Investing in innovation in any industry is a risky proposition, yet often one worth pursuing. Technological innovation is the driving force for economic growth, but it requires firms to make significant investments in research, development, and commercialization in order to produce results. The energy industry is no exception to this requirement, though the energy system’s nuances present unique challenges to potential innovators, including high capital intensity, as well as technical complexities and risks. Energy technology innovation, while highly desirable from a social perspective, is a tough nut to crack, even for the entrepreneurial forces of the private sector. This is where ARPA-E comes in.
The Advanced Research Projects Agency—Energy (ARPA-E), authorized in 2007 and first funded in 2009, was established within the U.S. Department of Energy (DOE) to fund projects developing breakthrough energy technologies that increase energy security, reduce energy-related emissions, and improve efficiency. ARPA-E’s objective in funding and providing expertise to these high-risk/high-reward projects is to assist inventors through a critical and sensitive phase of the technology development process in order to commercialize energy technologies and attract private sector investment. To date, ARPA-E has funded over 180 projects with $521.7 million in awards across 12 program areas, and its awardees have sourced more than $200 million of private capital after receiving ARPA-E funding.
Now an annual event, the 3rd ARPA-E Energy Innovation Summit—held at the end of February just outside of Washington, DC—brought together an eye-catching lineup of speakers and energy experts to discuss the issues of the day and to celebrate the success of ARPA-E awardees’ projects. The Summit featured a technology developers’ workshop aimed at providing training to entrepreneurs, multiple keynote presentations, fireside chats to promote interactive dialogues among experts, a technology showcase highlighting ARPA-E awardees, and plenty of networking events. Keynote presentations included commentary by U.S. Secretary of Energy Steven Chu, ARPA-E Director Arun Majumdar, President Bill Clinton, Microsoft Founder and Chairman Bill Gates, and prominent members of the U.S. Congress, among others. Nearly 2,500 people attended the Summit, comprising mainly researchers, corporate leaders, entrepreneurs, investors, policymakers, government officials, and students.
Summit participants had the opportunity to absorb a wealth of knowledge and to witness firsthand the remarkable innovation ecosystem that has arisen from ARPA-E’s efforts. Some examples of the technologies showcased: lithium air and lithium water batteries, microbial fuel cells, solar hydrogen generators, an ultra-compact solid state cooling system for refrigeration, high-powered laser drilling, and advancements in assorted types of solar and wind energy generation components. Venture capitalists, corporate managers, and technologists alike lined up to engage innovators and learn about their exciting new energy technologies. During the panel discussions and keynotes, experts from a variety of disciplines shared their perspectives on topics such as commercialization of technologies, financial tools, investment mechanisms, institutional frameworks, policy measures, national security considerations, and even political roadblocks.
Among many memorable takeaways, the following remarks stood out:
-Secretary of Energy Steven Chu highlighted our vulnerability to price fluctuations in the fuel markets, most recently to oil and gasoline, as well as our inability to drill our way out of the problem. Secretary Chu made the case for leveraging energy innovation in order to reduce our exposure to oil price fluctuations and improve the U.S.’s economic competitiveness.
-Former President Clinton discussed some of the hazards to the energy innovation project, including advances in fossil fuel extraction techniques that could lock us into dirty energy consumption, the lure of short-term jobs in oil and gas, constrained federal budgets that limit spending on research, and ideological imperatives to deny climate change. However, he built a case for continued investment in energy innovation domestically, and he noted that the nation’s economic future depends on the successful projects of the entrepreneurs present.
-Serial entrepreneur Steve Blank encouraged innovators to get out of their buildings and speak with customers to find out what they need. In addition, they should focus on deploying the lowest acceptable functional technology in the market in order to bet smaller while they learn, as opposed to ‘betting the farm’ on a more developed (and more expensive) project.
-Bill Gates drew a distinction between the IT revolution and the energy transition currently underway, noting that the IT revolution is an exception in terms of how quickly things can change. Energy transitions have historically taken 60-70 years on average, mainly due to their capital intensity. Mr. Gates argued that the U.S. is currently under-spending on energy R&D, and that the private sector needs incentives to jump into an area that has failure rates over 90 percent and that needs thousands of firms initiating projects to produce just a few viable options.
-Senator Jeff Bingaman described science and technology as critical to U.S. competitiveness and indicated that partisan politics is creating obstacles to continued progress in the energy system. Whereas regulation, spending on innovation and tax incentives had been effective policy tools in the past, they were now under sustained attack. Higher lighting efficiency standards are in the process of being rolled back, Solyndra has been used as an excuse to defund innovation projects, and the production tax credit’s renewal is in jeopardy. Senator Bingaman expects that we may need to wait until the November elections to make further progress in energy.
The ARPA-E Summit brought together the energy innovation community to demonsrate what is possible when the government invests in and incentivizes innovation. Knowledge networks and communities of practice form around the seeds of innovation capital, and new technologies find a way from laboratory to prototype, and from prototype to marketplace. Certainly, no one would dispute that we likely will come across some failures along the way, nor would they deny that some of the outcomes of R&D investment will be difficult to measure. However, with great risk comes the potential for great reward, and the ARPA-E Summit provided a sneak peek at what some of the fruits of our innovation investments might look like.
For more information on the 2012 ARPA-E Energy Innovation Summit, visit the website.