We often hear that the stimulus was a failure, and usually the example which rolls out is Solyndra, the Fremont, Calif. maker of innovative cylindrical thin-film photovoltaics, which went bankrupt under the strain of low-cost imported solar panels. Solyndra had received a $535 million loan guarantee funded by the American Recovery and Reinvestment Act (ARRA) of 2009, in addition to about $200 million in private venture capital funding.
Now, venture capital is a risky business, and a rule of thumb is that about a third of such investments are going to fail. The winners will more than make up for the losers, or so it’s hoped. So we shouldn’t be surprised by or over-fixate on a single investment gone bad. Instead, we should look over the whole portfolio.
The entire ARRA was $787 billion. Where did it go? The biggest single chunk went to tax cuts...$288 billion. Another $155 billion for healthcare, $100 billion for education. And $82 billion for low income, unemployed, and retired workers, mostly for extended unemployment and food stamps. Finally, $105 billion for infrastructure: bridges, roads, rail, airports. Now, all of this spending had to create or sustain some jobs along the way, because a lot of this money was spent on projects and salaries. But where was energy?
Way down the list is some $27 billion for energy efficiency and renewable energy, with another $7 billion-plus for scientific research, some of which was energy related. Most was spent for projects and equipment, buy-downs of energy efficient appliances, and on and on. You can see the list of grants at www.recovery.gov, and there seem to be about 5,000 listed, though I did not count them.
Almost lost in the noise is a program called ARPA-E, which had been authorized by the America Competes Act of 2007, but not funded. In April of 2009, ARPA-E was initially funded with $400 million of the ARRA funds. It was modeled after the similar DARPA program, the Defense Advanced Research Projects Agency, which among its most famous innovations is Arpanet, the precursor to the internet.
The idea of ARPA-E is that to maintain an advantage in science and technology, the U.S. must be willing to invest in research and development projects which have the potential to be game-changers, but which are too risky for business and venture capital to sponsor. The most promising technology areas were identified by a broad swath of scientists and technologists working in the field through technical workshops. In October of 2009, the first 37 projects were funded with a total of $151 million.
Three subsequent rounds of funding have sponsored 139 more projects, for a total funding of about $500 million. Somewhat less than Solyndra in total. And what has been achieved?
First, someone at ARPA-E deserves credit for creative acronyms. Among a dizzying array of programs, we have AMPED for systems controlling electric energy storage, ADEPT for power conversion, BEEST for battery technology, BEET-IT for building thermal technology, and the list goes on.
Far-out research usually takes time to bear fruit, if it ever does. But in February of 2011, Secretary Chu announced six ARPA-E-sponsored projects which had generated over $100 million in private capital investment. These were: 1366 Technologies in Mass. which found a way to reduce the cost of silicon wafers by 80%; Envia in Calif. which developed Lithium-ion batteries with the world’s highest energy density; FloDesign in Mass. for a new concept wind turbine; SunCatalytix in Mass. for a method to generate hydrogen and oxygen by a direct photocatalytic process; General Compression in Mass. for a compressed air energy storage system; 24M in Mass. for a new advanced battery architecture.
In August of 2011, Vice President Joe Biden announced five more companies which had secured another $100 million of private capital, including Phononic Devices of N.C. for a thermoelectric device to capture waste heat from industrial processes, buildings and automobiles; Primus Power in Calif. for a flow battery for grid-scale energy storage; OPX Biotechnologies in Colo. for developing a bacteria to produce biofuels from electricity and carbon dioxide; Stanford University for a new type of electric storage device; and Transphorm Inc. in Calif. for a more efficient power conversion technology using Gallium Nitride.
There will probably be many more of these companies, along with inevitable Solyndra-like failures. But if America wants to retain its technological leadership, it really must be willing to take chances on this kind of investment. This is the kind of risk-taking that got us to the moon, that got our rovers on Mars, and that will generate the high technology jobs of the 21st century.