.
"When it comes to competing for experienced people, an awful lot of folks would rather live in San Diego than Missouri," said Gerry Monkhouse, 68, co-founder and chairman of Cannon Power Group, a private wind developer based here. "We have the ability to attract the top-flight people."
The trend affects more than San Diego, said Bruce Cain, a Washington, D.C-based political scientist with University of California, Berkeley. The region is an important testing ground for the state as it backs renewable power for its next economic engine.
With Washington, D.C., watching, Cain said, San Diego and California must prove to the rest of the country that "there really is a green economy.
"Up and down the state there's a belief that this is an industry which is well suited to California," Cain said, adding that state leaders pushed green energy to help replace the once-booming defense industry. "We've got to find new businesses," he said, "so the question is, why do businesses come? They're going to come if the technical expertise is here."
California's energy policies also are a lure.
The Golden State has the country's most aggressive mandate for green power generation, requiring that clean sources represent 33 percent of power sold by 2020. The state's climate law, A.B. 32, takes effect next year and will place mandatory caps on carbon emissions.
For renewable energy companies, that means increased demand.
"We see California as a sustainable market for renewable energy, probably the most sustainable," said Cecilia Aguillon, director of market development and government relations for Kyocera Solar Inc., which last year opened a solar manufacturing operation in San Diego.
"If you're going to invest, you need to invest where you're going to get a return faster than anywhere else," Aguillon added.
While green companies see the state's rules as a plus, however, they are problematic for some in Congress, Cain said. California's laws agitate lawmakers who see it as government "picking winners and losers," he said.
Even in California, Cain said, there are people who are "skeptical about global warming and not terribly appreciative" of the state's mandates.
"The promise of California, the California model has caused a backlash," Cain said, angering parts of the country that have a fossil fuel economy and lack a technology infrastructure. "We are a polarizing state."
Growing up green
San Diego developed into an energy hub over several decades. Long a base for defense and science, the city has a foundation of technical expertise that fits with the renewable industry, Cain said.
Business clusters tend to form around research universities, he said, and similar ones exist in Los Angeles, the Silicon Valley and San Francisco.
Cannon Power and Sea West -- a company that later became AES Wind -- started here in the 1970s, when the state first created tax credits for renewable power. Those incentives came, Cain said, after people became alarmed about smog and some demanded action.
"Spurred by the beauty of the state, we just got on a path that snowballed over time," Cain said.
Some companies shifted work to Europe and Asia when incentives for renewable power disappeared in the 1980s. Businesses returned around 2000 as the state's electricity supply crisis started and California offered new enticements.
Energy-focused subcontractors, suppliers, law firms and venture capital groups have moved into the area, Monkhouse said. As more project developers came in, so did more manufacturers.
Japan-based Eurus Energy put its U.S. headquarters here a few years ago. France-based enXco opened its North America headquarters in a San Diego suburb in 2006, then moved to an expanded city-based office last year. EnXco's office houses 175 workers, said Donna Lotz, enXco marketing coordinator.
"San Diego's just a better diversified area for us," Lotz said. "There's a lot of companies here that are in the wind and solar business. The people that we work with, it's easier to fly them in and out of here.
"And [enXco] preferred the area," Lotz added. "Let's face it, San Diego is a beautiful area to fly people in when they're in 5 feet of snow. We bring them in to work with us."
Kyocera Solar opened its panel factory last year, manufacturing out of a Kyocera plant that packages semiconductor microchips.
With 146 sunny days each year, San Diego currently has the most households in the state with solar roof tops.
"With the time and cost of shipping" solar panels," Aguillon said, "you would like to be as close to the market as possible."
San Diego also has attracted business like renewables consultant Garrad Hassan, a British company. It put one of its four U.S. offices here. (The others are in Portland, Ore.; Austin, Texas; and Peterborough, N.H., the U.S. headquarters.)
Energy Capital Partners, a firm investing $6.5 billion in both renewable and traditional power generation and transmission, splits work between San Diego and its New Jersey headquarters. The San Diego location opened in 2005 when the company started. It wanted a West Coast presence and already had company leaders based in the city.
There also are a host of startups and smaller companies working on biofuels, energy efficiency, carbon capture, electric vehicles and improved solar technology.
New Leaf Biofuel blends biodiesel using waste cooking oil collected from local restaurants. Envision Solar aims to design visually appealing solar installations that are placed in parking lots. Energy Innovations is working on concentrated photovoltaic panels, which make more power for their size than traditional solar.
"The smaller [companies] are the ones that are making the biggest difference," said Jacques Chirazi, San Diego's clean-tech program manager. "They are creating new ideas that the big companies are not able to tackle yet."
The city is working to boost the growth of its energy companies.
In 2007, San Diego Mayor Jerry Sanders along with the University of California, San Diego, the Scripps Institute of Oceanography, San Diego State University and a few others launched an initiative called CleanTECH.
The effort nurtures startups, offers networking for established businesses and helps promote advancements like electric vehicles and smart grid technology. The cluster includes 767 clean technology members, up from about 200 when the initiative began, said CleanTECH President Lisa Bicker.
"Our mission really is to ensure that the San Diego region leads the way in the global transition to a clean energy economy," Bicker said.
The proximity of companies to each other has led to deals.
NRG Solar, a subsidiary of Princeton, N.J.-based NRG Energy Inc., has an office in north San Diego County. Regional President Steve Hoffmann three years ago met Eurus North America President Mark Anderson at a networking event sponsored by CleanTECH.
"We started talking about ways we could work together," Hoffmann said.
NRG Solar and Eurus then partnered on one of the largest solar photovoltaic generating facilities in the state, based in Avenal, Calif. When finished, the project will generate enough electricity to power 36,000 homes.
San Diego's nearness to Mexico also has attracted renewable power developers. Two companies with offices here -- Cannon Power and Sempra Energy -- plan to build wind farms across the border.
Cannon through a subsidiary will build on a 140-square-mile site about 15 miles south of the United States. Sempra is in the permitting process for a project about 1 mile south of the border and 70 miles east of San Diego, spokesman Scott Crider said.
Both projects aim to feed electricity into the California grid. Sempra has secured a power purchase agreement with its subsidiary, utility San Diego Gas & Electric Co.
The Mexican government supports renewables, Cannon's Monkhouse said, and there are sites with strong winds.
"You've got a pretty tremendous opportunity just south of the border to create some pretty good projects," Monkhouse said.
"I really think that Mexico is in fact the next gigantic market," Monkhouse added.
Many of the renewable energy companies in San Diego install their projects outside the area. Cannon Power, for example, built its $1 billion project in Washington state (Greenwire, Oct. 18, 2010), a wind farm that is again under expansion. That project's electricity feeds into California.
Terra-Gen Power works out of a San Diego office, but its Alta Wind Energy Center, currently the world's fifth largest wind farm, is 250 miles northeast in Kern County, Calif.
Eurus Energy put its U.S. headquarters in an office tower across the street from a popular shopping mall near La Jolla. But Eurus' closest project to its headquarters is in the Mojave Desert 200 miles north.
Eurus is building a photovoltaic power plant in Avenal, Calif., 300 miles north. Other U.S. developments are in Oregon, Illinois and Texas.
Those offices in San Diego have smaller economic impact on the city, said Russ Gibbon, San Diego's business development manager. It is limited, he said, to the payroll of company employees working in the city.
San Diego County's unemployment rate in May was 9.6 percent, down from the year-ago estimate of 10.1 percent, according to the state Employment Development Department. The state's unadjusted unemployment rate for the same period was 11.4 percent while the nation's was 8.7 percent for the same period.
But Cain said California benefits from projects hatched here and installed elsewhere in the state as well as from technology developed in San Diego.
"What happens in San Diego spreads out throughout the state," Cain said.
A lack of transmission, bureaucratic red tape in California and hurdles connected to environmental concerns previously have prompted developers who might be based here to build projects elsewhere, Monkhouse said. The state's green power mandate now is pulling projects back in, he said.
NRG Solar has had 38 workers in its office in north San Diego County. But it recently acquired the building next door to expand, growth driven in part by the state's renewable portfolio standard.
"It's just a crazy place to work," Hoffman said, adding that the company is considering expanding its electric vehicle and rooftop solar businesses. "You may see 60 people in this office within the next 12 months."