Few things divide Barack Obama and Donald Trump as cleanly as the future of energy. Sitting right on top of that fault line is the Department of Energy and its advanced research projects agency.
The president-elect on Wednesday nominated former Texas Governor Rick Perry to lead the DOE, whose name Perry famously couldn’t recall during a Republican debate in 2011 as he ticked off the various departments he’d try to abolish. DOE employees this week were already reeling from a 74-question interrogation that Trump’s transition team had sent them, including a demand to identify staff members or contractors who had worked on climate change. (The agency declined to provide the list, saying the move “left many in our workforce unsettled,” according to a statement. Trump’s team on Wednesday disavowed their inquiry.)
To the second item on the DOE questionnaire—“Can you provide a complete list of ARPA–E’s projects?”—the literal answer is easy enough. Click here.
But there’s more to it than that. The Energy Department’s research-and-development arm puts a modern spin on an old debate. The question may no longer be should the government help promising precommercial clean tech, but should the government help promising precommercial clean tech when the legacy energy system is threatening the long-term stability of global climate? All this as American politics is even more polarized than it was when ARPA-E was born a decade ago.
A pleasant hiatus in the bickering came in 2005, when the National Academies Press published the rare blue-ribbon commission report that actually leads to bipartisan legislation. Written by leaders of companies and research institutions, Rising Above the Gathering Storm documented the top things federal policymakers could do to help along Americans’ personal and aggregate success in cutting-edge science, technology, and emerging industries. Among the recommendations was this:
“Create in the Department of Energy an organization like the Defense Advanced Research Projects Agency (DARPA) called the Advanced Research Projects Agency–Energy (ARPA–E).”
In 2007, Congress did just that. ARPA–E then lay dormant until after the Great Recession, when the young Obama administration and Congress set up and funded the program—a way to help the president realize his clean-energy goals and support technologies too risky for bank financing.
The timing was good. A decade ago, venture capital was keen for opportunities in clean tech. But many investors sustained heavy losses and never returned. Venture capital for the sector fell from a high of $50.2 billion in the U.S. in 2007 to less than $4 billion this year, according to Bloomberg New Energy Finance.
Enter Obama’s Energy Department. The agency shaped several initiatives aimed at commercializing emerging technologies, including ARPA–E and the SunShot Initiative to lower solar-energy costs, and the Loan Programs Office. The latter, which expects to bring in at least $5 billion to the Treasury through interest payments, lived through the spectacular failure of solar manufacturer Solyndra, which had received a $535 million loan guarantee. But it also helped finance Tesla Motors in 2010.
“When I came into the DOE in 2009, we didn’t know what the winning technologies would be,” said Brandon Hurlbut, the agency’s chief of staff through mid-2013. “We wanted to give technologies a chance and let the market decide.”
ARPA–E provides seed money, usually up to a couple of million dollars each, to diverse technologies in solar and wind energy, natural gas, fusion, bio-engineered fuels, and batteries. It has financed more than 500 projects.
“You expect nearly all of them to fail,” said Hurlbut, who co-founded Boundary Stone Partners. “But the ones that do break out can be real game-changers.” Secretary of Energy Ernest Moniz, for example, recently visited an ARPA–E-supported research facility at the City College of New York that’s making liquid fuels from methane and microbes.
The SunShot program set out to reduce the price of solar in the U.S. to $1 a watt by 2020. Utility-scale solar, which is currently about $1.25 a watt, will probably hit that target next year. SunShot helped reduce costs for financing and the standardization of contracts. Such companies as Mosaic and UtilityAPI benefited from a mix of public and private funding, validating their place in the market.
“I can’t imagine what the entrepreneurial landscape would look like without SunShot,” said Peter Davidson, the former head of the Energy Department’s office of loan programs.
Quietly driving much of the conversation is scientists’ concern that time is running out to reduce the risk of catastrophic global warming by switching to a pollution-free energy system.
Critics include those wary of government intervention in markets. “The SunShot Initiative is a great example for that,” said Nick Loris, an economist who specializes in energy and environmental issues at the Heritage Foundation. “Those costs would have come down without that program.”
Many Republicans have become skeptical of ARPA–E. Tennessee Senator Lamar Alexander, chairman of the energy and water development appropriations subcommittee, has supported ARPA–E funding. But an energy bill that passed the Republican-controlled House, and has since died, would have cut its budget in half, to $140 million, and removed from its statement of goals the reduction of greenhouse gas emissions and the pursuit of energy efficiency.
While ARPA–E saw a 4.3 percent budget increase in 2016, to $291 million, more than 62 percent of DOE’s almost $30 billion budget is spent on nuclear security and environmental cleanup. And for all the talk of Obama buoying wind and solar, Trump may prefer to do the same for nuclear power and fossil fuels. His cabinet picks include, for Secretary of State, Rex Tillerson, the chief executive of ExxonMobil; for the Environmental Protection Agency, Scott Pruitt, the Oklahoma attorney general who’s been tightly aligned with fossil fuel companies; and Perry, who has both championed oil and overseen a boom in wind power.
Spokespeople for the Trump transition team haven’t responded to an e-mail seeking comment.
Loris, the economist, doesn’t discriminate among energy types, and said that spending research dollars on fossil-fuel research of commercial interest is as inappropriate as on clean-energy science. He’d do away with ARPA–E, other programs in DOE’s Office of Science, and the Strategic Petroleum Reserve. From a free-enterprise perspective, the right people—VCs—looked at clean tech 10 years ago. And most decided it wasn’t for them.
Entrepreneurs inclined to agree that the government shouldn’t be funding individual companies part ways with orthodoxy, because energy is different from other kinds of technology. For entrepreneurs, “general rule 101 is that large organizations slow you down,” said Carmichael Roberts, general partner at North Bridge Venture Partners and a member of DOE’s Secretary of Energy Advisory Board. “Where that does not hold true is in energy. Energy is one of the few areas where I would say unambiguously that you need to work closely with the government.”
If private capital is insufficient to fund energy technology, and the U.S. mutes its programs, others might swoop in. “Does China pick up the slack?” asked Emily Kirsch, co-founder of Oakland-based solar incubator Powerhouse. “The capital is there, the interest is there.” But Jonathan Levy, director of policy and strategy for Vision Ridge Partners and a former deputy chief of staff at Energy, contends any predictions are like “looking at a broken crystal ball.” He added though that “a deemphasis on climate would be a huge mistake given the trillion-dollar market for energy technology that the U.S. can decide if we want to lead in—or follow.”
On Thursday, ARPA-E continued about its business, announcing it would fund up to $70 million in projects that include making liquid fuels using renewable energy and improving soil quality and carbon-storage potential through new plant breeds.
Perhaps the agency’s fate will come down to a footnote. In its recommendation that the DOE create the program, the 2005 Rising Above the Gathering Storm committee noted a dissenter in its ranks, who said that “energy research is already well-funded by the federal government, along with formidable funding by the private sector,” and that ARPA–E might “put the federal government into the business of picking ‘winning energy technologies’—a role best left to the private sector.”
The voice of dissent belonged to Lee Raymond, Tillerson’s predecessor at ExxonMobil.