By Erin Smith and Addison Stark
The president’s Fiscal Year (FY) 2020 budget calls for the elimination of the Advanced Research Projects Agency – Energy (ARPA-E). This is unlikely to occur, however, because this critical innovation agency enjoys broad bipartisan support, both due to the projects it supports across the United States and the organizational characteristics that set the agency apart and have already demonstrated success in accelerating the development of advanced energy technologies. The administration has argued that in eliminating ARPA-E, they would spread its organizational principles through the Department of Energy (DOE). However, there are specific characteristics that cannot be spread to all offices, such as a mandate to invest in off-roadmap research areas and term-limited hiring requirements which cannot easily be replicated.
ARPA-E plays an irreplaceable role in the U.S. energy innovation ecosystem. The American Energy Innovation Council (AEIC) has called for increasing ARPA-E’s annual budget to $1 billion per year, nearly a three-fold increase over the FY 2019 appropriation of $366 million. Taking steps in this direction will begin to fulfill the vision set forth in the National Academies of Sciences, Engineering, and Medicine (NASEM) “Rising Above the Gathering Storm” report.
ARPA-E: An Innovative Research Model
ARPA-E is a program within DOE supporting projects with the potential to transform our energy system, improving U.S. productivity and economic growth. In its 10-year history to date, 145 projects supported by ARPA-E have attracted $2.9 billion in private sector follow-on funding, and 76 projects have gone on to form new companies. Modeled after the successful Defense Advanced Research Projects Agency (DARPA)—which is credited with the creation of GPS and the internet—ARPA-E focuses on high-risk, high-reward, pre-commercial projects. Selected through a competitive application process, every project team receives funding for a limited time and guidance to meet ambitious project milestones. ARPA-E is unlike other federal research programs largely because it combines a nimble, less-bureaucratic structure with a bottom-up approach that empowers researchers to choose which problems to address and take risks to solve them.
Why do we Need ARPA-E?
In 2005, as other nations like China and Russia began to aggressively scale up their own science and technology programs, leaders from both parties in Congress asked NASEM to identify concrete steps to bolster U.S. competitiveness in science and technology. In 2007, NASEM released its Rising Above the Gathering Storm report, which recommended Congress establish an agency similar to DARPA in the Department of Energy. Following the publication of that report, ARPA-E was created as part of the America COMPETES Act with a congressionally-established mission to overcome the long-term and high-risk technological barriers in the development of advanced energy technologies. Since it was first funded in 2009, ARPA-E has built a reputation as a nimble research model focused on breakthrough energy technologies with significant potential to transform the way we produce and use energy.
Advances in energy technology face unique challenges compared to other industries: energy projects are highly capital intensive, entail long development cycles, face significant regulatory uncertainty, and energy is valued as a commodity rather than as a product or service. For these reasons, the private sector on its own cannot or will not make the investments in energy research needed to match the scale of the opportunity of spearheading energy breakthroughs. The global energy industry was valued at $1.7 trillion in 2017, and advanced energy technology markets are expected to explode in the coming years. In order to capture these billion-dollar opportunities, it is crucial that the United States make robust investments in energy research today to maintain its leadership in the energy technologies of tomorrow, particularly considering decade-long development cycles. ARPA-E is filling a critical gap in the energy innovation space and is actively strengthening U.S. economic competitiveness and national security.
Assessing ARPA-E: Fulfilling its Mission
Under a congressional mandate, NASEM was tasked with evaluating the progress of ARPA-E in achieving its statutory mission and goals. In June 2017, NASEM released its assessment of the first six years of ARPA-E’s operations, finding that ARPA-E was making significant progress towards fulfilling its mission and was serving as a positive influence on the rest of the department. Some of the key takeaways from the assessment include:
- ARPA-E has funded projects that would not have otherwise received funding. ARPA-E provides crucial early-stage funding, technical support, and market analysis expertise for “off-roadmap” opportunities pursued neither by private firms nor other funding agencies, including other programs and offices in DOE. NASEM found that in doing so, ARPA-E has:
- Focused on the most transformative technology opportunities.
- Avoided duplicating research already underway.
- Supported projects that have since attracted significant private follow-on funding for technologies that are now beginning to enter the commercial market.
- ARPA-E practices have become an agent of change at DOE. ARPA-E best practices are being adopted in some DOE offices, which has been so successful that NASEM recommends that DOE should:
- Continue exploring and adopting elements of ARPA-E’s practices across the department.
- Incentivize more interaction between DOE offices and ARPA-E.
- It is too early to expect ARPA-E to have achieved all its goals. As energy technologies develop on decade-long scales, the report found that ARPA-E has not existed long enough to have transformed the energy landscape—yet.
ARPA-E: Key Features
ARPA-E was designed to accelerate the development of early-stage energy technologies and help projects surpass the so-called Valley of Death, the stage of the innovation cycle before a technology has demonstrated technical or commercial proof-of-concept. There is a lack of private investment for projects at this stage because they carry the highest risk. A series of unique organizational features have enabled ARPA-E to help projects bridge the valleys of death and transition their ideas from concept to engineering and to achieve remarkable success in the program’s relatively short lifetime. These features are listed below:
- Institutional independence
- Flat organizational structure
- Allows the agency to be highly responsive to research opportunities and the results of individual projects, which may lead to re-orienting or terminating projects.
- Empowered, involved, and term-limited program directors
- Hiring flexibility and short, three-year terms, enabling ARPA-E to recruit program directors who otherwise would never consider a career in government.
- Chosen for technical expertise, directors are empowered to conduct expert workshops which help identify problem areas that can benefit from ARPA-E’s unique approach to high-risk, high-impact projects.
- An active management process means they are frequently and directly involved in project management, including the ability to alter project milestones, budgets, and timelines.
- Projects supported for limited timeframes with multiple quantitative go/no-go milestones.
- Program directors can cancel projects and re-direct funds to more successful efforts.
- Fellows as a creative resource
- One key addition to the DARPA model on which ARPA-E was built, was the addition of early career technical fellows granted creative freedom to help program directors develop novel program ideas.
- Technology to Market advisors play a critical role
- Business development and scale-up experts are able to advise teams in order to accelerate and guide commercialization applications by encouraging projects to anticipate commercial challenges as they make decisions which will carry commercial consequences many years later.
- This was an innovation spearheaded at ARPA-E, and since its formation, DARPA has looked to build its own technology to market advising capabilities.
NASEM Recommends Adopting ARPA-E Practices Across DOE
One of NASEM’s key findings was that ARPA-E has become a positive agent of change at DOE and that some of its key practices are being incorporated in other DOE offices and federal agencies. Recognizing the potential to strengthen and streamline research activities—while considering the different scope, goals, and mission of DOE’s various offices—NASEM recommended continuing to explore and adopt ARPA-E’s best practices across the agency. This includes in DOE’s applied offices which, unlike ARPA-E, focus on technology that receives support over a longer timeframe and is often aligned with a technology roadmap. DOE’s Office of Energy Efficiency and Renewable Energy has successfully adopted several features from ARPA-E that fit within the office’s technology-focused framework, including:
- Modifying processes for selecting and funding proposals, including the use of pre-proposals like the concept papers ARPA-E requires applicants to submit.
- Holding workshops to convene experts in defining problems facing the energy sector and their potential solutions.
- Empowering program managers to select and make funding recommendations for awardees.
- Hiring some key personnel under limited terms, to create urgency and frequently inject fresh perspectives into the department.
- Funding awards using cooperative agreements with specific milestones so that awards can be terminated early if projects cannot perform.
- Actively managing awards, including the ability to re-direct or terminate underperforming projects.
- Having the ability to create and adjust technical milestones.
Specifically, the Solar Energy Technology Office (formerly the SunShot Initiative) incorporated technical support contractors for guidance, began asking applicants to submit concept papers when applying for funding, incorporated modified ARPA-E evaluation criteria, and encouraged reviewers to consider the potential economic or societal impact of a project, not just technical merit. DOE’s Vehicle Technology Office borrowed many of these features as well and likewise enjoyed noticeable improvement in program function.
Adopting certain ARPA-E organizational features has the potential to accelerate the pace of technology breakthroughs in other DOE offices and federal agencies. To most effectively follow NASEM recommendation to continue exploring ways to adopt ARPA-E best practices, it’s important to consider the unique research goals of each office and whether, and how, applying ARPA-E features can improve program function.