“Pound for pound, dollar for dollar, activity for activity, it is hard to find a thing the United States has done that is more effective than ARPA-E,” said FedEx Chairman and CEO Fred Smith at the 2012 ARPA-E Energy Innovation Summit.
 
In an optimistic, forward-looking address, Smith spoke passionately about the strategic and economic importance of America weaning itself off foreign oil.  
 
“We burn about 19 billion barrels of oil per day. About 50 to 60 percent of that is imported. Some of that comes from friendly locations. But 90 percent of proven worldwide reserves are owned … by governments that do not share the same values as the United States,” said Smith. “We at FedEx have long believed that … our dependence on imported petroleum constitutes the country’s largest security and economic risk.”
 
For much of his address, Smith preached to the ARPA-E choir, reciting well-known statistics about fossil fuel use and its attendant costs.  But after recent greentech challenges -- from Solyndra in solar to production tax credit extension challenges for wind -- Smith’s optimism was well received by attendees.
 
“There is light at the end of the tunnel for the first time in my business career,” said Smith. “We [at FedEx] are very supportive of ARPA-E and the leverage that it offers for conceptual breakthroughs … between the lab and commercialization.”
 
His optimism stems from advances in two arenas. First, vehicle electrification: “The alternative to internal combustion engines for vehicles -- either electrification for small vehicles or natural gas for larger vehicles -- has not yet been cost-effective on a pure P&L or investment basis. But there are very exciting developments. It appears to us … that the trajectory of battery development and costs is that in five years, you will have … positive ROI for light-duty [electric] vehicles. […] We are very confident that in a reasonable amount of time they will be cost-competitive.”
 
Of course, the critical barrier to cost-effective electrification is battery performance and cost.
 
“We at FedEx are operating several [electric vehicles] today. They cost about 75 to 80 percent less to operate per mile than their internal combustion counterparts,” said Smith. “[The key challenge] is to get the cost of batteries to the point where the capital cost of the vehicle is competitive with an internal combustion engine.”
 
“I was very excited when I heard the press announcement from Envia, a company that was funded in part by ARPA-E and in part by private funds, that seems to have [made] a significant breakthrough in energy density and cost performance," Smith continued, alluding to that firm's lithium-ion battery cell with demonstrated energy density of 400 watt-hours per kilogram. “[Envia] is also funded by General Motors, which introduced the transformative Chevy Volt, so there is a high likelihood that the technology will be incorporated into vehicles.”
 
Second, Smith spoke up in favor of natural gas vehicles.
 
“Many have advocated that natural gas be used as a transportation fuel. We agree for long-haul vehicles,” said Smith. “For the first time, there are LNG engines by Cummings and Navistar that appear to be quite competitive with internal combustion engines given the cost differential between natural gas and diesel. We … will have our first prototypical natural gas vehicles on the road this summer.”
 
Smith also emphasized that heavy-duty, long-haul natural gas vehicles would need only a limited number of refueling stations.
 
Finally, FedEx’s CEO spoke positively about biofuels in aviation.
 
“The aviation industry is totally committed to reducing energy consumption for both cost and environmental reasons,” said Smith. “The energy industry has demonstrated drop-in biofuels. The Navy has flown the ‘Green Hornet’ [an F/A-18 fueled by a biofuel blend]. KLM and Virgin have flown flights with drop-in biofuels. There is no question that you can produce highly efficient biofuels.  It is simply a matter of scalability and cost.”
 
***
 
Yoni Cohen has worked for greentech venture capital firms DBL Investors and Israel Cleantech Ventures and reported about environmental innovation for numerous publications. Follow Yoni on twitter @Cohen_Yoni.