Energy is a fundamentally interdisciplinary field, yet I’ve found that business people have trouble talking to scientists, who in turn have trouble talking to politicians. This past week, the third annual ARPA-E Energy Innovation Summit in Washington, DC facilitated just this conversation between policymakers, entrepreneurs, investors, government officials, researchers, university students and even major corporations such as FedEx, Walmart and Xerox.
From this multi-faceted conversation, a few themes emerged:
Stop Comparing Internet to Energy (Moore’s Curse)
The unprecedented rapid growth of the IT sector in the past decade has distorted the perception of the true pace of energy innovation. Those in the IT sector often reference Moore’s Law, the trend that the number of transistors that can be placed on an integrated circuit doubles every two years. Though it is tempting to think this will be the case for energy technology, a transition from fossil fuels will take decades, if not more. Thus, the idea of “Moore’s curse” was conceived of by author Vaclav Smil, who is arguably Bill Gates’ favorite energy author. The former Microsoft chairman mentioned Smil four times in Tuesday’s fireside chat with Secretary of Energy Steven Chu.
Venture capitalists that have traditionally invested in IT need to understand the long time frame for technological breakthroughs in the lab and taking a product to a market that dislikes change. Unlike technology, in which people crave the newest gadget, energy is a much more fundamental part of our lives, and it is often a part we’d rather not change.
We can always expect venture capitalists to be driven by profit, but there needs to be a shift away from the “quick flip” strategy that is so alluring for investors in Internet startups. In energy, VC’s play a role in teaching a scientist how to grow a business: how to scale, how to hire, and how to commercialize. The ultimate upside in energy is orders of magnitudes greater than what they could ever do with IT, because energy is something people need on an everyday basis. Instead of searching for the next Facebook, venture capitalists need to search for the next gasoline replacement, the smallest battery with the greatest storage, the smartest grid integrator, or something that can otherwise revolutionize the way we currently consume energy.
Perhaps we all need to be “cheap” like Steven Chu in order to support energy efficiency projects, which is how Chu claims he became interested in energy efficiency decades ago. Bill Clinton suggests starting with the low-hanging fruit first: retrofitting buildings and getting rid of landfills by harvesting the methane in it for transportation fuel.
More funding in energy technologies is needed…in the public sector
ARPA-E is funding energy technologies that have game-changing potential and need help “crossing the chasm” from the lab into scalable businesses. But as Matt Trevithick, Partner of Venture Capital firm Venrock said, “Technology makes the world bigger, policy cuts it up.” Some innovative startups that Director of ARPA-E, Arun Majumdar, highlighted in his keynotes and discussions include:
- Envia Systems, “world-record” energy density 400 Wh/kg in lithium-ion rechargeable batteries
- Polyplus, lithium-air, lithium-water, lithium-sulfur batteries
- Codexis, transforming waste biomass into clean fuel
- 24M, lithium-based flow battery at half the price and faster recharge than conventional batteries
- Cree, single transistor made of silicon carbide that can handle a megawatt of electric power, so transformers can fit in your suitcase
- Sheetak, thermoelectric solid-state cooling system to replace air-conditioning that uses less energy, less materials to make, and no polluting refrigerants
- Tobacco plants that produce fuel, at Lawrence Berkeley National Lab. “If they’re successful, you would have big oil and big tobacco saving the world,” said Arun Majumdar.
According to Arun, these startups will “compete, and if they don’t succeed, they’ll come back and find another solution.”
More funding in energy technologies is needed…in the private sector
Private financing in energy technologies isn’t a disaster; you just have to look for it in the right places. The panelists discussing “Financing the Future Electric System” agreed that the potential for renewable energy project finance is in pension funds, institutional investors, and large corporations serving as tax equity providers. Fueled by policy uncertainty, technology risk, and the limits of tax equity, the uncertainty in cleantech is what raises the cost of capital and scares off private investors. Stuart Bernstein, Global Head of Clean Technology and Renewables at Goldman Sachs, said on the panel discussion that he believes the venture capital winners will be counter-cyclical, investing in a time where many are too cautious about the risks and uncertainty of going against the grain.
Energy Clubs bring together business and engineers; Start with the campus
On Monday, the ARPA-E Student Program gathered the energy club leaders from universities across the United States for exclusive talks and discussion about the role of students in energy innovation (A big thanks to Shannon Yee for organizing!).
“Energy clubs provide a low-cost way to increase US energy competitiveness by engaging students, fostering new companies, educating a new workforce and catalyzing energy innovation,” said Asher Burns-Burg, an ex-president of BERC.
In the spirit of “ask for forgiveness, not permission,” the Student Program shared their dreams and best practices of running their campus energy clubs. The most common frustration was the issue of collaboration between departments and among universities; that is, how much potential there was for amazing innovation if only the different energy disciplines could better communicate with each other. Getting the Engineering PhDs to be interested in the same events as the MBAs was one hurdle. Some solutions include MIT’s Energy 101 lecture series, in which technical students taught basic clean energy concepts to business students in an attempt to level the playing field. The Berkeley-Stanford Cleantech Conference is an example of how two universities can create a bigger and better conference together – BSCC brought Steve Chu in 2011. In a student roundtable session with Arun Majumdar, he suggested starting with retrofitting the university campus to be the best it can be.
By the Numbers
The third Annual ARPA-E Innovation Summit:
- 2,440 attendees from 49 states and 26 countries
- 107 speakers
- Technology Showcase: 240 breakthrough energy technologies
- Over 180 projects to date
- $521.7 million over 12 program areas