Congress Weighs Energy R&D Unit

Legislation that would establish a new program within the Department of Energy to speed the commercialization of cutting-edge energy technologies has mustered strong bipartisan support in the Senate and appears headed toward easy passage. But a similar measure is on a much slower track in the House, where lawmakers are divided over the need to create a new government research agency.

"We all agree that energy R&D is key to energy independence, innovation, workforce development, and U.S. security," remarked Rep. Bart Gordon (D-Tenn.) at a hearing in March held by the House Science Committee. "The question is: How far are we willing to go to enact real change that garners tangible results? Establishing an ARPA-E is a bold step, but it just may be the tool that gets the job done."

An Advanced Research Projects Agency-Energy, or ARPA-E, was recommended in last October's widely acknowledged National Academy of Sciences (NAS) report, "Rising Above the Gathering Storm." The study, prepared by a panel led by retired Lockheed Martin chief executive Norman R. Augustine, identifies a range of action items that must be addressed if the U.S. is to remain competitive in the global marketplace. It calls ARPA-E the key to producing "transformational research that could lead to new ways of fueling the nation and its economy."

The NAS report argues that affordable and reliable energy production is central to the future of the U.S. economy and that revolutionary new technologies are needed for a sustainable energy future. It further asserts that existing DOE programs are not suited to promote such technological advances and move them into the marketplace. What's needed, the panel concludes, is a DOE unit based on the historically successful Defense Advanced Research Projects Agency (DARPA), the central R&D organization of the Department of Defense that is widely credited with the development of the Internet, as well as stealth technology for aircraft.

"The director of ARPA-E would report to the undersecretary for science and would be charged with sponsoring specific R&D programs to meet the nation's long-term energy challenges," according to the report. The agency would be "a lean and agile organization with a great deal of independence."

In January, Gordon and a group of House Democrats unveiled a package of legislation, H.R. 4435, aimed at enacting many of the NAS report recommendations, including establishment of ARPA-E. The new agency would not conduct research on its own but would issue grants to scientists in the private sector and academia. The goal, Gordon said, is to reduce the amount of energy the U.S. imports from foreign sources by 20% within 10 years through the development of revolutionary energy technologies.

"ARPA-E will provide aggressive funding for innovative, out-of-the-box research projects carried out by industry, universities, and consortia of groups, including federal laboratories," Gordon said. He pointed out that currently there is little incentive for private and public research programs to assume the sizable cost and risk required for developing a new generation of energy technologies.

"This program will give the best and brightest science and technology experts the flexibility and resources to develop new technologies through high-risk, high-return research addressing the nation's most pressing energy problems," Gordon explained. "This unprecedented rapid-response approach to technology development may be the answer to a cleaner, more stable energy economy."

Republican members of the House Science Committee and several witnesses who testified at the recent hearing suggested, however, that ARPA-E might be a solution in search of a problem. Describing himself as an "open-minded skeptic," committee Chairman Sherwood L. Boehlert (R-N.Y.) stressed that funding for a new research entity should not be taken from the increases proposed for DOE's existing basic research programs. In an era of tight federal budgets, Boehlert said, the panel would have to choose between authorizing funds to create an ARPA-E and granting the Bush Administration's request to boost DOE's science budget by 14% to $4.1 billion in fiscal 2007. "In this budget environment, we are surely not going to be able to do both," he said.

Boehlert observed that the ARPA-E proposal is predicated on several implicit assumptions, all of which, he said, are open to debate. The key assumptions, Boehlert said, are that the supply of new energy technologies is insufficient, that the supply is constrained because of a lack of fundamental research, that a sensible way to promote more fundamental research is to apply the DARPA model to the civilian energy sector, and that implementing the DARPA model is the best way to improve energy research given the tight federal budget.

"I think the first assumption is clearly wrong," Boehlert stated. The biggest barrier to new energy technologies is not supply, but demand, he said. "Until the government is willing to institute policies to stimulate demand, or until oil gets to a dangerously high price, it's going to be very hard for new technologies to enter or dominate the market," Boehlert remarked. "We already have plenty of technologies to improve automobile fuel economy just sitting on the shelf, to cite just one sad example."

Boehlert insisted that the supply debate is largely beside the point. "Until we change the market, developing new technologies is just going to be the equivalent of filling up a warehouse of a company that's already out of business," he declared. "But the demand side isn't in our jurisdiction."

Rep. Judy Biggert (R-Ill.), chairman of the Science Committee's energy panel, also said she needs "some convincing" that an ARPA-E would be more effective than traditional DOE technology programs. "It is not clear what problems we are trying to solve with the creation of an ARPA-E," Biggert noted. She said the proposal "is largely based on the mythology of the agencies, namely the myths that DARPA can't do anything wrong and that DOE can't do anything right." Biggert also asked: "Where exactly are we going to get the money for ARPA-E? Many of my colleagues are advocating for ARPA-E, but they can't stop criticizing the Administration for not funding" at higher levels other DOE programs that the White House wants to cut.

Testifying on behalf of the NAS panel that issued the ARPA-E recommendation, Steven Chu, director of DOE's Lawrence Berkeley National Laboratory, told the committee that ARPA-E is intended to be a research agency that will focus on "transformational energy research that industry by itself cannot or will not support due to its high risk but where success would provide dramatic benefits for the nation." To accomplish this goal, he said, NAS has conceived a DARPA-like agency that would have a "flat, nimble, and sparse" structure and would fund the development of completely new energy technologies.

Chu agreed that funding for ARPA-E must not come at the expense of existing science programs. "In funding ARPA-E, it is critical that its funding not jeopardize the basic research supported by DOE's Office of Science." He added that ARPA-E is one of 20 recommendations in the NAS report and pointed out that the panel's top research-related recommendation is to increase basic research funding by 10% over the next seven years.

To fund ARPA-E, the science academy recommends an initial investment of $300 million that would gradually increase to $1 billion annually by the research organization's fifth year of existence. "Needless to say, finding new money at this level will be difficult," Melanie A. Kenderdine told the committee, "and there will be a temptation to carve out funds for ARPA-E from existing programs, most likely at levels that are substantially lower than those recommended in the academy report." Kenderdine is vice president of the Gas Technology Institute.

She said Congress should pursue alternative funding sources for ARPA-E, such as oil or gas royalty payments. Kenderdine, a DOE official during the Clinton Administration, added that a recent poll found that a majority of Americans would back a minor increase in the gas tax if the revenue is dedicated to reducing U.S. oil dependence. "A one-cent-per-gallon gasoline tax would pay for the entire ARPA-E program at levels recommended in the NAS report," she testified.

Other experts cautioned that a DARPA-like entity within DOE would face a different set of challenges than the defense agency does. While DARPA has a clear mission of advancing the technological capabilities of the U.S. military and functions for the sole benefit of one customer, DOD, the technology portfolio that ARPA-E would pursue and the customer base to which it would appeal are less clear.

University of California, Berkeley, business professor David C. Mowery, who said he was "not convinced" by the arguments for ARPA-E, acknowledged that the development of new technologies is key to addressing the nation's energy challenges. But he also warned that the lack of a market for the technologies could impede the success of a new energy research office. "Realizing the benefits of these technologies requires more than their development by public or private-sector researchers. Widespread adoption of these technologies is necessary," Mowery testified. "And the need for widespread adoption highlights an important issue for ARPA-E that DARPA did not face: the creation of a market for the new technologies."

Catherine Cotell, vice president of In-Q-Tel, added that in contrast to DARPA's reliance on DOD for the procurement of the technologies it develops, the "customers" for the products of energy research are diverse, ranging from the individual consumer who buys an alternative-fuel vehicle to the large utility companies that provide power to the grid. "There is no single procurement mechanism, and this market can be significantly impacted by policy and regulation that may provide incentives or disincentives to early adoption," she explained.

In-Q-Tel is a private venture capital investment firm that was established by Congress for the purpose of funding the development of technologies that could benefit the Central Intelligence Agency. Unlike DARPA, Cotell noted, In-Q-Tel appeals to a broader market when making its technology-funding choices. While the company's ultimate mission is to support the CIA, she said, it only invests in the development of technologies for which it has determined the existence of a commercial market. Given this distinction, some experts, including senior DOE officials, have suggested that a research entity based on In-Q-Tel might be a more appropriate approach to getting new energy technology into the marketplace.

The Administration has not endorsed the ARPA-E proposal and has expressed concern that its funding could compete with higher priorities, including the proposed increase for DOE's science budget. The American Competitiveness Initiative, unveiled by President George W. Bush during his State of the Union Address in January, calls for a doubling of funding for basic research in the physical sciences over the next 10 years (C&EN, Feb. 6, page 7).

Raymond L. Orbach, director of DOE's Office of Science, noted in testimony before the Senate Energy & Natural Resources Committee that the creation of an ARPA-E is not part of the President's budget request. "We have significant concerns about the creation of this additional mechanism, the resources that would be required to fund it, and whether there might be alternative and better ways to accomplish its goals," Orbach said. Nonetheless, he added, DOE is open to discussing the idea.

Despite the Administration's reservations, legislation directing DOE to establish a high-risk R&D office modeled on DARPA breezed through the Senate energy panel on March 8. Under the bill, which has a filibuster-proof 65 cosponsors, ARPA-E would be authorized to distribute $1 billion in research grants through fiscal 2011 to businesses, universities, and other institutions. The legislation would also revise the comprehensive energy bill Congress passed last year to authorize a total of $24.7 billion from fiscal 2010 to 2013 for basic science research at DOE laboratories. In addition, it calls for new internships, fellowships, university scholarships, and a program to recruit "distinguished scientists" to the national labs.

Committee Chairman Pete V. Domenici (R-N.M.), the bill's lead sponsor, said he is working with appropriators to find money for the programs. "I want to see this bill enacted and fully funded this year," he remarked.

Although a new energy research agency enjoys strong support in the Senate, some lawmakers believe the office should be separate from DOE. Legislation sponsored by Sen. Max Baucus of Montana, ranking Democrat on the Senate Finance Committee, would create ARPA-E as an independent agency, with a director appointed by and answerable to the President.

Baucus said ARPA-E's objective would be to foster "transformative, out-of-the-box research" to break America's addiction to nonrenewable fuels. "With the Manhattan project and the Apollo space program, America proved that it could gather the best talent for a focused mission and succeed," he remarked. "It's time that we begin a similar effort on energy. ARPA-E will help us move forward on existing technologies and find new technologies that are not even imaginable today."