Does ARPA-E Deserve a Haircut?

October / November 2011 By: Tom Michael Volume 9 Number 5

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When the Department of Energy’s Advanced Research Projects Agency-Energy—known simply as ARPA-E—launched in 2009, the new agency was seen as a symbol of President Obama’s commitment to transformational innovation.

Today, to the chagrin of clean energy enthusiasts, ARPA-E is increasingly viewed as a luxury America can no longer afford—at least not at levels suggested by the Obama administration.

The New York Times reported in mid-September that an unusual collaboration of special interests, including Taxpayers for Common Sense, Friends of the Earth, Public Citizen and the Heartland Institute had suggested deep cuts to ARPA-E’s budget as the “super committee” in Congress seeks ways to reduce the federal deficit. Members of Congress, including especially vocal Republicans, have assailed the agency, complaining that it doesn’t make sense to spend money on new energy technologies when we’re not even maximizing production of the technologies we have, i.e. domestic oil and gas drilling.

About the same time, solar panel manufacturer Solyndra filed for bankruptcy, leaving American taxpayers on the hook for a $550 million federal loan the company received. The loan debacle seemed to provide ammunition to critics of Obama’s push for federal subsidies to upstart clean energy companies. 

The fact is, while plenty of politicians pay lip service to developing clean energy technologies, the research costs money—a lot of money. In Washington’s constricted spending climate, many are wondering if the investment in ARPA-E is worth it.

However, not everyone is a skeptic. A National Academies report recommended a whopping $1 billion budget for ARPA-E next year. Paul Bledsoe, an advisor to the Bipartisan Policy Center, said ARPA-E is worth the investment.

“Eliminating funding for ARPA-E would be particularly short-sighted because of the need for breakthroughs in development of clean, low-cost energy sources,” Bledsoe said. “Eating your seed corn is not a national strategy for long-term energy competitiveness.”

However, it looks like, at least for the short run, ARPA-E will suffer some serious budget cuts. The president’s 2012 budget blueprint requested $550 million for the agency, but the committee so far has offered up $100 million—a two-thirds cut from Congress’s 2011 authorization of $300 million. The negotiations between the House and Senate are ongoing.

When ARPA-E was launched in 2009 with $400 million in stimulus money, DOE Secretary Steven Chu hailed it as “a crucial part of the new effort by the U.S. to spur the next industrial revolution in clean energy technologies, creating thousands of new jobs and helping cut carbon pollution.”

Despite the skeptics, there is ample evidence that ARPA-E is working. In September, Vice President Joe Biden announced that five energy companies subsidized by ARPA-E had drawn a combined $100 million in private sector investment. Among the technologies being developed are a radically new battery design and new biofuels production methods.

ARPA-E was authorized by Congress in 2007 as part of the America Competes Act, a direct response to the independent report, Rising Above the Gathering Storm.

The 2005 document, often called the “Augustine Report” in honor of its lead author Norman Augustine, former chairman and CEO of Lockheed Martin Corporation and a frequent contributor to this magazine, concluded: “America faces a serious and intensifying challenge with regard to its future competitiveness and standard of living.”

Augustine argued that heavy investment in R&D—exactly the kind of work ARPA-E is engaging in—is the key to digging America out of the economic hole it is now in.

Of course, government can’t do it all, as even the director of ARPA-E conceded in a 2009 interview.
“ARPA-E can play a role, but we need more than ARPA-E,” said Arun Majumdar. “We need the smaller stakeholders, the venture capitalists, large and small industry, small business, academics, all working together. What ARPA-E can do is take a shot at those home runs and reduce the risks for the venture community or for large industry.

“Maybe the ideas are great, but it’s not business ready because there are technological risks,” he continued. “If ARPA-E can play a role in reducing those risks and make it business ready so business can thrive on it, that’s what we are all about.”

Tom Michael is Innovation’s Washington bureau chief.