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For ARPA-E research, questions over what next

The DOE's ARPA-E is funding energy research and development but the agency is seeking to engage large industrial companies to bridge the gap from lab to market.

BOSTON--Even with the excitement ARPA-E generates for its energy research, more people are questioning how to get those innovations out of labs and into the market at large scale.

The Advanced Research Program Agency-Energy was modeled on DARPA, which is considered a successful model of using the Department of Defense to fund new technology research. But the key difference in energy is that researchers don't have a ready customer in the DOD willing to buy or further enhance the fruits of government-funded work.

ARPA-E is seeking to improve its research programs to increase the chances that a breakthrough technology will actually be produced at scale, said Ilan Gur, a senior commercialization advisor at ARPA-E today here at the Lux Executive Summit. Specifically, ARPA-E program managers garner input from industrial companies to better ensure that grant programs address a market need.

"To succeed, projects have to reduce technical risk but ultimately they also need to reduce the commercialization risk," Gur said during a talk here. "In every stage, we are trying to bring in elements from industry so we know we are barking up the right tree and we can push these technologies into markets."

ARPA-E is structured to pursue high-risk, breakthrough projects rather than incremental changes. Having received $180 million in funding in the federal government's 2011 budget (although none so far for 2012), it is in the process of launching five more grant offerings, including grants to develop crops for biofuels and to reduce the use of rare earth minerals.

But even if researchers meet the technical milestones set by ARPA-E programs, they often face the daunting prospect of refining a technology to meet a specific market need and manufacturing it at scale. Whereas DARPA grant winners may develop a technology that the DOD is willing to pay a premium for, new energy technologies are generally entering a commodity business of supplying kilowatts hours or liquid fuels. And building pilot plants to meet cost targets can often cost tens of millions or hundreds of millions of dollars.

Large industrial corporations and other government programs can help nudge ARPA-E research closer to market, according to a panel of executives from industrial companies. ARPE-E program directors can help validate a specific technology or company, but neither ARPA-E nor typical venture capitalists have sufficient money to scale up energy technology companies.

Dow Chemical seeks to work with small technology start-ups at an early stage to get visibility into new technology, said David Parillo, the global director for Dow Solar Solutions' research and development. Start-ups can gain insight into the needs of commercial customers and how to build a commercial product, rather than a prototype. Government policies, such as an ARPA-E like program for late-stage funding, also need to be aligned with what ARPA-E is doing, he said.

"Industry engagement is extremely important in actually bringing these technologies to commercialization domestically and having a long and sustaining impact," he said. "It's a longer putt than some of us realize to get these businesses up and getting to positive cash flow."