SEATTLE — THAT Washington state boasts a booming economy is hardly a shock. The state is home to Amazon.com, after all, and a mature tech sector led by Microsoft. Washington apples, wheat, hops and grapes feed and inebriate the world. Boeing Co. aircraft circle it.
But Washington has a supercharger: power.
Cheap, climate-friendly electricity drives Washington's economy, the nation's fastest growing, according to the U.S. News' Best States ranking of economic growth. The tech-heavy state's expectedly strong broadband network sits atop one of the nation's best electrical systems, one well-positioned as the country shifts away from coal- and natural gas-generated electricity. The state expects to be coal-free by 2025, while still charging rates among the nation's lowest.
Aging hydroelectric dams provide most of the electricity Washington uses or exports, but windmills and solar arrays are increasingly common sights on the arid rolling hills east of the Cascade Mountains. Gov. Jay Inslee, the state's leading clean energy evangelist-turned-presidential hopeful, describes those projects as doubly fruitful: Customers get clean energy, and rural residents get economic opportunity.
‘Renewable energy projects create significant new revenues for rural communities where most of these projects are sited," said the governor, whose bid for the Democratic presidential nomination centers on climate change. "New wind development projects in Washington generate millions of dollars in annual lease payments; much of it goes to small rural landowners."
A Tech-Sector Powerhouse
Cleaner power is increasingly a priority for large businesses, particularly those in the tech sector. That sector's growth in and around Seattle has made the state a hub for invention while drawing droves of young, educated workers. Seattle-headquartered Amazon dominates e-commerce and cloud computing globally, while a resurgent Microsoft and rapidly expanding life-sciences sector that includes startup stars Adaptive Biotechnologies and Sana Biotechnologies are generating new technologies at a rapid clip.
Older corporate powerhouses founded or headquartered in the Seattle area – Starbucks, Costco, T-Mobile and Boeing – have been eclipsed by Amazon, whose recent growth remade Seattle's downtown core and recast its skyline. Washington’s gross domestic product growth rate – 5.7 percent in 2018, the highest in the nation – is largely thanks to that tech expansion, which has driven up real estate values.
In the state, the tech sector's long-term annual growth rate tops 10 percent, said Chris Green, an assistant director in the state commerce department. But that measure actually undersells the tech boom's impact.
"The explosion in applications of machine learning, data analytics and automation has extended into all sectors, which has created an accelerating impact," Green said via email.
"Tech giants bring talent to the area," he continued. "Those with an entrepreneurial bent find a thriving startup ecosystem to support them."
It follows, then, that the state ranks highly – third in the nation – for economy in U.S. News' latest Best States rankings. It also places No. 2 for infrastructure, No. 4 for health care and No. 4 for education. Washington's showing in these categories also helps it achieve the overall No. 1 ranking among states this year.
Infrastructure, Opportunity Challenges
But despite the top 5 placements, each area shows deficiencies in access to high-quality systems: Washington lags in opportunity, ranking between Alaska and Kentucky at No. 19. And, while the state's infrastructure ranks second in the nation thanks to strengths in energy and internet access, its transportation system is middling and average commute times are among the longest in America.
Necessities, particularly housing, are beyond the means of many workers in booming areas of the state. An acute lack of affordable housing has been accompanied by years long waits for subsidized rentals in the Seattle area, where roadside greenbelts and sidewalks are packed with tents and shanties.
Growth has proven to be a mixed blessing, said Taylor Hoang, a Seattle-area restaurateur who founded the region's Ethnic Business Coalition.
"If I really look at the scale, I would say it tips a little more to the positive than the negative," Hoang said. "But civic leaders have a huge challenge and responsibility to make sure the scale doesn't tip the other way, and I think we're somewhat on the verge of that at the moment."
While it will remain a cornerstone employer for the region, Amazon has said it has no plans to expand inside Seattle's city limits. The city may well be full from Amazon's perspective, but a tiff in 2018 that saw Seattle City Hall pass and then immediately withdraw a headcount-based tax on employers did nothing for relations between the company and city leaders.
A 'Leaky' College Pipeline
Regardless, Washington continues to train and draw young workers. State students are among the nation's best in eighth-grade reading and math test scores as measured by the National Assessment of Educational Progress, and come to their college degrees with less debt than most.
The state's universities, particularly the University of Washington, are both an educational force and an economic driver as Washington's innovation economy flourishes. Despite expansions in key initiatives like the UW's computer science department – a world-class program, expected to double in size in coming years – the state lags when it comes to converting high school graduates into college students.
The state has "a leaky pipeline," said Paul Francis, executive director of the Council of Presidents, which coordinates efforts at Washington's six four-year public universities.
"We're losing students throughout the process," Francis said. "We've just got to do a better job of creating a college-going culture, otherwise you're going to see business and industry continue to import people from out of state. They're not able to meet their needs, because we're simply not growing our own."
An Economy Fueled by Energy and Invention
Venture capital is flowing more freely in the state, which once badly trailed California's Silicon Valley by that measure, and Washington now ranks No. 3 in patents granted per capita nationally thanks to inventors at Microsoft, Boeing and Amazon.
Washington's economy has long relied on cheap, reliably available hydroelectric power from dams on the Columbia River and elsewhere. Hydro fueled Boeing factories around Puget Sound during World War II and at the dawn of the jet age. It now spins servers and lights offices around the western United States.
The state never depended on carbon-heavy electricity, and is in the process of shuttering its last coal-fired power plant. Washington utilities are stepping beyond the dams and boosting wind and solar capacities in the state, which currently ranks 11th among the states in wind-generated electricity and 30th in solar, according to trade associations. The University of Washington recently opened a 15,000-square-foot shared "testbed" lab meant to provide clean energy businesses with open access to state-of-the-art research and development tools.
Access to renewable energy is a priority for corporate customers such as Walmart, Google, Microsoft and Amazon that have pledged to shrink their carbon footprint, said Lauren McCloy, senior energy policy adviser for energy with the governor's office. Washington-generated power is also among the cheapest in the nation, McCloy said, offering the state a competitive advantage when courting new industry or selling power out of state.
For customers considering cleaner energy, McCloy said, "it's both an economic decision as well as a values-based decision."
"In Washington, we're really uniquely positioned to lead on both of those data points," she continued. "We'll continue to be looking at resource diversity going forward, but we obviously want it all to be clean."
Thanks to three large wind farms east of the Cascades, Puget Sound Energy, the state's largest power company, has become the nation's third-largest supplier of wind-generated electricity, said Ron Roberts, who directs power generation for the Bellevue-based utility. PSE, whose 1.1 million customers include Costco, has found a strong market for renewable, climate-friendly electricity.
The utility now allows customers to buy into a pot of 100-percent local renewable energy through a 2-year-old program called Green Direct. PSE has opened up the program to new subscribers twice thus far, and Roberts said the energy inventory sold out swiftly both times.
"There's a pretty large appetite in the region for renewable energy," he said. "When we look at investments, we continue to look at investments that align with our customers' needs and wants and desires. Obviously, a carbon-neutral form of generation fits in to that."
New Developments on the Horizon
The state is also poised to lead in the development of electric grid modernization technologies. Intelligent, efficient electric grids allow intermittent energy generators like windmills to flourish. Two eastern Washington-based firms, Itron and Schweitzer Engineering Labs, are leaders in the field. Inventors elsewhere in the state hope to refine low-carbon biofuels that can power aircraft.
Earlier this month, Washington lawmakers passed a suite of clean energy measures that put the state on a path to a fossil fuel-free electrical system by 2045. New programs shepherded through the state legislature by Inslee would also dramatically expand access to electric vehicles, support and eventually mandate energy efficiency in large buildings, and ban “super-pollutants” that can do thousands of times more damage to the environment than carbon dioxide.
In Inslee's view, Washington has shown that "cleaner is cheaper," and stronger. The clean energy sector, by his reckoning, is growing twice as fast as the rest of the regional economy, and creating opportunities in areas far from coastal tech centers.
"We're as confident as ever," the governor said, "about our efforts to speed the transition to clean energy."