After sitting through presentations from a "who's who" of the energy world these past two days at the DOE's inaugural ARPA-E Innovation Summit, any one of the more than 1,700 individuals in the room likely needed to call upon their deepest sense of equanimity or find the nearest cocktail bar.
On the one hand, it would be hard to rival, or argue against, the talent and commitment of the ARPA-E team, from Director Majumdar on down, and extending to other leaders at the DOE, mostly notably, the Energy Secretary and Nobel laureate himself, Steven Chu. On the other hand, despite the DOE and the Administration's best efforts, it is clear that the U.S. is falling behind in what everyone in the room seems to agree is the next great industrial revolution. While the name of the program is clearly on target, and based on the original name of DARPA (the DoD's advanced research agency that brought us advancements that include GPS, stealth bombers and the internet), what is plainly missing is the military-scale funding to go along with it.
At its core, the summit was attempting to address the question of how the United States can accelerate energy innovation and ensure commercialization, such that the U.S. will hold a leadership position in greentech in order to:
1) Increase national security through energy independence,
2) Promote GDP growth and nurture/build market leading companies, and
3) Combat the carbon challenge
Below I will touch on the various themes that were explored by the many panelists, and end by listing other important subjects that received a healthy dose of attention.
Opportunities Lost
Director Majumdar cautioned that many technologies leading the greentech revolution today have been squandered by the United States. The ARPA-E Director pointed out that the U.S. now has "less than 10% of the photovoltaic market" and "1% of the global market for lithium-ion batteries" -- two technologies that were invented in the U.S. GE's CEO Jeff Immelt told a similar story related to nuclear energy. Mr. Immelt went on to explain that "we [the U.S.] are out of the game in offshore wind" as result of favorable foreign policies (in this case, Denmark) that encouraged strong investment from those nations' companies.
John Doerr, Thomas Friedman and Jeff Immelt all agreed that the U.S. must act now by putting the right national policies in place to give greentech a chance in this country. John Doerr argued that the three most important actions that U.S. must take are: 1) put a price on carbon, 2) put a price on carbon, and 3) put a price on carbon, his notable sound bite from many a conference. Friedman suggested that unless that happens, everyone in attendance is essentially a "hobbyist."
Gamechangers
Majumdar kicked-off the summit by highlighting previous "gamechangers" of human civilization such as artificial fertilizers, the polio vaccine, airplanes, nuclear energy, the transistor, fiber optics, integrated circuits, wireless communications, the internet and others, and then explained that we need the collective equivalent of all of these advancements in the next 20-year period. Secretary Chu called for a "golden moment in energy innovation," and reminded us that the DOE is a science-funding agency, with more than 100 Nobel Prize winners to their credit (far more than any other agency in the world).
The theme of new approaches and new assumptions was touched on by many including famed VC Vinod Khosla; Secretary Chu made a point that "instead of turning science into technology, let's turn technology into science," highlighting that many of the solutions we are now looking to create will not be made from scratch, but rather will leverage our existing knowledge base, specifically IT. Following this point, Under Secretary for Science Steve Koonin mentioned that the U.S. remains the world leader in simulation technologies, which can be beneficially utilized for any system (such as the distribution system of a power grid) or complex manufacturing processes to gain optimal results.
The United States' National R&D Budget is "Criminally" Low
Over the 2-day summit, much effort was made to suggest that ARPA-E needs to become "the Bell Labs of Energy Science." It was argued that research hubs for the energy sector are a huge national priority, and that more PhDs and greater collaboration would be required along way.
John Doerr pointed out that Japan's R&D spending is three times that of the U.S., and concluded that the U.S.'s R&D budget is "criminally" low. Dan Senor, author of Start-Up Nation, explained that the reason that Israel's economy is "the most innovative in the world" is partly due to the fact that they dedicate the highest percentage of GDP to civilian R&D.
Dan Reicher, Director, Climate Change and Energy Initiatives at Google.org, suggested that "the fruits of the recession" are the stimulus funds directed at energy, but questioned if the federal government would continue to make needed investments in R&D next year, and beyond.
The China Scare
Perhaps more than any other topic, the emergence of China as a serious threat in the commercialization of clean energy was a subject about which many expressed grave concern. John Doerr explained that China has a better understanding that energy security is vital to their future (relative to the U.S.), and as an example pointed out that China now has a system in place whereby mayors of the different regions have to report their "carbon scorecard" on a regular basis. Another panelist mentioned that China has had 30 IPOs in cleantech over the past several months, well beyond the number here in the States.
Jeff Immelt put up a slide that showed China surpassing the U.S. in overall manufacturing circa 2015, and another slide that gave China "greenlights" in the four critical areas needed for greentech advancement: 1) public policy, 2) the ability to scale the supply chain, 3) local demand for product, and 4) capital investment. Meanwhile, the U.S. could only claim a greenlight in its supply chain, yellow lights in investment and local demand, and a big, glaring red light in public policy.
Thomas Friedman pointed out that while the drawbacks of the Chinese state government are well advertised, one very real benefit of their system is that when it comes time to deploy technologies, China can order optimal solutions from the top down, giving them speed at a time when the U.S. Congress is stalled on all fronts.
Friedman went on to say that one of the most significant global events that occurred in the past 24 months is that Red China became "Green China." One senior level executive at IBM told me that China's budget for cleantech is "unlimited."
Conclusion:
Director Majumdar finished by saying that ARPA-E would be a success if the following happened:
- The agency can identify a mechanism for scaling these seed technologies
- More patents are filed
- Their investments receive a follow-on investment by the private sector
- Accelerated market entry (in general)
- An increase in the value of greentech companies occurs
- A new ecosystem of companies is established
- World-setting, best-in-class products are the result
It's difficult to argue with any of these objectives, but is $400 million enough? China is spending billions.
Other Themes:
1) Advanced Carbon Capture -- new approaches needed
2) Batteries/ Energy Storage (Lithium-Ion)
3) Energy Efficiency -- low-hanging fruit (with a fence around it); new regulation needed
4) More nuclear energy needed (2003 MIT Nuclear Study report was mentioned several times as the best research done)
5) Trade-off between higher customer energy bills and new industry/new jobs
6) Need to take "climate change" out of the conversation. Republicans have successfully "crossfired" this term into a 4-letter word. It has been suggested that a more effective phrase would be "carbon pollution."
7) Electrofuels are important -- an example of a high-risk/high reward fuel source that ARPA-E is targeting