“If the federal government is going to fund energy research it should not duplicate or crowd-out private sector investment. It should focus on revolutionary breakthroughs that will transform our energy infrastructure.” -- Rep. Paul Broun (R-GA), Chairman of the Subcommittee on Investigations and Oversight
The House Committee on Science, Space, and Technology’s Subcommittee on Investigations and Oversight held a hearing on January 23, 2012 entitled “A Review of the Advanced Research Projects Agency-Energy.” The goals of this hearing were to review the performance of the Advanced Research Projects Agency – Energy (ARPA-E), which is a Department of Energy (DOE) agency, and to evaluate the recent Government Accountability Office (GAO) and Department of Energy Inspector General reports on the activities of ARPA-E.
The witnesses for the hearing were: Arun Majumdar, ARPA-E Director; Gregory H. Friedman, DOE Inspector General (IG); and Frank Rusco, GAO Director of the Natural Resources and Environment Division.
ARPA-E was established in 2007 by the America COMPETES Act. The goals of ARPA-E are to “overcome the long-term and high-risk technological barriers in the development of energy technologies” that result in “reductions of imports of energy from foreign sources; reductions of energy-related emissions, including greenhouse gases; and improvement in the energy efficiency of all economic sectors.”
The America COMPETES Act instructed ARPA-E to achieve these goals by “identifying and promoting revolutionary advances in fundamental sciences; translating scientific discoveries and cutting-edge inventions into technological innovations; and accelerating transformational technological advances in areas that industry by itself is not likely to undertake because of the technical and financial uncertainty.”
The opening statements of Broun and Rep. Paul Tonko (D-NY) set the tone for the hearing:
“The Committee was concerned that ARPA-E would compete with the Office of Science for scarce resources, thereby undermining basic research. Similarly, the Committee was also concerned that ARPA-E could unnecessarily duplicate DOE’s significant related work in other programs and areas scattered throughout the department. Finally the Committee was concerned ARPA-E would focus on late-stage technology development and commercialization efforts that are better left for the private sector to undertake, thereby accepting both the risk and the potentially great reward,” said Broun.
“ARPA-E could apply the successful DARPA model to the energy sector and enable promising ideas to move expediently towards proof-of-concept or demonstration. ARPA-E was to take on a scope of work that the private sector could not take on by itself and to accelerate the timeline of innovation in a way other agencies or venture capital could not do alone. Nothing in the GAO report that tackles this question suggests ARPA-E is doing anything but what the Congress and the President envisioned when ARPA-E was established in 2007,” said Tonko.
Majumdar began his testimony by highlighting the work of ARPA-E, stating that “ARPA-E looks to high impact research projects that the private sector is unlikely to invest in, but if successful, could create the foundation for entirely new industries.” He emphasized that “projects focus on research on innovative energy technologies while increasing America’s competitiveness in rare earth alternatives and breakthroughs in biofuels, thermal storage, grid controls, and solar power electronics.”
While discussing the results of the GAO report, Majumdar highlighted that ARPA-E agreed with the findings in the GAO report that “most ARPA-E projects could not have been funded solely by private investors and venture capitalist[s] generally do not fund projects that ARPA-E looks to fund.” Projects which used ARPA-E funding are, as he insisted, separate and different in scope from those funded by venture capital firms.
In his testimony, Rusco said that “venture capital firms generally do not fund projects that rely on unproven technological concepts or lack working prototypes demonstrating the technology.” He discussed examples where funding from ARPA-E was used for new and cutting-edge research and technology transfer. He cited 18 applications for ARPA-E funding that had also received funding from venture capital firms. However, he stated later during the questioning period following his testimony, that in most of these 18 cases, the funding received from ARPA-E was used for items which were technologically different than the items which received from the venture capital firms.
Friedman testified that the IG report “revealed that ARPA-E generally had effective systems in place to make research awards and to deploy Recovery Act resources. Of particular note, we found that ARPA-E, despite being a relatively new program, had developed and implemented research proposal selection criteria designed to make certain that awards were consistent with its mission objectives.”
Following the testimony, the majority of Member questions were on the subject of whether or not ARPA-E funded only cutting-edge and new projects that would not otherwise have been funded by the private sector. A heated discussion ensued between Democrats and Republicans with the Republicans questioning whether or not ARPA-E funded programs which also received outside private sector funding truly required ARPA-E funding to complete projects. Democrats argued that funding used to accelerate projects contributes to American competitiveness in that those projects are being developed faster and can enter the market sooner.
Majumdar insisted that ARPA-E has “never funded any idea that has been funded by the private sector.”
When asked by Rep. Jerry McNerney (D-CA) whether or not ARPA-E picks winners and losers as it provides funding to energy projects, Majumdar responded that ARPA-E finds white spaces in the market, where there is a need for new development, and then provides funding to multiple companies to develop technologies to fill that need. He emphasized that ARPA-E does not dictate which company is better than others, but instead ARPA-E allows for a competitive market to develop in areas where new technology and ideas are necessary.
When asked by Broun whether ARPA-E funds only went to projects that were too risky for the private sector, the panelists stated that ARPA-E funds were used only for new ideas.
Committee Chairman Ralph Hall (R-TX) asked where does ARPA-E fit within the DOE list of priorities, to which Majumdar responded “Secretary Chu has said many times in the past that ARPA-E is one of his top priorities.”
To view the hearing and read the reports discussed by the Subcommittee, visit the website.