New Government-Backed Green Technologies Find Private Investment
by Matthew L. Wald, NEW YORK TIMES, February 2, 2011
In late 2009, the federal government gave $151 million in grants to advance 37 clean energy ideas deemed too radical or too preliminary to attract much private financing — like electricity storage that mimics photosynthesis and batteries that double or triple the energy stored per pound.
Since then, six of the projects have made enough progress to attract $108 million in private venture capital financing — about four private dollars for every dollar that the taxpayers spent to get them rolling — the Department of Energy plans to announce Thursday.
While none of the projects are expected to produce commercial products for years to come, the Obama administration is emphasizing the early signs of success as it seeks to persuade a sometimes skeptical Congress to approve more money for clean energy innovation.
Success is probably 10 to 20 years away, said Arun Mujamdar, director of the program, which is called the Advanced Research Projects Agency-Energy.
But the private investment is “a good sign, an endorsement of some sort,” he said. “The best thing the government can do is to catalyze investment.”
While 31 projects have not yet attracted outside help, all are continuing, according to the department. Josh Lerner, a professor at the Harvard Business School and an expert on venture capital, said he would have been surprised if most of the projects had attracted private financing quickly.
If all the projects had quickly drawn private money, it would have suggested that the projects would have happened without government intervention, Mr. Lerner said.
With a track record of six of 37 being picked up, “it’s hard not to feel it’s a reasonable indicator that they’re doing something right,” he said.
While the government took ownership stakes in automakers and banks that got taxpayer help, it has not done so with the energy companies it has financed through the program, known as ARPA-E, so taxpayers reap no direct benefits.
Congress modeled the program after the better-known Defense Advanced Projects Research Agency, or Darpa, which provided early seed money for the Internet and sponsored competition to build sophisticated robot vehicles, among other projects. Most of Darpa’s projects fail to produce commercial products, but the basic research it finances has sometimes led to breakthroughs.
For the first round of ARPA-E projects, the Energy Department focused on wind and solar energy production, energy storage and the capture and storage of carbon dioxide.
No carbon storage project attracted outside investment, in part because investors no longer expect a government cap on carbon dioxide emissions to help drive demand.
But sun and wind power and storage technologies did lure investors.
Envia Systems, which received $4 million in government money, used a material licensed from Argonne National Laboratory to build a better cathode, or negative terminal, for a battery. Envia, which is based in Newark, Calif., recently signed a contract with General Motors to begin delivery in 2014 of a material that will let batteries store roughly twice as much electricity per kilogram compared with the batteries now going into the Chevrolet Volt, said Michael Sinkula, the co-founder of the company.
Envia raised $17 million recently from an alliance of investors that included G.M., and it is now pursuing research on a better anode, or positive terminal, which will yield an even bigger improvement in the weight-to-energy ratio, Mr. Sinkula said.
Another battery company, 24M, a spinoff of the Massachusetts Institute of Technology and A123 Systems, got a $2.55 million federal grant and took in $10 million in venture capital money. It is also working on a lithium-ion battery with much higher energy density. [Read rest of story]