ARPA-E doesn’t duplicate private-sector development, says GAO

The Department of Energy’s Advanced Research Projects Agency–Energy is not paying for development projects that the private sector would otherwise finance, a Government Accountability Office study has concluded. The GAO’s finding runs counter to the contentions of some Republican members of the House Committee on Science, Space, and Technology.

Frank Rusco, GAO director of natural resources and environment, told lawmakers on 24 January that most projects that would meet ARPA–E criteria will not be funded solely by private investors. His conclusion was based on interviews with venture capitalists and on the GAO’s analysis of financing outcomes for unsuccessful applicants for ARPA–E grants. Venture capital firms told the GAO that they would not support the types of projects selected by ARPA–E because the technologies had no track record, they would take too long to commercialize, or investors were not comfortable financing new energy technologies.

GAO examined the cases of 22 applicants that met ARPA–E’s selection criteria but were ultimately not funded. Two of the applicants the GAO interviewed did subsequently receive venture capital funding for work that was very similar to their ARPA–E project proposals. Four others secured funding from another federal or nonprofit source, but only after modifying their proposals to focus on more basic research.

Representative Paul Broun (R-GA), chairman of the committee’s investigations and oversight subcommittee, charged that in a dozen cases, ARPA–E awardees had told the GAO that they would use their grants to advance or accelerate earlier work that had been financed by the private sector. Broun, along with Science Committee chairman Ralph Hall (R-TX), had requested the GAO review. They questioned whether taxpayer funding should pay “to simply speed up or accelerate what companies are already doing, or should it fund research in truly high-risk ‘white spaces’ that no one else is willing to undertake?”

Rusco told Broun that ARPA–E’s projects were more “transformational in nature” and “technologically distinct from” the privately backed development work that had preceded them. And ARPA–E director Arun Majumdar told the subcommittee “we have never funded any idea that’s been funded by the private sector.”

ARPA–E was created by the America COMPETES Act of 2007 to support the development of high-risk, high-payoff clean energy technologies. ARPA–E proposals are peer-reviewed, and projects are selected by a small number of expert program managers who are appointed to three-year terms. Since its initial appropriation in 2009, $521 million has been awarded to 181 projects.

In the effort to develop batteries to provide electric vehicles with longer range, ARPA–E is funding 15 different technological approaches. The goal is to double the energy density of today’s lithium-ion batteries, at one-third the cost. The marketplace, said Majumdar, will determine which of the supported technologies will win out. “We create the competition, not pick the winners,” he stated.

The GAO report made several recommendations . First, that ARPA–E provide applicants with guidance for reporting their prior sources of funding. Second, that it require applicants to explain why investors are not willing to fund their proposals. And third, that ARPA–E use venture capital data provided by third parties to identify applicants’ prior funding.