What Success Means for ARPA-E

One of the most difficult parts of the Department of Energy’s brand new ARPA-E program, which invests small grants into high-risk, early-stage energy startups, will be determining how successful it is. There definitely isn’t a lack of entrepreneurs, researchers, and investors looking to embrace the program, which was evidenced by the energized attendees at the first annual ARPA-E Summit on Wednesday. But how exactly should we be judging a program, which by its nature, is making risky bets on, in essence, moonshots that have a very slim chance of changing the energy game?
On Wednesday morning Senator Jeff Bingaman (D), called one of the fathers of the ARPA-E program during the summit, laid out what he thought were three characteristics of success for the fledging ARPA-E program.

The first year of the ARPA-E program — and any new program — is the most important, said Bingaman, and ARPA-E needs to overcome these challenges:
1). Leadership: The ARPA-E program needs to hire the best managers who aren’t afraid to take risks, said Bingaman. Already Arun Majumdar, Director of ARPA-E, has hired 4 managers that have the technical know-how and leadership skills to complete the task, said Bingaman.
2). Speed: ARPA-E needs to demonstrate that it can quickly select projects and get funds to these ventures. “Speed is of the essence,” said Bingaman. On that note too, the Senator said ARPA-E had already reviewed 3,700 proposals and selected 37 in 4 months, and even Energy Secretary Steven Chu had participated in the review process.
3). Capture Industry Attention: The technologies that are nurtured in the ARPA-E program need to eventually be able to scale and be adopted by the market. “The energy industry historically has not been the quickest to react to change. ARPA-E is intended to correct that situation,” said Bingaman. I think Bingaman really hit the nail on the head with this statement:

“For ARPA-E to have long term success it needs to show transformational energy technologie aren’t simply preferable but are also technologies that the energy sector is willing to seize upon.”

Again, Bingaman pointed to the amount of industry attention at the ARPA-E summit as an early suggestion that the program is on the right track. Of course, Bingaman was bullish on the early successes of the program — he helped develop it. But it does seem like ARPA-E is headed in the right direction.
As Bingaman pointed out one of the most important indicators of success of the program will be how many of the technologies developed in ARPA-E make money — how many win over energy customers. That’s the kind of transformational change that investor Vinod Khosla, who also presented at the summit on Wednesday morning, is looking for, too. If customers in China and India won’t buy the energy technologies he’s investing in then they’re inconsequential, Khosla often says.
While speed is of the essence in the review process (as Bingaman pointed out) clearly the quality of the review process will be a crucial factor in determining if ARPA-E has selected the most transformative and most commercially friendly technologies. And we won’t be able to determine how good the selection process is for many years to come. Many entrepreneurs (many who didn’t get funding) at the ARPA-E summit have complained to me that the review process has been so rushed that it hasn’t given their technologies a hard enough look. In response to an entrepreneur that complained about the brevity of the review process during the Q&A portion of Khosla’s speech, Khosla delivered a very diplomatic answer that I agree with:

“The ARPA-E program is new and I’m sure it’s not perfect. Any process will be flawed but over time will get better. ARPA-E seems to be doing the right things.”