DEPARTMENT OF 

ENERGY

Advanced Research 

Projects AgencyEnergy Could Benefit 

from Information on 

Applicants’ Prior 

Funding

Report to Congressional Requesters

January 2012

GAO-12-112

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-112, a report to 

congressional requesters

January 2012

DEPARTMENT OF ENERGY

Advanced Research Projects Agency-Energy Could 

Benefit from Information on Applicants' Prior 

Funding

Why GAO Did This Study

The Department of Energy’s (DOE) 

Advanced Research Projects AgencyEnergy's (ARPA-E) purpose is to 

overcome long-term and high-risk 

technological barriers in the 

development of energy technologies. 

Since 2009, ARPA-E has awarded 

$521.7 million to universities, public 

and private companies, and national 

laboratories to fund energy research 

projects. 

GAO was asked to examine 

(1) ARPA-E’s use of criteria and other 

considerations for making awards and 

the extent to which applicants identify 

and explain other private funding 

information, (2) the extent to which 

ARPA-E-type projects could have been 

funded through the private sector, and 

(3) the extent to which ARPA-E 

coordinates with other DOE program 

offices to avoid duplicating efforts. 

GAO interviewed ARPA-E program 

directors, award winners, and 

nonwinners with characteristics similar 

to those of award winners. GAO also 

analyzed private venture capital 

funding data and spoke with venture 

capital firms. 

What GAO Recommends

GAO recommends that ARPA-E 

consider providing applicants guidance 

with a sample response explaining

prior sources of funding, requiring

applicants to provide letters from 

investors explaining why they are not 

willing to fund proposed projects, and

using third-party venture capital data to 

identify applicants' prior funding. 

ARPA-E commented on a draft of this 

report and concurred with key findings 

and recommendations.

What GAO Found

ARPA-E uses four selection criteria, such as the potential impact of the proposed 

technology relative to the state of the art, and other considerations in awarding 

funds. Other considerations include balancing a variety of technology 

approaches and the likelihood the technology would be brought to market. GAO

identified 18 out of 121 award winners through ARPA-E’s first three funding 

rounds that had received some prior private sector investment, and ARPA-E took 

steps to identify and understand how this funding was related to proposed 

projects. Beginning with the third funding round, ARPA-E began requiring that 

applicants explain why private investors were not willing to fund proposed 

projects. However, ARPA-E did not provide applicants with guidance, such as a 

sample response, to assist them in completing this requirement, and responses 

were generally limited. Some applicants provided general information about prior 

research but did not specifically explain why private investors would not support 

their projects. When applicants provided little prior funding information, ARPA-E’s 

program directors spent time and resources to determine the extent of such 

funding for proposed ARPA-E projects. One applicant included a letter from its 

venture capital investor to explain why the investor was not willing to fund the 

work proposed to ARPA-E, an approach the National Institute of Standards and 

Technology uses as a check in its funding applications for advanced research but 

that ARPA-E currently does not use. Also, ARPA-E officials said that they have 

considered but have not used venture capital data to identify applicants with prior 

private investors. Examining such data allowed GAO to quickly cross-check 

applicants’ prior private funding. 

GAO’s review suggests that most ARPA-E projects could not have been funded 

solely by private investors. Private venture capital firms told GAO that, among 

other considerations, they generally do not fund projects that rely on unproven 

technologies and tend to invest in projects that can be commercialized in less 

than 3 years. Data from ARPA-E on award winners show that 91 out of 121 

ARPA-E projects from the first three funding rounds had technological concepts 

that had not yet been proven in a laboratory setting. Also, nearly all of the ARPAE award winners and applicants GAO spoke with estimated that their projects 

were at least 3 years away from potential commercialization. In addition, GAO 

found that few eligible applicants that were not selected for an award later

secured private funding.

ARPA-E officials have taken steps to coordinate with other DOE offices to avoid 

duplication. For example, ARPA-E program directors told GAO they engage in 

outreach with officials from related DOE offices in advance of funding 

announcements to identify funding gaps in research. In addition, program 

directors have recruited officials from other DOE offices and the Department of

Defense (DOD) to review ARPA-E applications. This cross-agency interaction 

may also reduce the potential for overlap in funding. 

View GAO-12-112 or key components. For 

more information, contact Frank Rusco at

(202) 512-3841 or ruscof@gao.gov. 
Page i GAO-12-112 ARPA-E 

Letter 1 

Background 5

In Addition to Its Selection Criteria, ARPA-E Also Considers 

Applicants’ Prior Sources of Private Funding; However, Most 

Award Winners We Reviewed Did Not Explain This Information 10

Most ARPA-E Projects Likely Could Not Have Been Funded Solely 

by Private Investors 14

ARPA-E Officials Have Taken Steps to Coordinate with Other 

Department of Energy Offices in Advance of Awarding Funds 19

Conclusions 21

Recommendations for Executive Action 22

Agency Comments and Our Evaluation 22

Appendix I Scope and Methodology 24

Appendix II ARPA-E Program Technology Areas 28

Appendix III Description of ARPA-E Award Winners with Prior Private Investment 31

Appendix IV Comments from ARPA-E 34

Appendix V GAO Contact and Staff Acknowledgments 36

Table

Table 1: ARPA-E Funding Announcement Program Technology Areas 9

Figures

Figure 1: ARPA-E’s Described Role within DOE and the Private 

Sector 6

Figure 2: Current Battery Range for Electric Vehicles and Goals of 

ARPA-E Research 7

Contents
Page ii GAO-12-112 ARPA-E 

Abbreviations

ADEPT Agile Delivery of Electrical Power Technology

America America Creating Opportunities to

 COMPETES Meaningfully Promote Excellence in

 Act Technology, Education, and Science Act

ARPA-E Advanced Research Projects Agency-Energy

BEEST Batteries for Electrical Energy Storage in 

Transportation

BEETIT Building Energy Efficiency Through Innovative 

Thermodevices

DARPA Defense Advanced Research Projects Agency

DOD Department of Defense

DOE Department of Energy

EERE Office of Energy Efficiency and Renewable Energy

GENI Green Electricity Network Integration

GRIDS Grid-Scale Rampable Intermittent Dispatchable 

Storage

HEATS High Energy Advanced Thermal Storage

HVAC heating, ventilating, and air conditioning

IMPACCT Innovative Materials and Processes for Advanced 

Carbon Capture Technologies

NIST National Institute of Standards and Technology

NVCA National Venture Capital Association

PASTA Panel of Senior Technical Advisors

PETRO Plants Engineered To Replace Oil

REACT Rare Earth Alternatives in Critical Technologies for 

Energy

PHEV plug-in hybrid electric vehicle

SBIR Small Business Innovation Research

TRL technology readiness level

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Page 1 GAO-12-112 ARPA-E 

United States Government Accountability Office

Washington, DC 20548

January 13, 2012

The Honorable Ralph M. Hall

Chairman

Committee on Science, Space, and Technology

House of Representatives

The Honorable Paul Broun, M.D.

Chairman

Subcommittee on Investigations and Oversight

Committee on Science, Space, and Technology

House of Representatives

U.S. energy consumption has increased by 20 percent over the past 20 

years and is projected to continue to grow.1 Volatile prices, global supply 

disruptions, and the impacts of energy use on climate and the 

environment have driven interest in reducing energy demand, improving 

energy efficiency, and expanding supplies with both renewable and 

traditional energy sources. In 2005, members of Congress asked the 

National Academies what actions federal policymakers could take to 

enhance the nation’s science and technology enterprise so that the 

United States could successfully compete, prosper, and be secure in the 

global community of the 21st century.2 The National Academies compiled 

their findings and recommendations in a report that identified two key 

challenges: (1) creating high-quality jobs for Americans, and 

(2) responding to the nation’s need for clean, affordable, and reliable 

energy.3

 

1

U.S. Energy Information Administration, Annual Energy Review 2009. (Washington, D.C.: 

2009).

The report also highlighted the idea that scientific and technical 

innovations are key drivers of economic growth in the United States. 

Among the report’s recommendations was the creation of an organization 

within DOE to sponsor energy research that industry by itself cannot or 

2

The National Academies comprise four organizations: the National Academy of Sciences, 

the National Academy of Engineering, the Institute of Medicine, and the National 

Research Council; they advise policymakers on scientific and technical matters. 

3

The National Academies, Rising Above the Gathering Storm: Energizing and Employing 

America for a Brighter Economic Future (Washington, D.C.; 2007). 

 
 

Page 2 GAO-12-112 ARPA-E 

will not support and in which risk may be high but success would provide 

dramatic benefits for the nation in meeting long-term energy challenges.

In 2007, the America Creating Opportunities to Meaningfully Promote 

Excellence in Technology, Education, and Science Act (America 

COMPETES) established the Advanced Research Projects AgencyEnergy (ARPA-E) within the Department of Energy (DOE) to overcome 

the long-term and high-risk technological barriers in the development of 

energy technologies.4

Since first receiving an appropriation in 2009 in the American Recovery 

and Reinvestment Act of 2009, ARPA-E has awarded $521.7 million to 

universities, public and private companies, and national laboratories to 

fund 181 projects that attempt to make transformational—rather than 

incremental––advances to a variety of energy technologies, including 

high-energy batteries and renewable fuels.

ARPA-E borrows from the Defense Advanced 

Research Projects Agency (DARPA) model, an agency created within the 

Department of Defense (DOD) in 1958 to direct and perform advanced 

research and development projects. As specified in statute, ARPA-E’s 

program goals are to enhance U.S. economic and energy security 

through the development of certain energy technologies and to ensure 

that the United States maintains a technological lead in developing and 

deploying advanced energy technologies.

5 Award winners must meet 

cost share requirements, through either in-kind contributions or outside 

funding sources.6

ARPA-E is required by statute to achieve its goals through energy 

technology projects that, among other things, accelerate transformational 

technological advances in areas that industry by itself is not likely to 

 

4

Pub. L. No. 110-69, § 5012 (2007).

5

ARPA-E generally uses cooperative agreements to make funding awards, which involve 

the transfer of a thing of value to the recipient to carry out a public purpose authorized by 

law. Cooperative agreements differ from grants because substantial involvement is 

expected between ARPA-E and the recipient. ARPA-E uses similar funding agreements 

for national laboratories.

6

The cost share requirement for award winners is generally at least 20 percent of total 

allowable costs, although under section 988(b)(3) of the Energy Policy Act of 2005, ARPAE has reduced the cost share requirement for certain applicants, such as universities, to 5 

percent or 10 percent for all of the funding rounds except the first. Award winners’ cost 

share must be provided by a nonfederal source. 
 

Page 3 GAO-12-112 ARPA-E 

undertake because of technical and financial uncertainty. At the same 

time, the Director of ARPA-E is required to ensure, to the maximum 

extent practicable, that ARPA-E’s activities are coordinated with, and do 

not duplicate the efforts of, programs and laboratories within DOE and 

other relevant research agencies. This report responds to your request 

that we examine ARPA-E awards. Our objectives were to examine (1) 

ARPA-E’s use of criteria and other considerations for making awards, and 

the extent to which applicants identify and explain other private funding 

information; (2) the extent to which ARPA-E-type projects could have 

been funded through the private sector; and (3) the extent to which 

ARPA-E coordinates with other DOE program offices to avoid duplicating 

efforts.

To address these three objectives, we reviewed ARPA-E applications and 

conducted interviews with applicants, award winners, representatives of 

venture capital firms and other experts, and DOE and other federal 

agency officials. ARPA-E has released a total of four funding 

announcements—meaning the agency was accepting project proposals 

for a set period of time—in April 2009, December 2009, March 2010, and 

April 2011. Our review focused on ARPA-E’s first three funding rounds, 

which had closed prior to the start of our review. The fourth funding round 

did not close until September 2011.7

• To examine ARPA-E’s use of criteria and other considerations for 

making awards, we selected a nonprobability sample of 20 

applications from the 4,788 applications in the first three funding 

rounds and reviewed these 20 applications. To examine the extent to 

which applicants identify and explain other private funding information, 

we searched for evidence of prior private funding for all 121 award 

ARPA-E awarded funds for 121 

projects out of 4,788 applicants across the three funding rounds we 

examined. To address these three objectives, we reviewed ARPA-E 

applications and conducted interviews with applicants, award winners, 

DOE officials, and representatives of venture capital firms, among other 

activities. Specifically,

 

7

In the fourth round of funding, ARPA-E awarded 60 projects out of 427 applicants.
 

Page 4 GAO-12-112 ARPA-E 

winners in VentureDeal, a venture capital database.8 As a result of 

our search, we identified 18 award winners that had some prior 

private venture capital funding from the 121 award winners. We then 

reviewed the applications of these 18 award winners and interviewed 

their representatives.9

• To analyze the extent to which ARPA-E projects could have been 

funded through the private sector, we analyzed data on the state of 

technology and potential time to commercialization for the 121 award 

winners from ARPA-E’s first three funding rounds. In addition to 

analyzing data for the 121 award winners, we conducted structured 

interviews with 22 of 33 “contingently selected” applicants chosen by 

ARPA-E during its second and third funding rounds. Contingently 

selected applicants are those applicants that met ARPA-E’s selection 

criteria but were ultimately not awarded funds.10 We also conducted 

structured interviews with a nonprobability sample of 13 award 

winners selected from ARPA-E’s first three funding rounds and we 

spoke with the 18 ARPA-E award winners mentioned above that we 

identified through the VentureDeal database to discuss key 

differences between their prior research and their ARPA-E-funded 

projects.11

• To examine the extent to which ARPA-E coordinates with other DOE 

programs to avoid duplicating efforts, we spoke with the ARPA-E 

program directors as well as officials from other DOE program offices, 

DARPA, and the DOE Office of Inspector General. We also asked 

We also conducted interviews with a variety of companies 

and individuals knowledgeable about research associated with ARPAE-type projects, including six venture capital firms.

 

8

We were not able to verify the completeness of VentureDeal data, and there may have 

been ARPA-E award winners that had prior private funding that did not appear in these 

data. To compile data on venture capital funding, VentureDeal uses (1) Securities and 

Exchange Commission regulatory filings, (2) survey information collected directly from 

venture capital firms, (3) financial news media announcements and press releases from 

venture capital firms or recipient companies, and (4) local business journals. 

9

Eight of these 18 companies also appeared in the sample of 20 applicants that we 

selected to examine ARPA-E's use of criteria and other considerations for making awards.

10According to ARPA-E officials with whom we spoke, these applicants would have been 

selected for an award had additional funds been available. The remaining 11 contingently 

selected applicants did not respond to our requests for an interview. 

11Four of these 18 award winners also appeared in our nonprobability sample of 13 award 

winners.
 

Page 5 GAO-12-112 ARPA-E 

award winners and contingently selected applicants to discuss their 

understanding of other potential sources of DOE funding for their 

projects.

We provide a more in-depth discussion of our methods in appendix I.

We conducted this performance audit from November 2010 to December 

2011 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

In 2005, the National Academies recommended to Congress the creation 

of an organization within DOE like DARPA. In 2007, the America 

COMPETES Act created a new agency within DOE called ARPA-E. In 

line with the National Academies’ recommendation, the America 

COMPETES Act as amended directs ARPA-E to achieve its goals by 

identifying and promoting revolutionary advances in fundamental and 

applied sciences, translating scientific discoveries and cutting-edge 

inventions into technological innovations, and accelerating 

transformational technological advances in areas that industry by itself is 

not likely to undertake because of technical and financial uncertainty. As 

such, ARPA-E officials told us that ARPA-E was designed to sponsor 

research beyond basic science, yet riskier than what the private sector 

alone or DOE’s applied offices would support.12

 

12DOE funds the development of energy technologies ranging from basic and applied 

energy research to loan guarantees for clean energy generation facilities. For example, 

DOE’s Office of Science supports basic scientific research, including chemistry, biology, 

and materials sciences, as foundational research for a number of energy technologies. 

DOE’s Office of Energy Efficiency and Renewable Energy applies established research to 

alternative and clean energy technologies, such as improving existing lithium ion batteries 

for use in electric or hybrid vehicles. DOE’s Loan Programs Office offers loans to 

commercialize clean energy projects, such as wind farms.

(See fig. 1.) The National 

Academies recommended that ARPA-E should not perform research and 

development itself, but should fund it to be conducted by universities and 

others in the private sector. In 2009, the American Recovery and 

Reinvestment Act of 2009 appropriated $400 million for ARPA-E.

Background 
 

Page 6 GAO-12-112 ARPA-E 

Figure 1: ARPA-E’s Described Role within DOE and the Private Sector

Note: Private sector groups are in oval boxes and DOE offices are in rectangular boxes. According to 

ARPA-E officials, higher-risk research is less likely to be successful in being brought to market but 

may have greater potential benefits in increasing energy supplies and creating jobs. Technology 

readiness levels are used by DOE to categorize research according to its proximity to basic science 

or large-scale deployment.

ARPA-E is an agency with fewer than 30 federal employees, and its eight 

program directors, who are generally scientists and engineers, create and 

manage funding programs for the agency. ARPA-E’s program development 

and award selection process takes 6 to 8 months from start to finish, 

beginning when the agency hires a program director for a 3-year term and 

tasks the program director with identifying a gap in energy technology 

research and developing a program to fill that gap. For example, ARPA-E’s 

batteries for transportation program, called the Batteries for Electrical Energy 

Storage in Transportation (BEEST) program, was established to fill a gap in 

existing federal research programs on batteries for electric vehicles. 

Identifying these gaps and designing the program involves research; 

consultation with scientific experts, including a workshop with outside 

experts; and internal discussion at ARPA-E. From this process, program 

directors develop funding announcements that describe the technical 

requirements specific to each program’s technology area that applicants 
 

Page 7 GAO-12-112 ARPA-E 

have to meet and the four criteria that ARPA-E uses in its selection 

process.13

• Impact of the proposed technology relative to the state of the art. The 

applicant must demonstrate the potential for a transformational—not 

incremental––advancement over current technologies. (See fig. 2.) 

More specifically, the applicant must demonstrate an awareness of 

competing commercial and emerging technologies and identify how its 

proposed concept/technology provides significant improvement over 

these other solutions.

The four criteria are the

• Overall scientific and technical merit. The applicant must demonstrate 

that the work is unique and innovative. The applicant must also 

demonstrate a sound technical approach to accomplish the proposed 

research and development objectives. The outcome and deliverables 

of the program, if successful, should be clearly defined. Specific 

technical requirements that are unique to each individual ARPA-E 

program funding announcement must also be addressed.

• Qualifications, experience, and capabilities. The applicant must 

demonstrate that it has the expertise and experience to accomplish the 

proposed project. In addition, the applicant must have access to all 

facilities required to accomplish the research and development effort.

• Sound management plan. The applicant must have a workable plan to 

manage people and resources. Major technical research and 

development risks should be identified. The schedule and budget 

should be reasonable.

Figure 2: Current Battery Range for Electric Vehicles and Goals of ARPA-E Research

 

13ARPA-E program directors developed funding announcements for six program technology 

areas that made up the agency's second and third funding rounds. (See table 1.) 
 

Page 8 GAO-12-112 ARPA-E 

ARPA-E employs the following three-stage application process:

• Concept paper. Applicants initially submit a 5- to 7-page abstract of 

their projects. Scientific experts from industry, government, and 

academia serve as reviewers.

• Full application. After reviews of the concept paper, ARPA-E encourages 

some applicants to submit full applications using ARPA-E’s online 

application system. ARPA-E’s current instructions request that applicants 

provide, among other things, information about other prior, current, and 

pending public and private sources of funding, as well as why other 

funding sources are not willing to fund the projects. Full applications are 

then reviewed by leading scientific experts in the field, who evaluate 

them against the four criteria and assign numerical scores.

• Reply to reviewer comments. After assessing the full applications, 

reviewers provide comments and questions to the applicants, who 

then have the opportunity to respond.

The applications with the reviewers’ comments are forwarded to a threeperson panel beginning the next three phases of ARPA-E’s award funding 

process, which are as follows:

• Selection. The three-person panel, usually chaired by the relevant 

program director, considers the reviewers’ comments and numerical 

scores, and recommends applications to award. The final decisions 

on which applicants to select are made by the selecting official, which 

is usually the ARPA-E Director.

• Award negotiations. Negotiations proceed for approximately 2 

months. Program directors work closely with the award winners to set 

up a project plan with technical milestones that are to be met during 

the funding of the award, which are planned to last between 2 and 3 

years. Funds are awarded following the negotiations.

• Monitoring. ARPA-E monitors and supports the project through 

quarterly reviews and site visits. After about 1 year, the agency 

decides whether to continue or terminate the project if the agreed-to 

milestones are not met.

In April 2009, ARPA-E started its funding award process by releasing a 

funding announcement soliciting proposals for all energy ideas and 

technologies. Following the review process, 36 projects were awarded 

funds after being selected from 3,700 applications that spanned the 
 

Page 9 GAO-12-112 ARPA-E 

technology areas of 10 programs. ARPA-E released additional funding 

announcements in December 2009, March 2010, and April 2011. (See 

table 1.) Money appropriated by the American Recovery and 

Reinvestment Act of 2009 funded ARPA-E’s first three funding rounds. 

After receiving an appropriation in DOE’s fiscal year 2011 appropriations 

act, ARPA-E announced a fourth round of funding in April 2011. 

Table 1: ARPA-E Funding Announcement Program Technology Areas

(Dollars in millions)

Funding announcements

1 2 3 4 

April 2009 December 2009 March 2010 April 2011

Program (number 

of projects)

Biomass energy (5) Batteries for transportation (10) Grid-scale electricity 

storage (12)

Advanced thermal 

storage (15)

Building efficiency (3) Materials for carbon capture 

(15)

Building efficiency (16) Electricity network 

integration (14)

Carbon capture (5) Electrofuels (13) Electrical power 

electronics (14)

Plants engineered to 

replace oil (10)

Conventional energy (1) Rare earth alternatives for 

energy technologies (14)

Direct solar fuels (4) Solar electrical power 

technology (7)

Energy storage (6)

Energy-efficient water 

purification (1)

Renewable power (4)

Vehicle technologies (5)

Waste heat capture (2)

Total funding $150 $113 $94 $156

Source: GAO analysis of ARPA-E data.

Note: The table shows 116 total projects funded by ARPA-E in its first three funding rounds. In August 

and September 2010, ARPA-E selected 5 additional projects for funding, raising total funded projects 

over these three rounds to 121. These 5 projects were in the following program technology areas: 

building efficiency, vehicle technologies, renewable power, and energy storage. Funds awarded 

across the four funding rounds totaled $521.7 million. For further details on ARPA-E’s program 

technology areas, see appendix II.
 

Page 10 GAO-12-112 ARPA-E 

In addition to applying its four criteria, ARPA-E gives program directors 

discretion to use additional considerations to award funds to projects, 

including whether ARPA-E applicants received private funding. Most 

ARPA-E award winners did not receive prior private funding, but for those 

that did, most award winners we reviewed did not explain these funds.

Of the 20 applications we reviewed for award selection criteria, all 

contained supporting information addressing the agency’s four criteria. In 

our analysis of the ARPA-E reviewers’ evaluations from these 20 

applications, we noted regular assignment of numerical scores rating 

applicants on the extent to which they met the criteria. All eight ARPA-E 

program directors told us they considered or, if they were recently hired, 

will consider all four criteria, but several focused more heavily on two 

criteria—the impact of the proposed technology relative to the state of the 

art and its overall scientific and technical merit.

In addition to basing the numerical scores applicants receive on the 

extent to which they meet the four selection criteria, program directors 

told us the agency gives them the ability to take other qualitative 

considerations into account when awarding funds. One of those 

considerations is to fund a broad range of potential technological

solutions with varying levels of risk in solving a given technical problem. 

Two program directors selected projects to reflect a variety of 

technologies, and they told us they believe that this approach increases 

their programs’ overall chances of success. Specifically, one program 

director told us he chose projects that employed a variety of new battery 

technologies, a strategy that should increase the likelihood that at least 

one of them will work. This program director also chose some battery 

projects with much higher potential storage capacity but with a lower 

In Addition to Its 

Selection Criteria, 

ARPA-E Also 

Considers Applicants’ 

Prior Sources of 

Private Funding; 

However, Most Award 

Winners We Reviewed 

Did Not Explain This 

Information

ARPA-E Program Directors 

Use the Agency’s Four 

Selection Criteria and 

Other Considerations to 

Select Projects
 

Page 11 GAO-12-112 ARPA-E 

probability of success in achieving project milestones and in ultimately 

being brought to market. In those cases, ARPA-E provided smaller 

awards to the projects with the lower probability of success.14

Several program directors also told us that during the selection process, 

they considered the applicants’ projects’ proposed project scope and 

duration, requested funding levels, and technical milestones and 

negotiated to revise these, if necessary, to better align applicants’ 

projects with ARPA-E’s program goals. According to our review of ARPAE data from the first three rounds of funding, the agency reduced 

requested award amounts by 5 percent or more on 31 out of 121 projects, 

for a total of $59 million below total requested award amounts for these 

rounds. When ARPA-E makes these kinds of adjustments, the agency 

may also reduce the proposed project scope to fund only what the 

program directors consider to be the transformational part of the project 

and to avoid funding applied research or development work that would be 

outside ARPA-E’s program goals. For example, the agency reduced the 

award amount and proposed project scope for an energy storage 

technology project designed to improve energy storage on the electrical 

grid. The project proposal initially requested nearly $5 million to 

demonstrate the technology at nearly full scale. During award 

negotiations, ARPA-E reduced this amount to $750,000 to focus the 

project only on smaller-scale development and testing of the technology. 

ARPA-E officials told us the larger-scale demonstration could likely be 

funded by the private sector.15

 

14All the ARPA-E program directors who had finished their selection process at the time 

we spoke with them told us that for a project to have a high risk level is not one of their 

other considerations when evaluating projects, but that the nature of the agency’s work 

has the effect of ultimately funding high-risk projects. Several program directors said that a 

high risk level is inherent in projects with high technological impact. 

15Alternatively, ARPA-E can consider only funding a specific part of research that must be 

proven before additional work is funded. For example, one applicant’s carbon capture 

project involved a new means of solidifying carbon dioxide. The program director told us 

he wanted the applicant to first demonstrate that the approach would work, so he reduced 

the initial amount of funding by over 60 percent. 
 

Page 12 GAO-12-112 ARPA-E 

When making award decisions or adjusting the scope of proposed 

projects, ARPA-E program directors may also consider the identification 

in applications of sources of private funding and the extent to which that 

funding might support the proposed projects. This information can help 

provide program directors with assurance that ARPA-E funds do not 

overlap with private investment. During the first two funding rounds, 

ARPA-E required that applicants identify relevant private investors if the 

applicant believed these funds were related to the proposed project. Of 

the 18 applications we reviewed from award winners that we identified as 

having received private venture capital, 14 applied during ARPA-E’s first 

and second funding rounds. Most of these award winners did not explain 

why investors were not willing to fund proposed work. ARPA-E program 

directors and an ARPA-E official, speaking on behalf of the agency, told 

us they took additional steps to clarify outstanding prior funding questions 

when ARPA-E was aware that applicants had received private sector 

funding. For example, one applicant we reviewed from the first funding 

round had previously received substantial private funding for work that 

appeared very similar to its proposed ARPA-E project. ARPA-E officials 

told us they were initially unable to determine why the private investor 

was not willing to also fund the proposed ARPA-E project and that the 

company’s application did not include an explanation. ARPA-E officials 

told us that getting this information required them to draft a series of direct 

and detailed questions that elicited several pages of written responses 

from the applicant. ARPA-E officials also told us they conducted multiple 

rounds of written and oral follow-up with the applicant and the private 

investor. Through these efforts, ARPA-E determined that the 

technological risks of key parts of the project were too high for the private 

investor and therefore decided to fund the research.16

Because ARPA-E officials recognized the need for applicants to provide 

better prior funding explanations, beginning with its third funding 

announcement, the agency required applicants to explain why proposed 

work was not sponsored internally if the applicant was a large company, 

or why private investors were not willing to support the project if the 

applicant was a small business or start-up company. ARPA-E did not 

provide guidance on how applicants should respond to this additional 

requirement by, for example, providing a sample response. Of the 18 

 

16ARPA-E program directors told us they also conducted review efforts in a number of 

other cases where it was initially unclear why other entities would not provide additional 

funds to ARPA-E award winners. 

ARPA-E Also Considers 

Applicants’ Prior Sources 

of Private Funding, but 

Most Award Winners We 

Reviewed Did Not Explain 

This Information
 

Page 13 GAO-12-112 ARPA-E 

ARPA-E award-winning companies, 4 applied during the third funding 

round, and these companies provided a range of information in response 

to this new requirement in their funding applications. Two explained how 

ARPA-E funds would allow them to go beyond currently funded work but 

did not provide reasons why investors were not willing to support the 

proposed work. Another wrote only that the ARPA-E research was too 

risky for the company’s private investors. One application contained an 

explanation outlining the specific research its private investors were and 

were not willing to fund. This applicant explained that private funds were 

directed toward lower-risk and higher-cost technologies.17 This application 

also included a letter from the company’s venture capital investors that 

explained which parts of its research the investors were planning to 

continue funding and which research was too risky for them, although not 

requested by ARPA-E. This letter provided additional third-party support 

for the funding information in the application. Officials from the National 

Institute of Standards and Technology’s (NIST) Technology Innovation 

Program told us they request that applicants provide letters from private 

investors to document why applicants’ projects could not be privately 

funded.18

When we followed up with the 18 companies, they were generally able to 

explain to us why their private investors were not willing to undertake the 

additional risk and uncertainty associated with the proposed projects.19

 

17ARPA-E officials told us that they funded only the parts of this project that were too risky 

for the private investors. 

When we examined the data in the VentureDeal database for a number of 

applicants, the data allowed us to quickly cross-check the names of prior 

private investors that applicants reported to ARPA-E. ARPA-E officials 

said that they have not used such data for these purposes but that they 

have considered doing so. Without an examination of outside venture 

capital data on its applicants, the agency may be missing a time-saving 

opportunity to check information on private funding provided in 

applications, especially in instances where applicants may not have been 

thorough in their explanations. We found a number of readily available 

subscription-based venture capital data services that provided company 

18According to NIST, the Technology Innovation Program funds advanced research in 

areas of critical national need including health care, robotics, and civil infrastructure.

19Most of these explanations related to the risk or uncertainty associated with the 

proposed projects.
 

Page 14 GAO-12-112 ARPA-E 

names, transaction amounts, and funding purposes. We found that the 

web-based VentureDeal database matched formats and data available 

from other venture capital data services.

Our review suggests that most ARPA-E-type projects could not be funded 

solely by private investors. Private venture capital firms told us that, 

among other considerations, they generally do not invest in projects that 

cannot be commercialized in less than 3 years. Nearly all of the 13 

ARPA-E award winners and most of the 22 of the contingently selected 

applicants we spoke with estimated that their projects were 3 or more 

years away from a potential market-ready product (i.e., 

commercialization). In addition, we found that only 2 of the 22 

contingently selected applicants we spoke with that met ARPA-E’s 

selection criteria but were not selected for an award subsequently 

secured private funding.

The representatives we spoke with from six venture capital firms identified 

three factors that limit the general availability of venture capital funding for 

new energy technologies. These factors were consistent with data we 

analyzed for the 121 award winners from ARPA-E’s first three funding 

rounds, the sample of 13 award winners we interviewed from these 

funding rounds, and the 22 contingently selected applicants we 

interviewed.

First, venture capital firms generally do not fund projects that rely on 

unproven technological concepts or lack working prototypes 

demonstrating the technology. A number of venture capital firm 

representatives told us that they are generally not willing to fund the 

applied scientific research sometimes required by ARPA-E-type projects. 

Projects they fund generally focus on developing technologies based on 

known scientific principles. Data from ARPA-E on award winners show 

that 91 out of 121 ARPA-E projects from the first three funding rounds 

had technological concepts that had not yet been demonstrated in a 

laboratory setting.20

 

20These data showed that most ARPA-E award winners were at or below technology 

readiness level (TRL) 3. TRL 3 represents a level where potential technologies are still 

unproven.

According to a recent report from the American 

Energy Innovation Council, private investors consider these projects too 

Most ARPA-E Projects 

Likely Could Not 

Have Been Funded 

Solely by Private 

Investors 

Venture Capitalists 

Generally Do Not Fund 

Projects That ARPA-E 

Looks to Fund
 

Page 15 GAO-12-112 ARPA-E 

high risk for investment, even for concepts with promising technological 

potential.21 Most of the contingently selected applicants we spoke with––

17 out of the 22––told us they were unlikely to receive funding from other 

sources for their proposed projects because of high levels of scientific 

uncertainty, an unavailable or undeveloped market, or a lack of a working 

prototype. For example, one such applicant said that he only had a 

computer model suggesting that his high-efficiency air conditioning device 

would work, which was insufficient to convince potential private investors. 

In addition, many of the ARPA-E award winners we surveyed also 

recognized the inherent uncertainty in their research; 5 of the 13 told us 

that their projects had a fairly low probability of success.22

Second, venture capital firms seek more rapid returns on investment and 

closely analyze a project’s potential return on investment over time, a 

factor that influences their decisions to invest in projects that are in later 

stages of development and closer to commercialization. Venture capital 

firm officials told us that they focused closely on the timeliness of 

investment returns, with one firm noting that the industry tended to invest 

in technologies that could be commercialized in less than 3 years and that 

would potentially exhibit exponential market growth in approximately 5 to 

7 years. However, we found that nearly all of the ARPA-E award winners 

and most contingently selected applicants we spoke with estimated that 

their projects were 3 or more years away from potential 

commercialization.23 For example, 12 out of 13 ARPA-E award winners 

estimated that it would take at least 3 years for their ARPA-E projects to 

reach the commercialization stage with ARPA-E funding.24

 

21American Energy Innovation Council, Catalyzing American Ingenuity: The Role of 

Government in Energy Innovation (Sept. 2011). The American Energy Innovation Council 

is a bipartisan group of American business leaders.

Had they not 

22The 18 award winners we identified as having received prior private venture capital told 

us they were generally able to pursue the development of energy technologies with 

greater scientific or technical uncertainty with the ARPA-E funding than what they were 

working on with their private funding. See appendix III for more detail on these companies' 

prior privately funded research. 

23On the basis of the initial testing of our questions, we determined that these estimates 

may be optimistic, given that respondents are invested in attempting to bring a technology 

to market as soon as possible.

24For the 12 award winners, 6 estimated their projects would take 3 to 5 years to reach 

commercialization, and the remaining 6 estimated their projects would take more than 5 

years to do so. 
 

Page 16 GAO-12-112 ARPA-E 

received ARPA-E funding, most of these award winners––10 out of 13––

told us they either would not have pursued their ARPA-E project or that 

they would not have been able to develop a commercial product in less 

than 10 years. At the same time, 18 out of 22 ARPA-E contingently 

selected applicants estimated it would take at least 3 years for their 

projects to reach commercialization if they had been able to secure 

funding for the proposal they submitted to ARPA-E.

Third, venture capital firms may not be comfortable investing in new 

energy technologies, noting the historical lack of successful venture 

capital investments in these types of projects. Venture representatives 

said that venture firms were more comfortable investing in software 

companies or other businesses with higher potential profit margins and 

less costly product development than new energy technologies. One 

venture representative noted that his firm looked to invest in products with 

potential gross profit margins of 50 percent or more. In addition, these 

representatives noted that it is difficult for new advanced energy 

technologies to compete with well-established and low-margin traditional 

sources of energy like natural gas. Venture representatives also noted 

that venture firms had become more risk averse and reluctant to fund new 

energy technologies after lackluster investment returns have made the 

venture industry more aware of the challenges associated with investing 

in unproven energy technologies.

While venture capital firms generally do not fund projects that ARPA-E 

looks to fund, our work suggests that receiving ARPA-E project funding 

may have a positive effect on some award winners’ ability to attract 

follow-on funding from the private sector for their ARPA-E work. For 

example, ARPA-E’s data indicate that 18 out of 121 ARPA-E award 

winners from ARPA-E’s first three rounds of funding had received private 

sector funding totaling $318 million after receiving ARPA-E funding.25 In 

some cases, award winners received private follow-on funding 

immediately after receiving ARPA-E funding. A number of the award 

winners we spoke with stated that, given the highly competitive nature of 

the program, receiving ARPA-E funding served as a “stamp of approval” 

to venture capital or other private firms.26

 

25A number of these 18 award winners with follow-on funding were part of the 18 

companies we identified as having received private funding prior to ARPA-E. 

These award winners told us 

26These award winners included those that had prior venture funding as well as the others 

we interviewed.
 

Page 17 GAO-12-112 ARPA-E 

that an ARPA-E award served as a signal of scientific and financial 

approval for potential investors. Economists call this rapid follow-on 

private funding a certification effect, which may explain the experiences of 

some of these award winners.27 This effect suggests that public awards 

address information gaps that might have otherwise precluded private 

investment. Some award winners and economists we spoke with told us 

that the government was suited to identifying technical risks because of 

its ability to draw on the expertise of many scientific reviewers, while 

venture firms may not have the scientific expertise on hand to fully 

understand potential investments. Furthermore, economic literature 

suggests that the certification effect may be particularly relevant in the 

high-technology industries, where the venture capital community plays an 

important role and in which traditional financial measures of risk and 

returns on investments may prove insufficient.28 Appendix III has more 

information on the difference between research funded by selected award 

winners’ prior investors and ARPA-E funded work.

Eighteen of the 22 ARPA-E contingently selected applicants we 

interviewed sought funding after being turned down for ARPA-E funds. Of 

the 18 that sought funding elsewhere, 13 submitted project proposals to 

government sources, such as other DOE offices, the National Science 

Foundation, or nonprofit academic research institutes, and the remaining 

5 submitted proposals to private investors such as venture capital firms.29

As of September 2011, we found that 2 out of the 22 contingently 

selected applicants secured funding from venture capital firms for work 

that was very similar to their ARPA-E project proposals.30

 

27See Andrew A. Toole, Calum Turvey. “How Does Initial Public Financing Influence 

Private Incentives for Follow-on Investment in Early-Stage Technologies?” Journal of 

Technology Transfer, 34: 43-58 (2007). See also Josh Lerner. “The Government as 

Venture Capitalist: The Long-Run Impact of the SBIR Program,” Journal of Business, vol. 

72, no.3, 285-318 (1999).

We also found 

that 4 contingently selected applicants secured funding from a 

28Lerner, “The Government as Venture Capitalist: The Long-Run Impact of the SBIR 

Program.” 

29One of the 5 contingently selected applicants that sought funding from a private investor 

also sought public funding.

30In addition, our review of venture capital funding data for the other 11 contingently 

selected applicants with whom we did not speak did not show that any had received 

venture capital funding since not being awarded ARPA-E funds.

Few Contingently Selected 

Applicants Found Funding 

from Private Investors or 

Public Sources
 

Page 18 GAO-12-112 ARPA-E 

government or nonprofit source for their projects.31 In addition, we found 

that most contingently selected applicants modified their ARPA-E project 

proposals to attract subsequent funding for their projects by reducing the 

scope of their proposals or by focusing on more basic science research. 

For example, the 4 contingently selected applicants that secured funding 

from a government or nonprofit source modified their ARPA-E proposals 

to be more focused on basic science research, rather than on developing 

a commercial technology. In addition, 1 of these applicants told us that 

the funding will allow it to continue exploring fundamental materials 

science rather than developing a product. Also, many contingently 

selected applicants and award winners said that other government 

sources were limited. Some noted that Small Business Innovation 

Research (SBIR) grants would not allow them to make as much progress 

as larger ARPA-E awards.32 Finally, a number of others mentioned that 

military funding agencies were not as focused on developing low-cost 

technologies with broader market appeal, because aerospace or military 

applications do not need to achieve the same low costs and market 

appeal as consumer or commercial applications.

 

31Three contingently selected applicants that submitted proposals to government or 

nonprofit sources were still awaiting responses. 

32Federal agencies that have budgets in excess of $100 million for research conducted by 

others (extramural research) are required to use 2.5 percent of these budgets to establish 

and operate a Small Business Innovation Research program. The program is intended to 

stimulate technological innovation, use small businesses to meet federal research and 

development needs, foster and encourage participation by minority and disadvantaged 

persons in technological innovation, and increase private sector commercialization of 

innovations derived from federal research and development. Eleven federal agencies 

participate in the SBIR program, with $16 billion awarded to date. Initial SBIR awards 

normally do not exceed $150,000 and are usually for a period of 6 months. 
 

Page 19 GAO-12-112 ARPA-E 

According to ARPA-E officials and documents, agency officials have 

taken steps to coordinate with other DOE offices in advance of awarding 

ARPA-E funds to help avoid duplication of efforts. These coordination 

efforts can be categorized into three areas:

Prefunding coordination. ARPA-E officials told us that program directors 

engage with officials from related DOE offices in advance of announcing 

the availability of ARPA-E funds. ARPA-E program directors told us that 

early in the development of a funding announcement, they conduct 

outreach with industry, academic, and government officials both inside 

and outside of DOE in an attempt to identify funding gaps related to the 

technology they wish to develop. For example, by doing such outreach, 

one program director determined that there had been little funding at DOE 

or elsewhere for lithium air or lithium sulfur batteries, which have the 

potential to last significantly longer than existing lithium ion batteries. 

Program directors also hold workshops and invite relevant participants, 

including those from other DOE offices and from other federal agencies, 

to identify technologies that have little to no existing research funding but 

that have transformational potential. ARPA-E officials told us that 

directors use the workshops and other meetings to identify research 

areas that other DOE offices are not working on, and the other DOE 

officials provide insights on funding areas where they are not active. For 

example, one of these ARPA-E program directors told us that he met with 

officials from DOE’s Office of Electricity Delivery and Energy Reliability 

and the Solar Energy Technologies Program within the Office of Energy 

Efficiency and Renewable Energy (EERE) before announcing available 

funds for the electrical power electronics funding announcement.33

In addition to inviting officials from other DOE offices to ARPA-E 

workshops, program directors told us they also engage with other DOE 

officials in other ways, both formally and informally. The program director 

According to this program director, this coordination helped him identify 

that there had been little funding for the development of magnetic devices 

for use in electrical power electronics. He ultimately designed the ARPAE electrical power electronics funding announcement to focus, in part, on 

the development of improved magnetic devices because of the lack of 

funding elsewhere.

 

33Electrical power electronics modify electrical energy (i.e., change its voltage, current, or 

frequency) and can be found in applications like lighting, motors, and electric vehicles.

ARPA-E Officials 

Have Taken Steps to 

Coordinate with 

Other Department of 

Energy Offices in 

Advance of Awarding 

Funds 
 

Page 20 GAO-12-112 ARPA-E 

responsible for ARPA-E’s work on advanced batteries said that he was a 

member of DOE’s Energy Storage Technology Development Team and 

regularly met with other officials who are engaged in applied battery 

research. This director said that it had become clear that DOE’s Vehicle 

Technologies Program will continue to focus on incremental 

improvements to existing lithium ion battery technologies that are 

currently on the market, while ARPA-E will fund newer, alternative battery 

technologies. Other program directors told us that they have regular 

discussions with counterparts within DOE to avoid duplicating efforts, 

although through other means than a formal committee.

Coordination of application reviews. Some ARPA-E program directors told 

us that they have recruited officials from other DOE offices to review 

applications submitted to ARPA-E and that these officials made up as 

many as one-third of the reviewers for one director. These application 

reviewers rate and recommend proposals for potential ARPA-E funding. 

ARPA-E program directors told us that these DOE reviewers help them 

stay aware of the types of projects that other DOE offices are funding. For 

example, according to one program director, DOE reviewers indicated on 

a number of occasions that an ARPA-E advanced battery applicant would 

be better suited for funding under DOE’s Vehicle Technologies Program 

because it was for a more developed technology. ARPA-E has also used 

application reviewers from other federal agencies, such as the 

Department of Defense. One program director told us that these 

reviewers have also helped avoid funding projects similar to those 

potentially funded elsewhere.

Official DOE coordination groups. ARPA-E is also a participant in DOE’s 

SunShot Initiative within the Solar Energy Technologies Program. The 

SunShot Initiative is an effort to coordinate solar energy research across 

DOE’s Office of Science, four national laboratories, the National Science 

Foundation, and ARPA-E, with the goal of achieving costs of $1 per watt 

for solar-generated electricity. One ARPA-E program director is a 

member of the SunShot Initiative advisory board and therefore able to 

coordinate ARPA-E solar-related activities with other SunShot Initiative 

members. SunShot Initiative officials told us that DOE plans to make it a 
 

Page 21 GAO-12-112 ARPA-E 

model for DOE’s internal coordination efforts and that DOE hopes to 

expand the approach to other research areas.34

Additionally, the ARPA-E Director created the Panel of Senior Technical 

Advisors (PASTA), which is a group of high-level DOE managers that 

meet periodically to discuss current and future DOE research efforts. 

ARPA-E officials told us that PASTA is an attempt to avoid duplicating 

efforts within DOE. PASTA meeting attendees have included officials 

from DOE’s applied and basic science offices.

We were not able to directly evaluate the effectiveness of ARPA-E’s 

efforts to coordinate with other DOE offices. Nevertheless, we found that 

on the basis of our interviews with ARPA-E award winners and 

contingently selected applicants, four award winners and two contingently 

selected applicants had received prior funding from other DOE offices.35

According to these award winners and contingently selected applicants, 

the prior funding was either for more proven technologies or was focused 

on more basic or foundational research than was the ARPA-E funded 

project.

ARPA-E recognizes the need to ensure that the agency is not funding 

projects that would be otherwise funded by the private sector, and has 

taken steps to get information from applicants on their other sources of 

funding. The agency has also taken steps to coordinate with other DOE 

offices in advance of awarding ARPA-E funds. However, for the 

applications we reviewed, we found that ARPA-E’s current funding 

announcements have generally yielded limited information from 

applicants that had prior sources of private funding. Where applicants 

provided little information, ARPA-E’s program directors spent time and 

resources to determine the extent of such funding for projects related to 

or similar to the applicants’ proposed ARPA-E projects. The agency’s 

 

34In addition, SunShot Initiative program officials told us they are trying to share elements 

of ARPA-E’s selection process with other offices within DOE—current DOE funding 

announcements generally take 15 months to carry out, compared with 6 to 8 months for 

ARPA-E. For example, ARPA-E officials also told us that DOE’s Energy Efficiency and 

Renewable Energy office is adopting their online application system because of its 

advantages over paper-based systems.

35These award winners included those in our nonprobability sample of 13, as well as the 

18 we identified with VentureDeal data. 

Conclusions 
 

Page 22 GAO-12-112 ARPA-E 

requirements for information on private sector funding could be improved. 

For example, ARPA-E does not provide guidance to applicants, such as a 

sample response, on how to meet its information requirement on prior 

private funding. An approach used by another federal program that funds

advanced research is for applicants to provide letters from private 

investors to document why their projects could not be privately funded. 

This approach was used by one ARPA-E award winner, who included a 

letter from the company’s venture capital investors to explain why the 

investors were not willing to fund the project proposed to ARPA-E. Also, 

ARPA-E officials said that they have not used venture capital data to 

identify applicants with prior private investors and to check information 

applicants provide to them, but that they have considered doing so. 

Examining such data allowed us to quickly cross-check applicants’ selfreported prior private funding. Without additional tools to better 

understand prior private funding, ARPA-E program directors will continue 

to spend time and agency resources taking additional steps to clarify prior 

private funding and may miss opportunities to avoid duplication with 

private investors.

To ensure that ARPA-E uses a more complete range of methods to 

ensure that limited federal funds are targeted appropriately, we 

recommend that the Secretary of Energy consider taking the following 

three actions:

• provide guidance with a sample response to assist applicants in 

providing information on sources of private funding for proposed 

ARPA-E projects,

• require that applicants provide letters or other forms of documentation 

from private investors that explain why investors are not willing to fund 

the projects proposed to ARPA-E, and

• use venture capital funding databases to help identify applicants with 

prior private investors and to help check information applicants 

provide on their applications.

We provided a copy of our draft report to ARPA-E for review and 

comment. ARPA-E concurred with key findings and our recommendations 

in its written comments, which are reproduced in appendix IV. In its 

comments, ARPA-E outlined the steps that the agency plans to take to 

address our recommendations. ARPA-E also provided additional 

clarifying comments, which we incorporated.

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 23 GAO-12-112 ARPA-E 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies of this report to the 

appropriate congressional committees, the Secretary of Energy, and 

other interested parties. In addition, the report will be available at no 

charge on the GAO website at http://www.gao.gov. 

If you or your staffs have any questions about this report, please contact 

me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in appendix V.

Frank Rusco 

Director, Natural Resources and Environment
Appendix I: Scope and Methodology

Page 24 GAO-12-112 ARPA-E 

To examine the Advanced Research Projects Agency-Energy’s (ARPA-E) 

use of criteria and other considerations for making awards and the extent 

to which applicants identify and explain other private funding information, 

we reviewed 20 applications drawn from a nonprobability sample of the 

4,788 applicants ARPA-E received during its first three funding rounds. 

We selected applications from a range of ARPA-E technology program 

areas to which the applications were submitted and applicant institution 

types (e.g., small company or university). Because we selected a 

nonprobability sample of applications to review, information we collected 

cannot be generalized to all applicants; however, it provided us with an 

understanding of ARPA-E’s criteria and other considerations for making 

an award. We also interviewed and reviewed the applications from our 

sample of 18 award winners, which were private companies that we 

identified as having received funding from private investors prior to 

receiving an ARPA-E award. We identified these 18 companies by 

searching for evidence of prior private funding for the 121 award winners 

in the VentureDeal venture capital database.1 In our review of these 

applications, we focused on the extent to which applicants disclosed prior 

private funding.2

To analyze the extent to which ARPA-E projects could have been funded 

through the private sector, we conducted three sets of interviews with 

ARPA-E applicants and award winners. Specifically, 

We also spoke with all eight ARPA-E program directors 

to discuss ARPA-E’s process for making awards and managing projects 

of award winners.

• We conducted structured interviews with 22 of the 33 contingently 

selected applicants that ARPA-E encouraged to submit full 

applications during its second and third funding rounds.3

 

1

VentureDeal is a company that maintains data on private venture capital funding. The 

VentureDeal database only includes businesses and does not include data on venture 

capital funding secured by universities or national laboratories. However, according to a 

VentureDeal official, universities and national laboratories are not likely to directly receive 

venture funding. In addition, we were not able to verify the completeness of VentureDeal 

data, and there may have been ARPA-E award winners that had prior private funding that 

did not appear in these data. We identified 1 of these award winners through an 

examination of ARPA-E data. 

Each of the 

2

Eight of these 18 companies also appeared in the sample of 20 applicants that we 

selected to examine ARPA-E's criteria for making awards.

3

The remaining 11 contingently selected applicants did not respond to our requests for an 

interview. 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 25 GAO-12-112 ARPA-E 

contingently selected applicants fulfilled ARPA-E’s selection criteria, 

had the same characteristics as ARPA-E award winners, and, 

according to ARPA-E officials with whom we spoke, would have been 

selected for an award had additional funds been available.4 This 

approach allowed us to consider the potential of ARPA-E-type 

projects to receive private funding.

• We conducted structured interviews with a nonprobability sample of 

13 award winners selected from ARPA-E’s first three funding rounds.5

We selected subjects for this sample across a range of ARPA-E 

award winner characteristics, including the technology program area 

for which an award winner received funding, the stage of development 

of an award winner’s project, and an award winner’s type of institution 

(e.g., small company or university). Because this was a nonprobability 

sample, the information from these structured interviews cannot be 

generalized to all award winners but can provide examples about 

award winners’ experiences. We conducted content analyses6 of the 

award winners’ and contingently selected applicants’ interview 

responses to quantify issues such as the ability of each group to 

secure private sector funding for ARPA-E-type projects.7

• Third, we spoke with the 18 ARPA-E award winners we identified 

through the VentureDeal database to discuss key differences between 

their prior research and their ARPA-E-funded projects.8

 

4

We spoke with 1 applicant twice because the applicant applied for two different projects. 

For each of the 33 contingently selected applicants, we also searched for entries in the 

VentureDeal database to determine if any had received private venture capital funding 

prior to and following ARPA-E's selection process.

5

We selected 15 award winners as part of our nonprobability sample but 2 award winners 

did not respond to our interview requests. 

6

Content analysis is a systematic research method for analyzing textual information in a 

standardized way that allows evaluators to make inferences about that information.

7

We conducted pretests of our structured interview questions with 3 award winners and 3 

contingently selected applicants to ensure that the questions were understandable and 

unbiased.

8

Four of these 18 award winners also appeared in our nonprobability sample of 13 award 

winners. 
Appendix I: Scope and Methodology

Page 26 GAO-12-112 ARPA-E 

We also conducted interviews with a variety of companies and individuals 

knowledgeable about research associated with ARPA-E-type projects, 

including six venture capital firms9 and the National Venture Capital 

Association (NVCA), a trade association, to determine the availability of 

private capital for ARPA-E-type projects and the criteria venture capital 

firms apply in making their investment decisions; two additional public 

companies that were awarded ARPA-E funding to discuss the ability of a 

public company to internally fund research;

10 and three economists to 

discuss the role and effectiveness of government-funded research and 

development of technology.11

To examine the extent to which ARPA-E coordinates with other DOE 

programs to avoid duplicating efforts, we spoke with the ARPA-E program 

directors as well as officials from other DOE program offices including the 

Office for Energy Efficiency and Renewable Energy (EERE) and the 

Office of Science. In addition, we met with officials from the SunShot 

Initiative, which is a collaboration among EERE, the Office of Science, 

and ARPA-E to make solar energy technologies cost-competitive with 

other forms of energy. We also spoke with officials from the Defense 

Advanced Research Projects Agency (DARPA) and the Department of 

Energy (DOE) Office of Inspector General. During our interviews with the 

award winners and contingently selected applicants previously 

mentioned, we asked them to discuss their understanding of other 

potential sources of DOE funding for their projects.

To assess the reliability of data from ARPA-E and VentureDeal, we 

reviewed relevant documentation and interviewed key data system 

officials at ARPA-E and VentureDeal and determined that the data were 

sufficiently reliable for the purposes of this report.

We conducted this performance audit from November 2010 to December 

2011 in accordance with generally accepted government auditing 

 

9

These firms were Khosla Ventures; Kleiner, Perkins, Caufield, and Byers; U.S. Venture 

Partners; Rockport Capital; Mohr-Davidow Ventures; and Polaris Ventures. We selected 

these venture capital firms because they were knowledgeable about ARPA-E-funded 

companies according to NVCA.

10These two companies did not appear in our earlier samples.

11We selected these economists based on their publication of literature on the role and 

effectiveness of government-funded research. 
Appendix I: Scope and Methodology

Page 27 GAO-12-112 ARPA-E 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: ARPA-E Program Technology 

Areas

Page 28 GAO-12-112 ARPA-E 

Funding Round 1

• Biomass energy. Biomass energy projects focus on means to convert 

crops, along with plant waste from other industrial processes, into 

energy through chemical, biological, or thermal techniques.

• Building efficiency. Building efficiency projects focus on technologies 

that heat, power, and maintain buildings.

• Carbon capture. Carbon capture and sequestration projects seek to 

create new methods to prevent the release of carbon dioxide into the 

atmosphere from traditional fossil fuel sources such as coal, natural 

gas, and petroleum.

• Conventional energy. Conventional energy projects seek to 

significantly increase the efficiency of traditional fossil fuel power 

production and reduce waste generated from this use.

• Direct solar fuels. Direct solar fuel projects seek to utilize 

photosynthetic microorganisms to produce liquid fuels and fuel 

precursors directly from solar energy.

• Energy storage. Energy storage projects seek to revolutionize battery, 

capacitor, and other energy storage methods for significantly 

improved efficiency.

• Energy-efficient water purification. Water technology projects seek to 

reduce the water intensity of the electricity and fuel sectors and, 

reciprocally, to reduce the energy intensity of the water sector.

• Renewable power. Renewable power projects focus on innovative 

technologies in several sustainable energy areas such as extremely 

efficient photovoltaic solar collectors, wind turbines, and geothermal 

energy. 

• Vehicle technologies. Vehicle technology projects seek to advance 

efficiency in vehicles through technologies like new hybrid engines to 

those that convert on-board waste heat to electricity.

• Waste heat capture. Waste heat capture projects seek to use thermal 

energy expelled by traditional industrial processes, such as coal 

smokestacks, and efficiently convert that heat into electricity.

Funding Round 2

• Batteries for transportation. Batteries for Electrical Energy Storage in 

Transportation (BEEST) projects seek to develop batteries for plug-in 

hybrid electric vehicles (PHEV) and electric vehicles (EV) that can 

make a 300- to 500-mile-range electric car.

Appendix II: ARPA-E Program Technology 

Areas
Appendix II: ARPA-E Program Technology 

Areas

Page 29 GAO-12-112 ARPA-E 

• Materials for carbon capture. Innovative Materials and Processes for 

Advanced Carbon Capture Technologies (IMPACCT) projects seek to 

reduce the cost of carbon capture significantly through a combination 

of new materials, improvements to existing processes, and 

demonstration of new capture processes.

• Electrofuels. Electrofuels projects intend to explore new paradigms for 

the production of renewable liquid fuels that are compatible with 

today’s infrastructure. They seek to use microorganisms to harness 

chemical or electrical energy to convert carbon dioxide into liquid fuels 

without using petroleum or biomass.

Funding Round 3

• Grid-scale electricity storage. Grid-Scale Rampable Intermittent 

Dispatchable Storage (GRIDS) projects seek to develop new energy 

storage technologies that are comparable in reliability and cost to 

pumped hydropower and that are modular and can be deployed in 

any location in the country.

• Building efficiency. Building Energy Efficiency Through Innovative 

Thermodevices (BEETIT) projects focus on developing new 

approaches and technologies for cooling equipment used in heating, 

ventilating, and air conditioning (HVAC) systems in buildings, as well 

as in refrigeration.

• Electrical power electronics. Agile Delivery of Electrical Power 

Technology (ADEPT) projects strive to reinvent the basic building 

blocks of circuits from transistors, inductors, and transformers to 

capacitors for a broad spectrum of power applications. ADEPT 

focuses on two areas: (1) creating the world’s first kilovolt-scale 

integrated circuits, and (2) developing transistor switches operating at 

grid-level voltages that would exceed 13 kilovolts.

Funding Round 4

• Advanced thermal storage. High Energy Advanced Thermal Storage 

(HEATS) projects seek to develop revolutionary cost-effective thermal 

energy storage technologies. HEATS focuses on three areas: (1) 

high-temperature storage systems to deliver solar electricity more 

efficiently around the clock to allow nuclear and fossil base load 

resources the flexibility to meet peak demand, (2) fuel produced from 

the sun’s heat, and (3) HVAC systems that use thermal storage to 

dramatically improve the driving range of electric vehicles.
Appendix II: ARPA-E Program Technology 

Areas

Page 30 GAO-12-112 ARPA-E 

• Electricity network integration. Green Electricity Network Integration 

(GENI) projects focus on innovative control software and high-voltage 

hardware to reliably control the grid network. GENI focuses on two 

areas: (1) cost-optimizing controls to manage sporadically available 

sources, such as wind and solar, alongside coal and nuclear, and (2) 

resilient power flow control hardware to enable automated, real-time 

control of grid components.

• Plants Engineered To Replace Oil (PETRO). PETRO projects seek to 

advance technologies that optimize the biochemical processes of 

energy capture and conversion in plants to develop farm-ready crops 

that deliver more energy per acre with less processing.

• Rare earth alternatives for energy technologies. Rare Earth 

Alternatives in Critical Technologies for Energy (REACT) projects 

work on early-stage technology alternatives that reduce or eliminate 

dependence on rare earth materials that may jeopardize the 

widespread adoption of many critical energy solutions by developing 

substitutes in two key areas: electric vehicle motors and wind 

generators.

• Solar electrical power technology. Solar Agile Delivery of Electrical 

Power Technology (Solar ADEPT) projects focus on integrating 

advanced power electronics into solar panels to extract and deliver 

energy more efficiently. Solar ADEPT projects are centered on 

advances in magnetics, semiconductor switches, and charge storage.
Appendix III: Description of ARPA-E Award 

Winners with Prior Private Investment

Page 31 GAO-12-112 ARPA-E 

The 18 award winners we identified as having received prior private 

venture capital told us that with the ARPA-E funding, they were generally 

able to pursue the development of energy technologies with greater 

scientific or technical uncertainty than they had when they were working 

with their private funding. About two-thirds of these award winners told us 

that the ARPA-E funding is allowing them to develop prototypes or to 

prove basic technology concepts on more advanced ideas than their prior 

work—6 of these award winners said this was for completely new 

research and 7 said it was for major advancements to prior research. A 

few of these award winners also told us they were able to work on 

projects with outstanding scientific research questions that private 

investors would not have funded. Five of these award winners reported 

that they would likely have been able to pursue some research similar to 

their ARPA-E projects, but it would have taken years longer without 

ARPA-E funding.

The following three examples reflect in more detail much of what we 

heard from these 18 award winners regarding the distinction between 

research funded by their prior investors and ARPA-E funded work:

• Sun Catalytix. Sun Catalytix was founded by a professor at the 

Massachusetts Institute of Technology to commercialize a set of 

catalysts to split water into hydrogen and oxygen gases. This reaction 

allows these gases to be cheaply produced for a variety of purposes, 

including renewable energy. Sun Catalytix was initially funded by a 

Boston area venture capital firm to develop a product based on these 

catalysts. According to a representative from this firm, the venture 

capital funding allows Sun Catalytix to attempt to develop a product 

that would potentially earn the venture firm a return on investment in a 

reasonable amount of time. At the time of the ARPA-E award, Sun 

Catalytix representatives told us they were still some years away from 

a commercial product using this new technology. According to these 

representatives, had the firm not won an ARPA-E award, further 

venture capital might not have been available to develop an initial 

version of their products. Sun Catalytix representatives told us that 

ARPA-E funds allowed the company to conduct additional applied 

scientific research that led to their discovery of a new platinum-free 

and therefore lower-cost catalyst with much wider market potential, 

including renewable energy applications. A representative from the 

venture firm told us that the firm would not have funded the additional 

advanced scientific research needed to develop the new, cheaper 

catalyst.

Appendix III: Description of ARPA-E Award 

Winners with Prior Private Investment
Appendix III: Description of ARPA-E Award 

Winners with Prior Private Investment

Page 32 GAO-12-112 ARPA-E 

• Agrivida. This small biotechnology company based in the Boston area 

is developing genetically modified sorghum, corn, and switchgrass 

crops for use in biofuel production. Agrivida representatives explained 

that the goal of their ARPA-E project is to generate crops capable of 

producing enzymes within the plant itself to internally break down the 

plant’s own cellulose after harvest. This technology would significantly 

lower the costs of cellulosic biofuel production, because enzyme 

treatments are currently a large part of the costs of current production 

methods. Before winning an award from ARPA-E, Agrivida had 

received venture capital funding to develop the technology. We spoke 

with a representative of the venture firm that funded Agrivida, who told 

us that this venture funding was only for research on the corn crop 

enzymes; the firm was not willing to fund additional research on other 

crops because the amount of funding it could provide to any one 

company in the early stages of research was limited. Agrivida officials 

told us that the ARPA-E award allowed them to expand the scope of 

their work and conduct additional research on switchgrass, which may 

have potential to become a major biofuel crop. They said that the 

ARPA-E funds have enabled rapid progress, allowing them to 

complete laboratory work in 1 year that would have otherwise taken 5 

years. Officials from Agrivida said they hope to have made enough 

progress by the time they complete their ARPA-E research to be able 

to attract additional investors and secure commercialization partners.

• 24M. This is a startup company that is developing flow batteries for 

use in transportation and electrical grid applications. Unlike normal 

batteries, flow batteries generate electrical current by internally 

circulating electrically active liquids, which allows for much lower costs 

than traditional batteries. However, flow batteries do not exist for use 

in tight spaces like cars where their cost advantages could allow for 

significant improvements to electric vehicles. In 2010, concurrent with 

its ARPA-E award, 24M received $10 million from two venture capital 

firms to develop flow batteries for consumer and commercial 

applications. A representative from one of these venture firms told us 

that his firm would not have been confident in funding the 24M project 

without ARPA-E involvement. Representatives from 24M said that the 

ARPA-E award was critical to their ability to secure private investment 

and to launch the company and that they now expect to have a 

working prototype by the end of their ARPA-E project.

In addition, the two public companies we spoke with that were awarded 

ARPA-E money told us that although their companies had internal 

resources devoted to research and development, they were not able to 
Appendix III: Description of ARPA-E Award 

Winners with Prior Private Investment

Page 33 GAO-12-112 ARPA-E 

internally fund the projects they proposed to ARPA-E. They told us there 

were two reasons for this. First, the companies said that existing product 

lines placed heavy demands on their internal research and development 

budgets, and that there is continuous pressure from existing customers 

and competitors to improve existing products; since ARPA-E projects 

were still a number of years away from a return on investment, these 

investments could not be justified. Second, these companies told us that 

internal investments had to meet minimum investment return thresholds, 

and that ARPA-E-type projects were not able to meet these thresholds. 

Officials from one company told us that the rate of return on investment 

required by its management was at least 20 percent per year.
Appendix IV: Comments from ARPA-E 

Page 34 GAO-12-112 ARPA-E 

Appendix IV: Comments from ARPA-E 
Appendix IV: Comments from ARPA-E 

Page 35 GAO-12-112 ARPA-E 
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 36 GAO-12-112 ARPA-E 

Frank Rusco, (202) 512-3841 or ruscof@gao.gov

In addition to the individual named above, Tim Minelli (Assistant Director), 

Paola Bobadilla, Cindy Gilbert, Robert Marek, Justin Mausel, Alison 

O’Neill, Jeanette Soares, and Franklyn Yao made important contributions 

to this report.

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(361246)
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