Judging ARPA-E

Gary Boas, Contributing Editor, gary.boas@photonics.com

Created under the Bush administration, the Advanced Research Projects Agency – Energy (ARPA-E) actually set up shop only last year, when it received $400 million in funding under the American Recovery and Reinvestment Act. Its director and staff must feel a bit beleaguered already, though, with critics questioning whether it is an appropriate avenue for government funding of technology development.

The organization is modeled after the Defense Advanced Research Projects Agency – better known as DARPA, the agency that brought us the Internet and the stealth technology found in the F117A Nighthawk aircraft, for example. The mission of ARPA-E, according to its Web site, is to “enhance US economic security by identifying technologies with the potential to substantially reduce energy imports from foreign sources; cut energy-related greenhouse gas emissions; and improve efficiency across the energy spectrum,” while ensuring that the US remains a technological and economic leader in the field of energy.

ARPA-E has come under fire from some quarters. Critics argue that the agency is essentially in the position of “picking winners” among competing technologies, contending that this is not a proper role for the federal government.

To use a bit of shorthand: The agency is looking for the next game-changing technology – the Google of energy.

ARPA-E selected an intriguing slate of contenders with its first round of funding. The agency recently announced that, after having received upward of 3000 applications, it has committed $151 million to 37 projects in areas such as renewable power, biomass energy and vehicle technologies. One example: 1366 Technologies Inc. of Lexington, Mass., has been awarded a $4 million grant to develop “direct wafer” technology that forms high-efficiency “monocrystalline-equivalent” silicon wafers directly from molten silicon and that could thus reduce the installed cost of solar photovoltaics dramatically.

ARPA-E was created to support research into radically new technologies, including solar, that could help the US cut back on its energy imports from foreign sources. Indeed, in the first round of funding, the Lexington, Mass.-based 1366 Technologies was awarded a $4 million grant to develop a “direct wafer”technology that could result in significantly lower costs for solar photovoltaics.

With a second round of funding available – this time for $100 million in grants – ARPA-E has received a total of 500 submissions for three categories: advanced carbon capture technologies, high-energy storage batteries for electric and hybrid electric vehicles, and new approaches to making liquid fuels without using petroleum or biomass. Review of these applications is under way.

Federal support for radically new and potentially game-changing technologies is especially important these days, as the venture capital community is less and less willing to invest in high-risk projects. Still, critics of the program maintain that the government should not be in the business of “picking winners” among competing technologies. Funding innovative basic science research is one thing, they say, but deciding which products should make it to market is another altogether. Here, various additional factors come into play: whether the materials are available in sufficient quantities to keep costs down, for example, or whether consumers would be willing to adopt the technology.

ARPA-E has sought to address such concerns in part by recruiting staff from the private sector, even enlisting some with hedge fund experience, as well as consulting with top researchers in particular fields.

One could also argue, however, that the potential for adoption should not be a primary consideration for ARPA-E. The agency has taken upon itself the support of some research that probably would have been deemed too risky by the investment community, because high payoff is unlikely. The ideal ARPA-E project probably looks a little crazy, but if it works … look out. In this context, judging the research based on its perceived practicality might almost seem irresponsible.

In any event, the question of picking winners and losers is often moot in the earliest stages of technology development. “The earlier you are in the development, the less you know about what the future will bring,” said Milton Chang, founder of Menlo Park, Calif.-based venture capital fund Incubic and a longtime player in the field of optics. “And if you spend all your time looking for the perfect solution, you will never find it. Sometimes you just need to shoot in the right direction and see what happens.”

As ARPA-E director Arun Majumdar reminds us, even if only a few of the funded projects are ultimately successful, we will still see a dramatically changed energy landscape.

Others criticisms have centered on the possibility that the projects will not create a commensurate number of jobs in the short term and that many of the jobs that are created might be sent overseas once the new technologies go into production. This could be an especially contentious subject, as ARPA-E is currently paid for with stimulus package money.

Proponents of ARPA-E counter that the American Recovery and Reinvestment Act was designed to lay a foundation for long-term growth as well as provide a jolt to the economy and, that by funding the development of potentially breakthrough technologies, the agency is doing just that.