As Energy Demand Accelerates, ARPA-E Bets on Caves, Biofuels

Eric Ingersoll wants to solve a central shortcoming of solar and wind power: their intermittency, such as when clouds block the sun or wind peters out during peak demand. His solution borders on geo-engineering: blow huge volumes of compressed air into underground salt caverns when the power sources are generating and then release the air through turbines when electricity is needed.

To be cost-effective for utility-scale operations, efficiency is crucial. Ingersoll was pretty sure he could keep 80 percent of the air pressurized, but private money to build a proof-of-concept model was elusive. In 2009 the 50-year-old autodidact landed a $750,000 grant from the U.S. Energy Dept., enabling him to test a critical refinement of his air-compression technology. “That [money] gave us a significant boost, going from ‘this looks like it is working,’ to ‘this is definitely working and it’s bankable,’” says Ingersoll, now chief executive officer and co-founder of 40-employee General Compression in Newton, Mass.

This is just the kind of creative transformational-energy research the DOE is trying to support through its Advanced Research Projects Agency-Energy (ARPA-E). First funded in 2009, the 21-employee agency is a critical part of the Obama Administration’s response to the specter of a tripling in global energy demand by 2025. Explicitly modeled on the Pentagon’s storied counterpart, the Defense Advanced Research Projects Agency (DARPA), ARPA-E functions as a funding agency that supports the most promising breakthrough-research proposals coming out of universities, corporations, and nonprofits, as well as from its network of 17 national labs. The grants target early stage technology, nurturing proof-of-concept units into pilot stages and later, into demonstration projects backed by venture capital.

The Recovery Act offered ARPA-E a chance to get off with a bang, funding a $400 million budget in 2009 and 2010, its first two years. Although that’s a small fraction of the $3.5 billion DARPA has long enjoyed annually, it was enough to trigger an avalanche of proposals — more than 3,500 in the first round, when the agency expected only about 400. This led ARPA-E to narrow priorities for each round of proposals. Early areas of focus have included technologies capable of capturing 90 percent of carbon emissions, biofuels that are 10 times more efficiently produced than those available today, and grid-scale storage of renewable energy such as that offered by General Compression.


Energy Secretary Steven Chu was a forceful advocate for ARPA-E’s creation even before joining the Administration. “I believe that the energy problem is the single most important problem that has to be solved by science and technology in the coming decades,” Chu contended before Congress. “The purpose of ARPA-E is not to get products into the marketplace, but to conduct the research necessary to transform the energy marketplace by creating platform technologies.”

Chu appointed Arun Majumdar, his former deputy director at the Lawrence Berkeley National Laboratory, to be ARPA-E’s first chief. He has also fought hard for bureaucratic flexibility from strict civil service regulations to be able to create an entrepreneurial culture in which project managers are given discretion to try to fulfill their vision of how a technology can succeed. This has been one of the secrets of DARPA’s success. It seems to be working at ARPA-E, according to Arati Prabhakar, a DARPA veteran who went on to serve as National Institute of Standards and Technology director and was most recently a partner with venture capital firm US Venture Partners.

That is also the assessment of Richard Van Atta at the Institute of Defense Analysis. He compares DARPA with ARPA-E in a forthcoming article in the ‘Journal of Technology Transfer’. Van Atta regards DARPA as “phenomenally successful” and says ARPA-E has a good shot at comparable success because it carefully replicates DARPA’s model, both in its culture and bureaucratic positioning. ARPA-E is also focusing on what he calls “the white space” of technology opportunities, where little work has been done previously and transformational — not just incremental — changes are possible.

It will take years before one can judge just how successful ARPA-E is at this time. Majumdar says that for all technologies that the agency is backing, commercialization –the ultimate test — could be 10 to 15 years off, if they survive that long. Early indications are upbeat: Six projects funded by ARPA-E with a total of $23.4 million in grants have attracted more than $100 million in venture capital to advance to the next stage. One of them is General Compression, which raised $20.9 million soon after winning DOE support.


Since opening shop, ARPA-E has awarded $363 million to 121 projects. Thirty-nine percent went to universities, roughly a third went to startups, and the balance went to large businesses (20 percent), national labs (5 percent), and nonprofits (3 percent). A fourth round of funding announced in April offered an additional $130 million in five new program areas. Despite its promising start, ARPA-E had to “fight like hell” to survive, says Van Atta, winning just $180 million for fiscal 2012 after the Administration requested $550 million.

Van Atta says the long fight for new energy technologies to reach successful commercialization is in some ways more formidable than the struggle confronting defense-related technologies. The latter can find critical support in robust Pentagon procurement or specific military services, while DOE has no comparable means of nurturing new technologies. It does support several, far smaller pools of money, including the $2.5 billion Loan Guarantee Program funded by stimulus money in 2009. That program is likely to be effectively extinguished in September, unless Congress finds money to fund the proposed Clean Energy Deployment Administration, essentially a nonprofit bank for renewable technology.

The idea behind the guarantees is to push companies past the so-called Valley of Death before new technology is considered safe enough for private capital. Even at that point,“new energy technologies have to perform the technology equivalent of parachuting into the Normandy battlefield,” note Van Atta and his co-author, William Bonvillian, director of MIT’s Washington office. “There is already a technology-economic-political paradigm that dominates the energy beachhead that must be overcome.”

Fortunately for Ingersoll, General Compression may not need further help from Uncle Sam. In early June the company closed a $54.5 million round led by Northwater Capital Management in Toronto. That’s helping to launch a pilot project in Texas undertaken with ConocoPhilipps (COP), which is also an investor. US Renewables Group, Duke Energy (DUK), and Serious Change are also partners. The pilot will start at 2MW, the output of the average wind turbine — enough to power 200 homes at peak demand — but should be able to go up to 1,000MW, the power of two conventional coal-fired power plants, says Ingersoll.


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