Dropping the Ball on Energy Innovation: ARPA-E and the 2012 Budget

ARPA-E – and clean energy innovation in general – took a body blow this week during the 2012 budget debate.  The House of Representatives debated their Energy and Water appropriations bill (which includes funding for DOE), attempting to strike a balance between the nation’s energy needs and budget austerity.  So far, budget austerity is winning at the expense of future economic growth and reduced carbon emissions.  The Advanced Research Projects Agency – Energy (ARPA-E) is being given an anemic $100 million budget for 2012.  This is in contrast to the original National Academies report recommendation of $1 billion, the President’s 2012 budget proposal of $550 million, and Congress’s 2011 authorization of $300 million.  This amount wasn’t unexpected – all energy innovation investments are slated to be cut – but the lack of support in boosting its funding ahead of a full budget vote remains disheartening.

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There were two attempts at boosting ARPA-E’s budget (a list of amendments can be found here).  One amendment audaciously aimed to boost ARPA-E to $550 million and pay for it by eliminating fossil fuel R&D.  A more politically realistic amendment sought to boost the program to $180 million, at the expense of some DOE administration costs.  Unfortunately, both amendments failed, and ARPA-E is left with 10 percent of the budget many energy policy leaders believe it needs.

The failure to fully support ARPA-E means policymakers are dropping the ball and potentially losing the game – except the game in this case is economic growth and reduced emissions – as ARPA-E is the central public-private program aimed at doing both.  In fact, as we argue in a recent report A Model for Innovation: ARPA-E Merits Full Funding , ARPA-E represents public-private innovation at its finest, for the following reasons:

The DARPA Connection.  ARPA-E was modeled after its DOD counterpart DARPA.  Both operate in what is known as “Pasteur’s Quadrant,” where fundamental science crosses paths with goal-oriented applied research. This approach at DARPA has yielded significant technological leaps forward in fields like information technology and GPS – and is producing significant breakthroughs at ARPA-E in fields like solar technology, battery storage, and power electronics.

Recruit the Best and the Brightest.  ARPA-E has built and sustained an impressive network of experts from which to draw staff and project participants. Many ARPA-E staff are top experts in their field, with commercial experience at large firms, start-ups, venture capital funds, and at leading research laboratories and universities. ARPA-E program staff are often seen as the “rock stars” of clean energy technology. Of current projects, 40 percent are led by researchers at top universities, with an additional 31 percent led by small businesses and startups.

Make Collaboration the Central Theme. One of the factors in DARPA’s success was that program managers made connections between researchers in various fields and in various institutions, allowing sharing of knowledge that would otherwise not happen easily.  ARPA-E is no different as Program Managers bring together leaders in clean energy technologies through workshops, peer review, and conferences to focus in on the most pressing technological challenges to invest in.  This process led to over 3,700 project proposals for its first six programs after its initial solicitation almost two years ago, representing a groundswell of high risk, innovative clean energy ideas.

Spur Economic Growth through Innovation.  Each of ARPA-E’s programs are aimed at a particular clean energy technology problem that if solved would have a drastic impact on the United States economy.  For instance, the ADEPT program is developing next generation power electronics that would bring the efficiency and control of information technology to utilities and consumers.  The BEEST program is developing breakthrough vehicle battery storage solutions that could revolution the re-emerging U.S. auto industry.  The REACT program could reduce the trade deficit by developing substitutes for rare earth materials crucial to many clean energy technologies, but largely found overseas in countries like China. And ARPA-E programs are making significant strides: ARPA-E projects have obtained $285 million in follow-up private sector investment and filed 17 patents as a result of $360 million in public investments.

ARPA-E isn’t your grandfather’s slow, politicized bureaucracy.  It’s critical to catalyzing rapid, radical innovation to bring clean energy ideas to market.  But this week’s budget decisions, if fully realized into law, drastically limit ARPA-E’s impact.  At $100 million ARPA-E wouldn’t be able to effectively invest in a broad mix of technologies.  Project managers won’t be able to effectively balance their project investments by risk, potentially losing the ability to invest in high impact technologies that no one else will support.  And with budget uncertainty, ARPA-E may be hard pressed to recruit the best and the brightest to help solve some of the most important technology problems of this century.  Congress is effectively kicking the legs out from under ARPA-E just as it is getting started in the name of budget cuts. 

And as we’ve argued before, gutting innovation-centric programs is throwing the baby out with the bath water.  We may reduce our deficits marginally today through these program cuts, but there will be much less economy growing innovations in future, say nothing for a drastically different climate.

Note: Image created by ITIF.

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About the author

Matthew Stepp is a Senior Analyst with the Information Technology and Innovation Foundation (ITIF) specializing in climate change and clean energy policy. His research interests include clean energy technology development, climate science policy development, transportation policy, and the role innovation has in economic growth.