Illinois Sparks an Electricity Efficiency Cluster

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Senior Entrepreneurship Writer at CNBC
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Editor's Note: This series takes a close-up look at the SBA's economic "clusters" designed to aid regional businesses. 

The Midwestern state that launched the political careers of Presidents Lincoln and Obama isn’t as well known for its leadership in electric grid technology. But because of its position at the forefront of the industry, Illinois has been awarded more than $1.5 million from the Small Business Administration as part of its regional cluster initiative to support startups working on electric grid innovations.

After the initial investment of $600,000 in both 2010 and 2011, the cluster received another $385,000 in 2012, with the potential for four years of additional funding beyond that.

The Illinois Smart Grid Regional Innovation Cluster has used the funds to provide support to small startups developing technology to help modernize and update Illinois' electric grid, the network for delivering power from suppliers to businesses and consumers.

Related: What Two Tech Startups Learned at a Business Accelerator

Illinois has become a national leader in technological developments to provide greater reliability and efficiency for what is being called the “smart grid.” In the past three years, nearly $4 billion has been invested in Illinois for energy efficiency, improvement of the grid infrastructure and development of green technologies.

The lion’s share-- $3.2 billion – came from the state’s two largest utility companies, Commonwealth Edison Company and Ameren Corporation. The Illinois Energy Infrastructure Modernization Act, passed by the Illinois Legislature in 2011, made the investment possible by allowing utility companies to raise rates.

“That is a big money play,” says David Baker, the project director for the SBA-funded cluster. “Other states are slowly moving in that direction, but we are kind of first.”

Related: Trying to Win a Government Contract? Avoid These 3 Mistakes

The Illinois cluster, which started in 2010 and is younger than the other clusters in the SBA pilot, primarily used its money to help early-stage startups. For example, the cluster worked with students still in graduate school, who needed a lot of handholding to turn their ideas into businesses--everything from learning how to pitch investors to building their first websites. Because each startup needed so much assistance, the Illinois cluster has worked with only about 14 companies, fewer than some of the other clusters.

With the first two years of SBA funding, the Illinois cluster helped its member companies receive investments of between $10 million and $11 million and create about 20 jobs, Baker says.

Chicago-based Intelligent Generation, one of the startups the Smart Grid cluster supported, has created a software program that connects to the hardware of the electric grid and allows a home or business to capture solar energy, store the energy in batteries and release it to the grid when needed. The software enables big-box retailers, for example, to lay solar panels along their flat roofs and make money by selling the energy to the grid.

Related: What Entrepreneurs Need to Know About Their Brains

As part of the cluster, Intelligent Generation was able to set up its solar panel and battery prototype on academic buildings at the Illinois Institute of Technology and demonstrate it to potential clients. The cluster also helped Intelligent Generation get access to graduate students to do market research. Intelligent Generation says it has a pipeline of customers and expects to start generating revenue by next February.  

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