Why Nevada Has Emerged As An Energy Tech Hub
Every month another company, it seems, announces plans to build a factory in Nevada to churn out the future of energy technology.
A year and a half ago, Tesla (TSLA) started building a massive battery factory, dubbed the Gigafactory, just outside of Reno. It has since been joined by a number of other high-tech companies involved in battery recycling, a futuristic transportation system, and electric cars.
Nevada, known mostly for gambling, turns out to have a unique set of characteristics like a low cost of doing business, large incentives, an ability to move quickly, and ample clean energy resources that make it attractive to companies developing innovative energy technologies. It’s slowly become a hub for manufacturing for energy storage, clean energy and greener transportation that could one day be as important as Silicon Valley is to Internet and software startups.
Who’s moving there?
This week it was secretive Tesla-rival Faraday Future that put its sights on Nevada. The company said it planned to build a $1 billion electric car factory outside of in North Las Vegas early next year if legislators approve a package of incentives and tax breaks. The startup, backed by Chinese Internet billionaire Jia Yueting, aims to build a three million square-foot factory on a 900-acre site that will churn out electric vehicles.
Earlier this week, Nevada made the news again when Hyperloop Technologies said it planned to start testing an ultra-fast transit system known as a hyperloop next year on 50 acres of Nevada desert. Tesla CEO Elon Musk has popularized the hyperloop idea, which involves pods riding around on an air cushion through reduced-pressure tubes.
Last month, yet another company, Aqua Metals (AQMS), a battery recycling startup, said it would build its first battery recycling factory on a site near Tesla’s Gigafactory. Aqua Metals, which recently closed on a loan to fund project, has developed a more energy efficient process to recycle lead acid batteries—the kind that start up gas-powered cars—than traditional methods (Tesla uses lithium-ion batteries for its cars).
In addition to the arrival of the energy tech companies, Nevada is at the forefront of clean energy projects including solar, wind, and geothermal farms. Apple built a data center outside of Reno, and has been building a solar farm about 70 miles away to help power its operations.
A geothermal startup called AltaRock Energy bought a geothermal plant earlier this year about a hundred miles east of Nevada’s Black Rock Desert. The company is using its novel technology to enhance the well and help the struggling site pay back a loan backed by the Department of Energy.
Nevada’s attraction is that it has one of the lowest costs of doing business in the West. The state doesn’t have a lot of taxes (no corporate income tax, minimal employer payroll tax) and land is relatively cheap. At the same time, it’s within a few hours drive of the Bay Area and Silicon Valley, enabling employees from companies like Tesla to quickly travel there from their headquarters around San Francisco.
Because of the way the state operates, Nevada’s environmental and regulatory bodies can move more quickly than many other states. The political mindset is that government should get out of the way of business — a laissez faire ideology that explains the rise of gambling and the sex industry in the state.
When Tesla’s Musk went looking for a home for the Gigafactory, he wanted a location where he could immediately start building the massive structure. He didn’t want to wait years for environmental reviews and regulations.
For years, Nevada politicians have wanted to stimulate its economy and move away from its dependence on gambling. As a result, the state economic development agency has aggressively offered companies like Tesla big incentive packages to build their factories in Nevada. Tesla was able to achieve $1.4 billion in tax breaks, free land, and other benefits from the state, Fortune previously reported.
The state’s abundance of clean energy—from solar, wind and geothermal farms—also makes it attractive to some companies like Tesla. Eventually, Tesla hopes to operate its battery factory entirely on clean energy, which would be difficult to do in other states that lack enough production.
Even excluding clean energy, Nevada is home to low cost and reliable energy, from natural gas. Such sources are necessary for energy-intensive factories.
Furthermore, Nevada is rich in minerals that are critical to some clean tech companies. For example, the state has one of the nation’s few lithium mines, which produces a critical ingredient for batteries. Tesla plans to buy lithium from a mining project that’s under development 200 miles from its battery factory.
With a growing mass of energy tech companies, Nevada is now has an ecosystem that invites more to move in. Construction companies are building roads throughout the sparse, rural areas around the Gigafactory to bring in supplies and employees. Construction workers at the Gigafactory can continue onto other projects like the Hyperloop test track or Faraday Future’s car factory.
All of this is mostly good news for Nevada’s smaller cities like Reno. For years, it has been economically depressed and dependent on gambling and tourism. But now the city is morphing into an area with highly-skilled manufacturing jobs. And significant part of those jobs are coming from the future of energy technology.
To learn more about how Nevada won the Tesla Gigafactory deal, watch this Fortune video: