Federal Energy Research Projects Win Venture Funding Support

Summary.  The U. S. Department of Energy is supporting selected high-risk, innovative projects that, if successful, would contribute to new commercially viable technologies for increasing energy efficiencies and reducing the need to burn fossil fuels.  Fossil fuels  produce greenhouse gases and lead to global warming.  In a recent announcement, the Department noted that six of the projects it has supported with seed money have succeeded in winning supplementary funding from private venture capital firms.  Thus the program has succeeded in identifying promising technologies that may mature into practical methods for reducing greenhouse gas emissions while contributing significantly to national economic activity.

Introduction.  Global warming due to greenhouse gases (mainly carbon dioxide, CO2) accumulation is widely accepted to pose a serious threat to the global economy, disrupting many geographical features such as coastlines, and fertile vs. arid regions, and leading to serious disruptions in agricultural production. 

In an effort to develop activities that may contribute to combating global warming, the U. S. federal government has given support to some innovative research programs. The New York Times reported on February 2, 2011 that several pioneering research projects initially funded by the U. S. Department of Energy (DOE), using seed money provided under the American Recovery and Reinvestment Act of 2009 (the “economic stimulus” bill) had succeeded in attracting private venture capital funding.  The supplemental backing by venture capitalists demonstrates that the DOE had initially selected enterprises deemed by the capitalists as having commercial prospects, i.e., that the technologies chosen had a good chance of achieving commercialization and profitable development.

The U. S. Secretary of Energy, Steven Chu, has called the present era a “Sputnik moment” with regard to investing in new technologies leading to development of renewable energy in the U. S.  This theme was echoed by President Barack Obama in his January 2011 State of the Union address. Such a program can help the U. S. regain leadership in the global competition to develop sustainable energy resources.  It can also reduce our reliance on fossil fuels such as those imported from abroad for our energy needs.  Currently much renewable energy technology is being developed abroad, including in China. 

ARPA-E Development program in DOE.  DOE’s Advance Research Projects Agency-Energy (ARPA-E) is the funding source for these start-up ventures.  It is modeled after the earlier U. S. Defense Department’s Defense Advance Research Projects Agency (DARPA) which funds innovative research directed toward defense and the armed forces.  DARPA is credited, for example, for giving rise to the communication system that became the Internet. 

ARPA-E was initially funded with a budget of $400 million over two years in the stimulus bill.  With this money it awarded 43 grants,  with an average grant size of about $2 million.  The selection process was quite rigorous,  This initial round attracted 3,600 summary proposals, of which 300 were selected to be resubmitted as full-fledged grant applications.  Expert scientists were drawn from universities around the country to evaluate the proposals.  As a result the winning grants are assured of having received critical scrutiny for innovative potential as well as technical rigor even before getting off the ground.

Venture Capital Support Gained.  The ARPA-E program disclosed that after only a year of support, six programs that it initially supported, with grants ranging from $700,000 to $8 million, had attracted private venture capital investments totaling more than $100 million. “This amount of private capital support indicates that the business community is hungry to invest in truly innovative solutions to the country’s energy challenges,” Energy Secretary Chu stated.  The six projects, originating in start-up technology companies, are from:

1366 Technologies develops new manufacturing technologies for the silicon wafers needed for photovoltaic (PV) solar energy harvesting.  The company was awarded $4 million, and received $33.4 million from venture capital investment.  PV cells directly convert sunlight falling on them into electric current.  At present, manufacturing silicon wafers for PV energy is sufficiently expensive that it is considered not to be economically feasible.  According to ARPA-E, the 1366 Technologies innovation could reduce wafer capital costs by as much as 90%. 

Envia Systems received $4 million from ARPA-E, and was granted $17 million more from GM Ventures.  In collaboration with the Department of Energy’s Argonne National Laboratory, the company is developing lithium ion batteries with the highest energy density known.  It uses its unique electrode materials to greatly increase the amount of electrical energy the batteries can store, making this innovation an important step in developing battery-powered electric vehicles.

FloDesign Wind Turbine was granted $8.3 million by ARPA-E to pursue its development of an alternative wind turbine design based on the structure of airplane jet engines.  The company attracted an additional $27 million in venture funding, permitting further development and expansion of its executive and research staff.  The design relies on use of a shrouded turbine that delivers far more energy per unit of rotor sweep area, and uses rotors that are 50% smaller than comparable conventional rotors.

SunCatalytix received $4 million from ARPA-E and has since received venture funding of an additional $9.5 million.  The company’s technology integrates sunlight harvesting and water to permit producing highly distributed energy from the sun for individual applications.  Its novel devices promote (catalyze) the breakdown of water into its components, hydrogen and oxygen, which can then be recombined to capture the energy released in a controlled fashion, on demand, using the company’s solar-to-fuel device.  The gases produced serve to store the sun’s energy in small scale installations, such as residential, for reuse on need.

General Compression gathers unneeded electrical energy produced from a wind farm.  The company received an ARPA-E grant of $750,000, and has been granted over $12 million in venture funding. Using a reversible compressor/generator module, it pumps compressed air into underground storage cisterns when energy produced exceeds demand, and uses the compressed air to generate electricity when demand exceeds production.  The installation can cycle between these two modes in seconds, and operates with efficiency approaching 75%, making it highly responsive to demands of the power grid.

24M received an ARPA-E grant of $2.55 million, and has won an additional $10 million in venture capital.  The company, collaborating with the Massachusetts Institute of Technology and Rutgers University, is developing new, alternative batteries for electric vehicles that exceed the performance and reduce the cost, compared to lithium ion batteries.  The company is working on new materials for storage of electrical energy, and a flow system that separates the storage function from the external electrical circuit.

Overview of ARPA-E Programs.  The ARPA-E office has categorized its programs into six groups.

BEEST (Batteries for Electrical Energy Storage in Transportation) seeks to develop new high energy-density batteries for use in electrical vehicles, with the objective of extending the driving range available.

IMPACCT (Innovative Materials & Processes for Advanced Carbon Capture Technologies) is directed to remedying the high carbon dioxide emissions from coal-fired electric power plants.  Its objective is to identify and develop new technologies for capturing and storing CO2 from coal burning plants, thus preventing the CO2 from entering the atmosphere.

GRIDS (Grid-Scale Rampable Intermittent Dispatchable Storage) seeks to develop new methods for storing large quantities of electric energy produced from intermittent sources such as solar or wind energy, removing the energy from regional and national grids when in excess, and delivering the energy to the grids when demanded.

ADEPT (Agile Delivery of Electrical Power Technology) seeks to develop new materials and modalities such as soft magnetic materials, high-voltage switches, and high-density electrical storage.  These will enable, for example, high capacity feeding of photovoltaic electrical energy, and use of new solid-state electrical substations and wind turbines.

Electrofuels seeks to develop microbial organisms to capture atmospheric CO2 and convert it into liquid fuels for use in transportation.  The objective is to carry out research and development of new technologies that complement existing research on biofuels and photosynthetic fuel production, for example, in algae. 

BEETIT (Building Energy Efficiency Through Innovative Thermodevices) seeks to develop new efficiencies for use in cooling buildings.  The program focuses on identifying new refrigerants that are not themselves greenhouse gases (contrary to currently used refrigerants) and on developing new air conditioning systems that have high efficiency and low energy requirements.

Other projects are also supported that do not fit readily into the categories above.

Budgetary Outlook.  According to the New York Times, the original funding from the stimulus bill was a two-year allocation.  That support was effective up to the present fiscal year, 2011.  But there has been no federal budget enacted for fiscal year 2011, so there is no new funding available at present to extend the grant program.  A budget request will be included in the proposed budget for fiscal year 2012.  Support for such an allocation will certainly be difficult given the present federal budgetary crisis and a strong spirit in the Congress for reducing discretionary (optional) spending.  Thus the Administration will need to present a strong case for this program, and defend it vigorously.

Balancing Governmental vs. Private Financing.  There is an active debate concerning the proper role of government support for high-risk innovative research.  The Department of Energy believes the ARPA-E program has struck the balance rather well.  It does not want to support every proposal regardless of quality.  In using outside scientists to vet incoming proposals, the Department believes it has identified proposals with a high probability of success.  On the other hand, government should not support research that would have been undertaken in the private sector anyway. 

The fact that these and other energy-related startup companies rely on initial seed money from the federal government shows that in their quest for support in the private realm, such firms were initially unable to attract the needed seed money.  The technologies in question generally are highly innovative and carry high financial risk.  And yet, the ARPA-E program, according to the report, feels justified in its choices of projects to support, since one-sixth of the chosen proposals have succeeded in attracting venture capital funding after only one year; perhaps some others will also succeed in this regard in coming months.

Urgent need to eliminate greenhouse gas emissions.  In several previous posts, including this simple model, I have discussed the need, highly urgent, not merely to lower the rate at which we release new greenhouse gases into the atmosphere, but rather to eliminate all new emissions as rapidly as possible in order to keep the total accumulated greenhouse gas amount at its present level.  The current level of atmospheric greenhouse gases is already higher than in recent geological history.  Climate scientists agree that this exceptional situation is even now  contributing to adverse climatic effects, and that higher levels of greenhouse gases will make the situation globally far worse. 

For this reason, the ARPA-E program is a necessary and fruitful undertaking.  It will provide several new technologies that, each in its own way, can potentially make major contributions to achieving this ultimate objective.  For relatively minor expenditure of public funds, it will foster the development of new enterprises that will contribute to the growth of the national economy and help reduce the need to burn conventional fossil fuels.

© 2011 Henry Auer