Jon Thaxton was in his element. Speaking rapidly, the lanky Sarasota County Commissioner paced back and forth from his desk chair to a topographic wall map in his office in the county administration building. He pointed to a large swath of emerald on the map that represents all of Sarasota County’s low-lying areas lining the coast and surrounding the Myakka River. As climate change progresses, these areas worry Thaxton.
He’s not the only politician in Florida or across the country to sense the potential danger. Businesspeople, no matter whether they’re intent on taking advantage of the changing climate or trying to defend their turf, better realize that government is going to impinge on business as it grapples with global warming.
“The most important driver for investment risks and opportunities is the future regulatory framework,” reads a recent global report published by UBS Wealth Management on the business effects of climate change.
A chain of events over the past two years, including New Orleans’ 2005 Katrina disaster, Al Gore’s 2006 documentary, An Inconvenient Truth, and the Paris meeting of the United Nations’ Intergovernmental Panel on Climate Change in February 2007, has pushed global warming way up on the list of Americans’ concerns. A Google search for “climate change” now yields 100 million results. That’s still below the 109 million Web mentions of “Iraq war,” but clearly ahead of the 87 million for “health crisis.”
The rising concern has triggered new regulations and incentives in the United States, and more are on the way. In a recent Pew survey of 31 large corporations, 90 percent said they believe that government regulation of greenhouse emissions is imminent.
After a new Florida governor, cabinet and legislature started work in January, a consensus quickly emerged that water-surrounded Florida must take action to brace for rising water levels, more intense hurricanes, drought and wild weather swings.
“Other states are way ahead of us,” said Florida Chief Financial Officer Alex Sink during the first of four “Conversations on Climate Change” in Tampa April 3. “We’ve got to think about what we could do.”
Global warming has gone way beyond the level of feel-good campaign speeches to become a hands-on issue in politics and business.
Republican state senator Mike Bennett, whose electric contracting company thrives mainly off new construction, has been a driving force behind a law that forces the state to measure greenhouse gas emissions, orders Florida to provide half of its newly added electricity generation capacity from renewable energy sources by 2015, and tells investor-owned utilities such as FPL to offer their customers “net metering.” (These meters run backwards when a client with solar panels on the roof or a wind turbine in the yard produces more energy than he consumes. This essentially forces utilities to pay energy-producing clients at retail rates, instead of much lower wholesale prices.)
The state legislature this year also passed a law that boosts funding for ethanol research to $63 million.
Sarasota County and the city of Sarasota are also taking action. Sarasota County became the first county in the nation last year to join the “2030 Challenge” of the U.S. Conference of Mayors, pledging to drive its fossil-fuel consumption to zero by 2030. The county wants to achieve this by making all its buildings energy efficient, reducing its fossil-fuel use, and using more renewable energy. The city of Sarasota joined the 2030 Challenge in May.
The challenge provides hands-on incentives to developers. “Green” projects will get accelerated treatment at the building department, and all public buildings will be built according to green building standards.
In 1994, the county created the Florida House green-home demonstration project, and it has had a strong sustainability program for years. Its Sarasota 2050 plan provides for smart growth aspects such as mixed-use, higher density “villages” east of I-75. Also, the city’s Downtown Master Plan by New Urbanist movement pioneer Andrés Duany jibes with efforts to reduce the carbon footprint by creating higher density in urban cores.
“Florida isn’t a leader, but Sarasota is probably among the most progressive counties in the nation,” says Alex Wilson, executive editor of Vermont-based Environmental Building News. “I was quite impressed when I visited.”
The current administration in Washington is trying hard to avoid regulations and firm commitments to reduce carbon dioxide emissions. But even electric utility companies are now clamoring for some action in Washington. In February, the Electric Power Supply Association, of which FPL is a member, appealed to the federal government in a “let’s-get-it-over-with” kind of act to impose greenhouse emission caps. Eventually, the feds will have to join the global warming fray.
“Historically in the United States, major new social initiatives have been explored at the state level first,” says Ken Locklin, principal of the Vermont-based Clean Energy Group and a speaker at the first “Conversation on Climate Change” April 3 in Tallahassee. “When a national consensus has emerged, one hopes to see a federal program. In terms of renewable energy, there are robust policies at 28 states from which the federal government could select.”
What businesses are the likely losers in a shifting environment?
The recent report by UBS Wealth Management lists as most at risk from global warming agriculture, fisheries, forestry, water utilities and water-intensive operations, but also tourism, healthcare and insurance.
Beyond the immediate victims of climate change, the businesses facing the toughest time will be those betting on the continuous, supreme reign of fossil fuels, Clean Energy’s Locklin says, and companies whose business models continue to rely on excessive energy or water consumption.
That puts the spotlight on electric utilities, the single largest consumers of fossil fuel and producers of carbon dioxide.
But the biggest question looming above Sarasota and Manatee counties is whether the region’s economic engine—construction—will be able to continue its fast-paced conversion of agricultural lands into new suburban subdivisions.
The most exposed Southwest Florida industry is agriculture, as droughts are now increasingly prolonged, irrigation water scarce, hurricanes intense and weather swings unpredictable.
And the winners? “Just as in the Great Depression, those who capitalize on the opportunities inherent in this challenge can create wealth,” says Stephen Mulkey, science advisor to the Century Commission for a Sustainable Florida, based in Tallahassee. “Major profits await those companies who can meet the growth needs of Florida, while reducing greenhouse emissions.”
Let’s begin with mitigation. As hurricanes are expected to become more intense, companies that provide products that protect homes, or build sturdier homes themselves, have seen brisk business for a while now. A Florida Senate bill passed this summer, for instance, forces owners of coastal homes valued at more than $750,000 to install hurricane shutters.
The biggest concern in Florida is rising sea levels, and waterfront property owners must cope and adjust. But one person’s disaster is another’s opportunity. Florida property owners and their insurance companies will spend billions on home and seawall builders for reconstruction and fortification.
Power lines are another major concern. As a result of the knockout Hurricane Wilma gave South Florida’s power infrastructure in 2005, FPL launched its Storm Secure program in 2006, spending $50 million a year to make its above-ground transmission lines sturdier. Also, FPL is facing pressure to dig up its neighborhood cables.
Another area of massive investment is water drainage. Many municipalities along the Florida coast must redesign their stormwater and flood management systems, Thaxton says.
“Stormwater systems in Florida are hyper-sensitive to water table rises,” he says. “A half-foot change in Florida has very dramatic consequences. You’re going to see more failures.”
Such failures mean more business for ditch-diggers and utility line layers such as Venice’s De Jonge Excavating Contractors, which was the contractor in the area’s largest recent stormwater project, a $5 million makeover at St. Armands Circle. A 60-year old system, designed when the sea level was a little lower, made the upscale shopping and dining area prone to flooding even after minor storms. Now, five lift stations pump stormwater out of the barrier island’s streets and into the Gulf of Mexico. Two new emergency generators will power the pumps during blackouts.
Rising seas bring saltwater into the aquifer. Water utilities in Broward and Palm Beach counties are already facing major challenges; closer to home, some saltwater is already seeping into Englewood area wells. That means business for water treatment systems companies such as Harn R/O and the water division of Crane Environmental, both based in Venice.
Probably the biggest opportunity on everybody’s mind, though, is renewable energy. Boosters such as Ken Locklin describe clean energy as the “21st century investment opportunity.”
“This is a permanent transformation that’s just beginning to get under way,” says Locklin, an adviser to the Clean Energy States Alliance, a consortium of 15 U.S. clean energy funds that is pouring $4.5 billion into renewable energy companies.
A half dozen or so companies in this region offer renewable energy technologies such as ethanol processing, thermal and photovoltaic solar power systems or hydropower engineering.
But, if you believe the UBS report, the largest opportunities may be hiding elsewhere, with companies that provide less obvious but much-needed services and products. Anything that makes homes, machines, lifestyles and production processes more energy efficient will be in much demand.
We found 10 regional companies that are responding to the changing climate.
Solar Direct Business: installer of solar energy systems in residential and commercial buildings throughout Florida; distributor of solar products; solar energy consulting, engineering, project management.
Business: installer of solar energy systems in residential and commercial buildings throughout Florida; distributor of solar products; solar energy consulting, engineering, project management.
Twenty-one-year-old Solar Direct is growing like a teenager. Co-owner Dale Gulden expects the Bradenton company to double to 50 employees within five years, and to move into a new showcase-style headquarters by 2010.
If new state and federal laws come through, a homeowner installing a 5-kilowatt, $50,000 photovoltaic system could receive up to $20,000 from Florida plus a $15,000 federal tax rebate. That $35,000 subsidy would amortize the homeowner’s investment in just 10 years.
By far most of Solar Direct’s business ($6 million in revenues) is smaller residential retrofits. Larger commercial clients are just waking up. Condo associations, Gulden says, are beginning to take note of tax shelters they can use for solar installations. And a “rather large” hotel corporation in Orlando recently contacted Solar Direct, inviting them to partner with Progress Energy to look at their renewable-energy options.
Kemick Construction Co. Business: builder of energy-efficient custom homes in the Sarasota-Bradenton area.
Business: builder of energy-efficient custom homes in the Sarasota-Bradenton area.
Over its 18-year lifespan, the small, family-owned Ellenton company headed by Larry Kemick has become accustomed to winning awards for green construction. Kemick builds on average 10 custom and 20 semi-custom homes per year, some of which score 35 on the Florida Energy Performance Index (the more efficient the home, the lower its EPI rating; the state requires new residential construction to have a maximum EPI rating of 100). Standard features such as solar energy systems aside, Kemick homes come with on-demand water supply, high-efficiency heat pumps, radiant barrier sheathing, highly insulating soffit systems, fluorescent lights and more. The company recently began to venture outside this region, building two homes near Jacksonville. A preacher of energy efficiency, Larry Kemick offers seminars on the issue.
Hydro Consulting & Maintenance Services LLC Business: hydropower consulting and engineering for large utility companies and dam operators throughout the United States.
Business: hydropower consulting and engineering for large utility companies and dam operators throughout the United States.
For four decades, Clyde Krout made a living as an engineer for large corporations, building and fixing hydropower projects. Two years ago, his wife, Lorraine, convinced him to strike out on his own. Now the Englewood-based business is soaring, taking advantage of the demand created by a tax break the federal government granted to hydro dam operators for updating their installations. Krout’s company tripled its contract volume in 2006 to $2 million, and he believes that pace will continue. Through May this year, sales had already reached $1.5 million. After starting with one employee in February 2006, he now has 20 employees based all over the United States and works for clients such as Florida Power’s operations in Maine, Niagara Mohawk, Allegheny Power, Kentucky Energy and the Army Corps of Engineers. “There’s no company like ours,” Krout says. “What people pay for is experience. There are big OEMs like Siemens, that have a consulting and maintenance division. I actually hired some of their technical people. But I have the better overhead.”
EcoSmart Inc. Business: wholesaler of environmental construction supplies to builders and contractors in the Southeastern United States
Business: wholesaler of environmental construction supplies to builders and contractors in the Southeastern United States
Green builders need someone to supply them with eco-friendly construction material. Enter EcoSmart company founder Matt Ross. Launched in 1993, EcoSmart—a Sarasota-based one-stop shopping source for green construction goods, including insulation windows, solar water heating, flooring, lighting, and water purification—has been going through annual growth spurts of 30 percent since 2003. Sales slowed in the first half of 2007 because of the real estate downturn; however, Ross still expects 10 to 15 percent growth over the next few years. The company now operates a central warehouse in Jacksonville and employs 25 independent reps in Florida, Georgia, North Carolina and Louisiana who generated $1.1 million in sales last year. Licensees in Minnesota and Canada are coming on board, and Ross is thinking about offering franchises. Sarasota County’s nonprofit Florida House reviews each of EcoSmart’s products.
Precise Power Corp. Business: manufacturer of high-efficiency and reliable emergency power systems
Business: manufacturer of high-efficiency and reliable emergency power systems
The Palmetto-based manufacturer of flywheel uninterruptible electrical power systems may not come to mind as a company standing to gain from global warming. However, just think about what you do with your computer systems during a hurricane. Or what hospital or airport radar operators are supposed to do when the lights go off. John Roesel’s machines are kicking in when the grid is down or acting up. And his high-efficiency motors save a bundle in energy costs. The engineer and his small company hold a patent on “written-pole” electric motors, giving them a unique niche for clients that need large horsepower capacity.
FanTech Inc. Business: manufacturer of indoor ventilation systems
Business: manufacturer of indoor ventilation systems
As builders aim for energy efficiency, buildings become more airtight. In the absence of a natural air current or the possibility of opening windows, mechanical systems such as FanTech’s Energy and Heat Recovery Ventilators look appealing. “The most efficient way to introduce fresh air in Florida are ERVs [energy and heat recovery ventilators],” says company president Ola Wettergren, an aeronautical engineer from Sweden who came to Florida to work for a sailboat builder. “We see wonderful opportunities for growth in this product segment.” The company, in Sarasota since 1981, employs 67 people and has revenues in the $30 million range but expects to grow beyond $100 million in the future, Wettergren says. FanTech is growing at an annual rate of 15 percent, but its core business has doubled in size every four to five years.
Duncan Seawall, Dock & Boat Lift Inc. Business: builder of seawalls, docks and boat lifts; dredging
Business: builder of seawalls, docks and boat lifts; dredging
As the area’s largest marine construction company, Duncan is on the frontline of the war against rising sea levels in Florida. Started in 1979 with a small barge and two employees, the Sarasota company now has 19 barges and more than 100 employees. Steven Liebel’s company takes on large commercial and government projects throughout Florida.
Crane Environmental Business: designer, manufacturer and builder of water treatment systems
Business: designer, manufacturer and builder of water treatment systems
The water division of Connecticut-based Crane Co. in Venice makes water treatment systems and desalination plants for cities and large commercial clients.
Don Borden, president of the water division, isn’t sure whether there’s a direct link between global warming and the 10 to 15 percent annual growth of his business, “but there’s no doubt the level of treatment of water is rising, because of purity and scarcity issues.” In 1998, Crane took over a locally grown company, Environmental Products USA. The 70 employees in Venice make reverse osmosis and nanofiltration systems for customers ranging from fisheries in Indonesia to resorts in the Caribbean to offshore oil platforms worldwide.
Global Modular Concepts LLC Business: manufacturer of modular construction components
Business: manufacturer of modular construction components
With its patented “Aerated Autoclaved Concrete” panels, the Bradenton-based startup hopes to take advantage of rising demand for energy-efficient and hurricane-safe buildings. The material, also known as Aircrete, is lighter than regular concrete, but still strong with great insulation qualities. The company was started by Erwin Andersen and Christopher Welles-Pryor.
Harn R/O Systems Business: designer, manufacturer and builder of reverse-osmosis water treatment systems
Business: designer, manufacturer and builder of reverse-osmosis water treatment systems
Venice turned out to be a great base for Jim Harn and his wife, Julie, who started Harn R/O Systems in 1970, especially since the city of Sarasota became one of their biggest customers. “I don’t have an idea what the effect of global warming is,” says Jim. “But the scarcity of water is a fact. Period. Traditionally better waters have been used up, and demand outstrips supply.” Harn R/O has had a hard time keeping up with demand because of the complexity and specialization required in the field. The company works with hand-selected chemical and electrical engineers; Harn R/O currently works with 20 employees.
Heat is On, Tide is Up
Impact of climate change on the Florida economy
• Inundation of low-lying areas and erosion of beaches and bluffs will force Florida coastal cities to make major expenditures for building seawalls and other flood control structures.
•Florida will lose significant amounts of beachfront property and suffer much greater storm damage from higher storm surges and more powerful-hurricanes.
• Salt intrusion into aquifers and surface waters and higher water tables will force municipalities to invest in desalination and other water treatment technology.
•The rise in the heat index will make Florida a less desirable place to live and will cause an increase in heat strokes and other health problems.
•Agriculture in Florida may see a short-term benefit, but later will be hurt by longer periods of drought and a loss of agricultural productivity.
•Coral bleaching from warming and more acidic seawater will have devastating impacts on both sport and commercial fishing.
•Insurance costs will soar and insurance companies will increasingly refuse to provide coverage in vulnerable areas.
Sources: Institute for Alternative Futures; International Hurricane Research Center, Florida International University
Shrinking the Footprint
Three economic options to reduce carbon dioxide in the atmosphere.
• Increased energy efficiency: alternative fuels, LEED, hybrid cars, less driving
• Remove carbon from existing electricity and fuel production: higher-efficiency coal, plants, solar, wind, nuclear
• Storage of carbon in natural sinks: underground, plant trees, conserve primary forests, direct tilling
SOURCE: Meg Lowman, New College of Florida
State agriculture officials were pushing bio-fuels production as one of the big opportunities for agriculture at a “Farm to Fuel Summit” in July in St. Petersburg. However, ethanol is far from the solution the state would like it to be. For one, the biggest producers of raw materials, sugar growers and citrus juice processors, are only mildly interested in contributing their resources. Tropicana, the Bradenton-based juice maker owned by PepsiCo, actually sits on a potentially large resource for ethanol production: one-third of Florida’s citrus harvest. Tropicana has made noises that it is interested in ethanol production, but it hasn’t made an announcement. Another major challenge is the high water need of ethanol refineries, such as one planned at the Port of Tampa.
As hurricanes intensify, many Florida coastal cities are clamoring to go underground. More than one-third of FPL’s neighborhood power lines are already dug up. That’s almost twice as much as the national average, but still leaves the infrastructure vulnerable to wind impact, as seen during the 2005 hurricane season. FPL, long reticent to yield to the pressure, last year had a partial change of mind. The utility, while insisting on the limitations of going underground in Florida, where the water table is rising, offered municipalities intent on digging up cables to provide 25 percent of the cost. The main beneficiaries of the trend are large ditch-digging contractors such as New York City-based Volt Telecom Inc. and Miami-based MasTec Corp.