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ARPA-E's Aims are too Short Term, Energy Innovation Can Take 50-60 Years

The Advanced Research Projects Agency for Energy (ARPA-E) was founded by the US Department of Energy (DoE) in order to fund research into new energy technologies. The benefit of the ARPA-E is one of the few things that both Republicans and Democrats agree on. In fact last year when cuts were being made to most sectors and government programs, Congress voted to double the funding of the ARPA-E. The department is so popular in part due to its relative cheapness. (For the same amount of money that the government sank into doomed Solyndra, ARPA-E has funded 180 projects.)

However the ARPA-E has also met some criticism that its short term views and the funding programs that it provides are not enough to address long term energy problems. Arun Majumdar, ARPA-E’s director, acknowledged that the agency is aiming for different objectives than the solving of long term energy problems. “In the energy sector, it takes time for an innovation to go all the way and scale and make a big difference in the commercial market. That takes about 10, 15, maybe 20 years. Who knows?” he said. Instead the agency has helped increase private investment into new energy research, and generally raised awareness.

Energy Secretary Steven Chu said that ARPA-E fulfils a specific role, looking for the rare technological innovations that “can find a way to market very quickly.” He said that the DoE is needed for funding long term research, and even though “no one can deny that the reaction to Solyndra has had a damping effect on government finance programs for companies,” Chu said that failures were always expected and that is why the government appropriated a $10 billion dollar fund to cover losses.

Bill Gates has suggested that, “the IT revolution is the exception that kind of warped people's minds about how quickly things can work. If you underestimate how hard it is, that's part of why we can end up underfunding the kind of innovative work that needs to go on.” He mentioned that past energy innovations have generally taken 50 – 60 years to have an impact and that a failure rate of about 90% is to be expected.

By. Joao Piexe of Oilprice.com

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  • Matthew Stepp on March 09 2012 said:
    Joao -

    Thanks for your thoughtful piece and for pointing out a very important point: energy innovations take a long time from basic conception to market. Given our energy challenges, targeted public investments, like those made by ARPA-E, are vital to accelerating this time frame and hopefully shaving off years or even decades.

    But I wanted to make one clarification. You state that ARPA-E and ARPA-E's funding don't provide enough funding or are skewed too much to short-term (lower risk?) investments. While it's true that ARPA-E is grossly underfunded - it's FY2012 budget is $275M even though PCAST and the National Academies recommend it to be $1B - it's funding levels per project are realistic. Increased funding would allow ARPA-E to invest in more projects across the mid-to-high risk scale.

    Also, I don't think it's correct to say that ARPA-E isn't thinking about "the long-game." ARPA-E investments are meant to accelerated high-potential tech ideas through the pilot project stage. So it's only speeding up developing along one section of the innovation lifecycle. If these projects succeed and reach the pilot stage, then it still requires significant capital investment to traverse the second valley of death and eventually scale-up (which was the original intent of the loan guarantee program). So ARPA-E is very much doing it's job, but it's only a part of a greater suite of innovation policies (a fact often lost in the policy debate).

    Matthew Stepp
    Senior Policy Analyst
    Information Technology and Innovation Foundation

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