Advanced Research Projects Agency - Energy (ARPA-E): Background, Status, and Selected Issues for Congress
Released: 2009-06-30T00:00:00

In August 2007, Congress authorized the establishment of the Advanced Research Projects Agency - Energy (ARPA-E) to support transformational energy technology research projects with the goal of enhancing the nation's economic and energy security. Modeled on the Defense Advanced Research Projects Agency (DARPA) in the Department of Defense (DOD), ARPA-E would be a new organization within the Department of Energy (DOE) (see Box 1 below ).

Overview of ARPA-E Design

As outlined in the America COMPETES Act ( P.L. 110-69 , §5012), the goal of ARPA-E is to enhance the economic and energy security of the United States through the development of technologies that reduce energy imports, reduce energy-related greenhouse gas emissions, and improve energy efficiency in all economic sectors. In addition, ARPA-E would aim to ensure that the United States is a technical leader in developing and deploying advanced energy technologies.

According to the act, ARPA-E would achieve this goal by identifying and promoting revolutionary advances in fundamental sciences and translating scientific discoveries and cutting-edge inventions into technological innovations. ARPA-E would focus its efforts on accelerating transformational technological advances in areas that industry, by itself, is not likely to undertake due to technical and financial uncertainty. As stated in §5012, the agency's programs would accelerate novel early-stage energy research with possible technology applications; the development of techniques, processes, and technologies and related testing and evaluation; research and development (R&D) of manufacturing processes for novel energy technologies; and coordination with nongovernmental entities to demonstrate technologies and research applications to facilitate technology transfer.

To achieve these goals, ARPA-E would make awards to academic institutions, companies, research foundations, and trade and industry research collaborations. In addition, awards may be made to consortia of these organizations, and these consortia could include federally funded research and development centers (FFRDCs). According to the act, the criteria for selecting projects would include novelty, scientific and technical merit, the demonstrated capability of the applicant to successfully carry out the proposed project, future commercial applications of the project, and the feasibility of partnering with one or more commercial entities, as well as additional criteria established by the director of ARPA-E.

Management

The management of ARPA-E, as described in the act, is modeled on that of DARPA (see Box 2 below ). DARPA has a well-known history of catalyzing innovative technologies, such as Saturn rocket engines used for moon flights, pilotless Predator planes used in Iraq and Afghanistan, computer-aided design, global positioning satellites, computer mouse, and Internet. DARPA seeks to sponsor revolutionary, high-payoff research that "bridges the gap between fundamental discoveries and their military use." According to a former director, "DARPA will take a chance on an idea with no data. We'll put up the money to go get the data and see if the idea holds. That is the highest-risk type of research you can have."

The act states that ARPA-E would be managed by a presidentially appointed director, who would report to the Secretary of Energy. The director would approve all new programs, develop funding criteria, establish technical milestones to assess program success, and terminate programs not achieving their goals. The director would have the authority to appoint not less than 70, and no more than 120, scientific, engineering, and professional personnel without regard to civil service laws and to determine their compensation. The director would be responsible for ensuring that ARPA-E activities are coordinated with, and do not duplicate, DOE and other federal programs and laboratory activities; the Program Managers would establish R&D goals and select projects based on merit.

Both the director and the Program Managers would be permitted to seek advice on the overall direction of ARPA-E and specific program tasks from a new ARPA-E advisory committee or existing DOE federal advisory committees. Additional sources of advice provided for in the act include the President's Council of Advisors on Science and Technology (PCAST), professional organizations, and disciplinary societies.

Authorization of Funding

The act authorizes an Energy Transformation Acceleration Fund in the Department of the Treasury, with $300 million of funding authorized for FY2008 and "such sums as are necessary" for FY2009 and FY2010. ARPA-E's budget request and appropriations are to be separate and distinct from the rest of DOE's budget.

No more than 50% of ARPA-E funding may be used for coordination with nongovernmental entities for technology demonstration and research applications to facilitate technology transfer. At least 2.5% must be used for technology transfer and outreach activities. No funds may be used for construction of new buildings or facilities until August 2012.

Outcome Evaluation

After ARPA-E has operated for four years, the National Academy of Sciences (NAS) is to evaluate how well ARPA-E is achieving its goals and mission. The ARPA-E director would submit an annual report, describing projects supported in the previous year, as part of the annual budget request to Congress. The director would also submit strategic vision roadmaps to Congress no later than October 1, 2008, and October 1, 2011. The roadmaps are to describe the strategic vision ARPA-E would use to determine its future technology investments for the subsequent three fiscal years.

Funding

Congress authorized $300 million for ARPA-E in FY2008 and "such sums as are necessary" for FY2009 and FY2010. Congress subsequently appropriated no funds for FY2008. The Bush Administration requested no funds for ARPA-E in FY2009, and took no actions to begin its operations. In the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ), Congress provided ARPA-E funding of $400 million which supplemented FY2009 funds of $15 million ( P.L. 111-8 ). As a result, ARPA-E's received its initial funding of $415 million in FY2009. The ARRA funds are available for obligation until September 30, 2010. The Obama Administration has proposed ARPA-E receive funding of $10 million in FY2010. The House Committee on Appropriations declined to provide this funding. No Senate action has taken place.

Obama Administration Actions

President Obama announced the establishment of ARPA-E in a speech at the National Academy of Sciences. Shortly afterward, the Obama Administration released a funding opportunity announcement soliciting concept papers. The Administration has not announced ARPA-E's director or organization. These activities are discussed below.

President Obama

On April 27, 2009, President Obama in remarks at the National Academy of Sciences stated the following:

And today, I'm also announcing that for the first time, we are funding an initiative—recommended by this organization—called the Advanced Research Projects Agency for Energy, or ARPA-E.

This is based, not surprisingly, on DARPA, the Defense Advanced Research Projects Agency, which was created during the Eisenhower administration in response to Sputnik. It has been charged throughout its history with conducting high-risk, high-reward research. And the precursor to the Internet, known as ARPANET, stealth technology, the Global Positioning System all owe a debt to the work of DARPA.

So ARPA-E seeks to do the same kind of high-risk, high-reward research. My administration will pursue, as well, comprehensive legislation to place a market-based cap on carbon emissions. We will make renewable energy the profitable kind of energy. We will put in place the resources so that scientists can focus on this critical area. And I am confident that we will find a wellspring of creativity just waiting to be tapped by researchers in this room and entrepreneurs across our country. We can solve this problem.

In a fact sheet that provided additional details regarding the speech, the Obama Administration stated the following:

SPARKING THE CLEAN ENERGY REVOLUTION

• As part of his plan to build a clean energy economy that will reduce our dependence on foreign oil and cut carbon pollution, the President will announce the launch of the $400 million Advanced Research Projects Agency-Energy (ARPA-E). In addition, the Department of Energy will announce grants to establish 46 Energy Frontier Research Centers.

• ARPA-E is a new Department of Energy organization modeled after the Defense Advanced Research Projects Agency, the defense agency that gave us the Internet, stealth aircraft, and many other technological breakthroughs. The recommendation to create ARPA-E came from a report of the National Academy of Sciences entitled Rising Above The Gathering Storm, and funding for ARPA-E was included in the Recovery Act.

• ARPA-E will award grants to recipients that enhance the economic and energy security of the United States through the development of breakthrough energy technologies; reduce the need for consumption of foreign oil; reduce energy-related emissions, including greenhouse gases; improve the energy efficiency of all economic sectors; and ensure that the United States maintains a technological lead in developing and deploying advanced energy technologies.

• ARPA-E will issue an initial solicitation that will focus on applicants with a well-formed R&D plan for a transformational concept or new technology that can make a significant contribution towards attainment of the President's Energy Plan. Under this announcement, ARPA-E will fund energy technology projects that (1) translate scientific discoveries and cutting-edge inventions into technological innovations and (2) accelerate transformational technological advances in areas that industry is not likely to undertake independently because of high technical or financial risk.

Funding Opportunity Announcement

Later that day, the DOE released a Funding Opportunity Announcement (FOA) with ARPA-E's first solicitation. The solicitation states the following:

This is the first solicitation for the Advanced Research Projects Agency – Energy (ARPA-E). ARPA-E is a new organization within the Department of Energy (DOE), created specifically to foster research and development (R&D) of transformational energy-related technologies. Transformational technologies are by definition technologies that disrupt the status quo. They are not merely better than current technologies, they are significantly better. Often, a technology is considered transformational when it so outperforms current approaches that it causes an industry to shift its technology base to the new technology. The Nation needs transformational energy-related technologies to overcome the threats posed by climate change and energy security, arising from its reliance on traditional uses of fossil fuels and the dominant use of oil in transportation.

ARPA-E will fund scientists and technologists to take an immature technology that promises to make a large impact on the ARPA-E Mission Areas (see Section I.B) and develop it beyond the "valley of death" that prevents many transformational new technologies from becoming a market reality. The "valley of death" generally occurs in two phases. The first phase occurs at the point of determining whether a laboratory stage technology can ever become a real-world technology or it has some inherent unsuitability for real-world applications. Once it has been determined through R&D that the apparent barriers can be overcome and how they may be overcome, then additional investment from many other sources causes a new field of technology options to open up. The second phase of the "valley of death" occurs at the point of developing the immature transformational technology to the point where key risks have been lowered enough that industry can invest in the final stages of development and incorporate the technology into products.

Success for ARPA-E as an organization will be gauged by (a) whether its portfolio of investments includes the most promising transformational energy technology options and (b) the agency's ability to form and manage R&D efforts to mature these technologies rapidly. In the end, the nation will judge ARPA-E on whether these technologies come to market and are being used widely enough that they make a significant difference to reductions in domestic oil use and energy-related emissions of greenhouse gases.

Proposers will initially submit a concept paper by June 2, 2009. ARPA-E will inform applicants by July 13, 2009, if they should submit a full application. The FOA indicates that ARPA-E anticipated most awards will be for projects in the $2 million-$5 million range, though some may be as low as $500,000 and as high as $20 million. In addition, ARPA-E anticipates making multiple awards, and awarding agreements totaling up to $150 million. The period of performance for awards is expected to be no more than 24 months, with a 36-month maximum. A minimum of 90% of work, as defined by total project costs, must be performed in the United States.

No information is provided in the FOA regarding ARPA-E's organization or staffing, or the amount of its $415 million FY2009 budget for those activities. Given DOE expects to award $150 million in response to this first solicitation, $265 million remains of this budget for ARPA-E administration and possible future awards.

What Research Might ARPA-E Support?

According to the America COMPETES Act, ARPA-E has the general goal

(A) to enhance the economic and energy security of the United States through the development of energy technologies that result in

(i) reductions of imports of energy from foreign sources;

(ii) reductions of energy-related emissions, including greenhouse gases; and

(iii) improvement in the energy efficiency of all economic sectors; and

(B) to ensure that the United States maintains a technological lead in developing and deploying advanced energy technologies.

ARPA-E is to achieve these goals through energy technology projects by—

(A) identifying and promoting revolutionary advances in fundamental sciences;

(B) translating scientific discoveries and cutting-edge inventions into technological innovations; and

(C) accelerating transformational technological advances in areas that industry by itself is not likely to undertake because of technical and financial uncertainty.

Secretary of Energy Steven Chu

In 2006, during congressional testimony provided to the House Committee on Science prior to becoming Secretary of Energy in the Obama Administration, Dr. Steven Chu suggested the following as research that ARPA-E might fund:

1. The development of a new class of solar cells.

Photovoltaic solar cells using semiconductor technology can be very efficient at converting sunlight into electrical energy, but the fabrication cost remains too high. Organic and polymer solar cells can be made at low cost, but the efficiencies are low and existing materials degrade in sunlight. One promising avenue towards inexpensive, efficient and long lasting solar cells is to create novel materials based on multiple elements that can be manufactured with thin-film technologies. Another approach is to create nano-particle devices (distributed junction solar cells) that use different nanostructures for the conversion of sunlight into charge carriers and for the collection of those charges onto electrodes.

2. Biomass substitutes for oil.

The ethanol for transportation is currently produced from sugar cane, corn or other plants. However, the most cost effective bio-fuels will come from the conversion of cellulose into chemical fuel. When the fuel is burned, CO 2 is released into the atmosphere, but the overall cycle can, in principle, be carbon neutral. The creation of crops raised for energy will also take full advantage of our great agricultural capacity.

ARPA-E can fund the creation of new plants to be grown for energy by incorporating a number of genes introduced into plants. Recently, a team of scientists at Lawrence Berkeley National laboratory inserted many genes into bacteria to produce an extremely effective anti-malarial drug. The Gates Foundation has given this team a $42 M [million] grant to commercialize the technology so that the drug can be made available to the developing world. Similar technology can be used to make plants self-fertilizing, drought and pest resistant. Note that about 25% of the energy input in growing corn comes from fertilizer, which is made from ammonia derived from natural gas.

Research on more efficient conversion of cellulose into liquid fuel would also yield great dividends. Current methods use the high temperature/high acid processes that are very energy intensive. The breakdown of cellulose into ethanol is also accomplished with bacteria or fungi, but this process can be made much more efficient if the micro-organisms are modified with these methods.

Since becoming Secretary of Energy, Secretary Chu reportedly contends that "solving the world's energy and environment problems would require Nobel-level breakthroughs in three areas: electric batteries, solar power and the development of new crops that can be turned into fuel." Further, that a "'revolution' in science and technology would be required if the world is to reduce its dependence on fossil fuels and curb the emissions of carbon dioxide and other heat-trapping gases linked to global warming." Additionally Secretary Chu reportedly believes that solar technology "will have to get five times better than it is today, and scientists will need to find new types of plants that require little energy to grow and that can be converted to clean and cheap alternatives to fossil fuels," and that alternatives must be found to burn coal cleanly as other countries are unlikely to discontinue its use.

DOE Basic Energy Sciences Advisory Committee Report

In December 2008, a DOE Basic Energy Sciences Advisory Committee (BESAC) subcommittee released a report entitled New Science for a Secure and Sustainable Energy Future , based on reports from a series of workshop and a panel on Grand Challenges report held over several years. The report identified "three strategic goals for which transformational scientific breakthroughs are urgently needed." These goals include making fuels from sunlight (see Figure 1 ); generating electricity without carbon dioxide emissions (see Figure 2 ); and revolutionizing energy efficiency and use (see Figure 3 ). The figures referenced provide an illustration of possible breakthrough research needs for each as identified by the BESAC subcommittee.

How Might ARPA-E Obtain Guidance on Customer Needs?

Although there may be interim steps along the way, some experts believe that the end goal for ARPA-E research is a "proof of concept," that is, "evidence (usually deriving from an experiment or pilot project) demonstrating that a design concept, business idea, etc., is feasible." Although smaller in scale than ARPA-E, university proof of concept centers, whose goal is to accelerate the commercialization of university innovations without being part of the commercialization effort, might provide a useful example for ARPA-E as to how to incorporate the views of customers into the research process.

A study by the Kauffman Foundation examined two proof of concept centers they deemed successful: the Massachusetts Institute of Technology (MIT) Deshpande Center for Technological Innovation and the University of California, San Diego (USCD) von Liebig Center. MIT's Deshpande Center investment of $9.0 million since 2002 has resulted in 1 licensing agreement, 18 startup companies, $140 million in outside financing, and over 200 jobs. UCSD's von Liebig Center project investment of $3.8 million since 2001 has resulted in 22 license agreements and 16 start-up companies, which have attracted more than $78 million in subsequent capital from the private sector and created over 130 new jobs.

At MIT, business community volunteers called "Catalysts" provide guidance to researchers. The Catalyst volunteers are individuals with experience relevant to innovation, technology commercialization, and entrepreneurship, but do not represent any company interests. The approximately 50 Catalysts are chosen based on their "experience in commercializing early stage technologies and/or mentoring researchers and entrepreneurs, and industry expertise; willingness to proactively provide assistance to MIT research teams; willingness to abide by the time commitment, confidentiality, and conflict of interest guidelines; and commitment to the interests of MIT researchers and the Deshpande Center." Catalysts are also members, along with MIT staff, of a multidisciplinary committee that evaluates all applications for research funds. Once selected by the committee, a Catalyst works with researchers to submit a full proposal.

At UCSD's von Liebig Center, two kinds of mentors provide guidance to researchers: Technology and Business Advisors, and Champion Entrepreneurs. The approximately six Technology and Business Advisors are seasoned entrepreneurs, paid discounted wages by UCSD, to help project teams develop and implement commercialization strategies. Champion Entrepreneurs are venture capitalists, experienced entrepreneurs, and angel investors who lead projects through the commercialization pipeline and help start a company around it. Advisors at UCSD are assigned to faculty after they submit a Statement of Intent to help them prepare a proposal and presentation to a review panel that consists of both technical and business experts. Projects are selected based on the technology's novelty and need, the potential market size, the market definition, the technology's maturity, the utility of the grant, the intellectual property position, and the principal investigator's credibility.

What Will Be ARPA-E's Relationship with Other DOE R&D Organizations and DARPA?

The America COMPETES Act mandates that ARPA-E be managed by a presidentially appointed director, confirmed by the Senate, who would report to the Secretary of Energy, presumably to facilitate the independence of ARPA-E within DOE. The act also states that no other programs within DOE will report to the ARPA-E director. As a result, the head of ARPA-E could not also be head of another organization such as the Office of Science or one of the energy technology offices, which focus on specific topics such as energy efficiency and renewable energy, fossil energy, nuclear energy, and electricity delivery and energy reliability. In addition, one key consideration that the ARPA-E director may face is to identify projects that complement those of the Office of Science and the energy technology offices.

Other DOE R&D Organizations

The Department of Energy may need to distinguish how ARPA-E's role differs from that of existing DOE R&D activities, including the Office of Science and the energy technology offices (see Figure 4 ). For example, DOE's Office of Science has now funded 46 new Energy Frontier Research Centers (EFRCs). In addition, the Department of Energy is proposing to fund eight Energy Innovation Hubs as discussed in its FY2010 budget request. During congressional testimony, Secretary Chu provided a description of each of these initiatives and distinguished between them:

Specifically, this budget request includes three initiatives designed to cover the spectrum of basic to applied science to maximize our chances of energy breakthroughs. The FY 2010 budget will launch eight Energy Innovation Hubs, while the Energy Frontier Research Centers (EFRCs) and ARPA-E were launched last month. Let me briefly explain the differences and why I believe launching these Hubs is so important.

EFRCs are small-scale collaborations (predominantly at universities) that focus on overcoming known hurdles in basic science that block energy breakthroughs – not on developing energy technologies themselves.

ARPA-E is a highly entrepreneurial funding model that explores potentially revolutionary technologies that are too risky for industry to fund.

The proposed Energy Innovation Hubs will take a very different approach – they will be multi-disciplinary, highly collaborative teams ideally working under one roof to solve priority technology challenges, such as artificial photosynthesis (creating fuels from sunlight)....

The following is additional information about the three initiatives:

• Energy Innovation Hubs

In FY 2010 the Department proposes to fund eight multi-disciplinary Energy Innovation Hubs, at a total of $280 million. Modeled after the Department's Bioenergy Research Centers, the work of the Hubs will span from basic research to engineering development to commercialization and a hand-off to industry. Each Hub will be funded at $25 million per year, with one-time additional start-up funding of $10 million in the first year for renovation, equipment and instrumentation.

The Hubs will support cross-disciplinary research and development focused on the barriers to transforming energy technologies into commercially deployable materials, devices, and systems. They will advance highly promising areas of energy science and technology from their early stages of research to the point that the risk level will be low enough for industry to deploy them into the marketplace.

While the intent is to provide a funding stream that is more dependable than the standard funding mechanisms, renewal after 5 years will not be automatic. To receive renewed funding, Hubs will be expected to be delivering exceptional scientific progress.

The research Hubs will explore the following topics: Solar Electricity; Fuels from Sunlight; Batteries and Energy Storage; Carbon Capture and Storage; Grid Materials, Devices, and Systems; Energy Efficient Building Systems Design; Extreme Materials; and Modeling and Simulation.

• Energy Frontier Research Centers

In FY 2010 the Department of Energy will continue to support Energy Frontier Research Centers (EFRC). Currently there are 46 EFRCs, funded at $2 to $5 million per year. These centers enlist the talents and skills of the very best scientists and engineers to address current fundamental scientific roadblocks to clean energy and energy security. Roughly one-third of the centers are supported by Recovery Act funding. These centers, involving almost 1,800 researchers and students from universities, national labs, industry, and non-profit organizations from 36 states and the District of Columbia, address the full range of energy research challenges in renewable and low-carbon energy, energy efficiency, energy storage, and cross-cutting science. EFRC researchers take advantage of new capabilities in nanotechnology, light sources that are a million times brighter than the sun, supercomputers, and other advanced instrumentation, much of it developed in collaboration with the Department of Energy's Office of Science.

• Advanced Research Projects Agency- Energy (ARPA-E)

ARPA-E is a new Department of Energy organization modeled after the Defense Advanced Research Projects Agency, created during the Eisenhower administration in response to Sputnik. The Recovery Act provided $400 million and the FY 2010 budget requests $10 million for ARPA-E. The purpose of ARPA-E is to advance high-risk, high-reward energy research projects that can yield revolutionary changes in how we produce, distribute, and use energy. It will ensure that the United States maintains a technological lead in developing and deploying advanced energy technologies.

ARPA-E seeks out the best ideas and assembles teams that can move quickly to help bring the idea to market, and funds this work through grants that range between $500,000 and $10 million. Most projects will be funded with seed money that sunsets after three years. Research teams are expected to either make exceptionally rapid progress or bring their technology to the point the private sector can pick it up within that time.

In addition, the America COMPETES Act authorizes the establishment of Discovery Science and Engineering Innovation Institutes, multidisciplinary research institutes located at DOE national laboratories that would apply fundamental science and engineering discoveries to technological innovations. No funding, however, has been provided for these institutes.

Defense Advanced Research Projects Agency (DARPA)

One option to quickly begin ARPA-E's operations may be to take advantage of DARPA's Program Managers and energy portfolio. As illustrated in Figure 5 , DARPA faces challenges that will be similar to those of ARPA-E in terms of focusing on mid-term programs, based on time of acquisition, relative to other DOD activities that focus on near and far-term programs. One analyst testified that the following are key elements in DARPA's succeeding in its unique role as an instigator of radical innovation:

• Create surprise; don't just seek to avoid it : DARPA mission is to investigate new emerging technological capabilities that have prospects to create disruptive capabilities. It is differentiated from other R&D organizations by a charter that explicitly emphasizes ''high-risk, high payoff'' research.

• Build communities of ''change-state advocates'' : DARPA Program Managers may often themselves foster a specific concepts or technological approach that they seek to explore and develop. But they almost never are the main, let alone sole, investigator of the notion. Rather it is DARPA's motif to instigate cooperation among a group of forward-looking researchers and operational experts. In this sense, DARPA's success depends on it being a leader and catalyst in developing this community of interest.

• Define challenges, develop solution concepts, and demonstrate them : One aspect of DARPA's success has been efforts to define strategic challenges in detail. Since its inaugural Presidential Issues, DARPA has been problem focused, seeking breakthrough change-state approaches to overcome daunting issues.

Besides the management lessons that might be learned from DARPA's history of interacting with other DOD organizations to ensure programs are complementary, employing Program Managers, and its way of doing business (see Box 3 below ), one policy option might be for ARPA-E to use some of DARPA's existing Program Managers focused on energy issues, or alternatively Program Managers who are ending their rotation at DARPA. This would provide ARPA-E with a workforce already trained in how to work as a Program Manager in the DARPA model. In addition, ARPA-E might either subsume DARPA's existing energy projects, or alternatively solicit the researchers its supports for ideas appropriate for ARPA-E.

DARPA includes energy programs within its portfolio. For example, in its 2007 strategic plan, DARPA identifies the following energy projects:

Mobile Integrated Sustainable Energy Recovery (MISER) program: to develop technologies that can use military waste to run military generators; Very High Efficiency Solar Cell program: to develop photovoltaic devices with efficiencies exceeding 50 percent; and the BioFuels program: to develop an affordable surrogate for military jet fuel (JP-8) derived from oil-rich crops produced by either agriculture or aquaculture including, but not limited to, plants, algae, fungi, and bacteria.

One key difference between DARPA and ARPA-E as outlined in the America COMPETES Act may be the number of Program Managers relative to its overall budget. While DARPA's budget is $3 billion in FY2009 with approximately 100 Program Managers, ARPA-E's budget is $400 million with the America COMPETES Act stating ARPA-E must have minimum of 70 scientific, engineering, and professional personnel. It is not yet known how many of the 70 will be Program Managers; however, the disparity of funding may mean that each Program Manager will have less funding to facilitate their ideas. This may make it challenging for ARPA-E to recruit high quality Program Managers and for those managers to be successful.

What Lessons Might be Learned from the Establishment of Other DARPA-based Organizations?

As discussed earlier, the general concept for management of ARPA-E is based on that of DARPA (see Box 2 above ). Since 2002, two federal organizations have been established based on the DARPA model: the Homeland Security Advanced Research Project Agency (HSARPA) and the Intelligence Advanced Research Projects Activity (IARPA).

Homeland Security Advanced Research Project Agency (HSARPA)

The Homeland Security Act of 2002 ( P.L. 107-296 ) authorized establishment of HSARPA with an authorization of $500 million for FY2003 and such sums as may be necessary thereafter. According to the act, the HSARPA Director was to administer an Acceleration Fund for Research and Development of Homeland Security Technologies

to award competitive, merit-reviewed grants, cooperative agreements or contracts to public or private entities, including businesses, federally funded research and development centers, and universities. The Director shall administer the Fund to

(A) support basic and applied homeland security research to promote revolutionary changes in technologies that would promote homeland security;

(B) advance the development, testing and evaluation, and deployment of critical homeland security technologies; and

(C) accelerate the prototyping and deployment of technologies that would address homeland security vulnerabilities.

Some experts believe that although Congress provided HSARPA with a strong and flexible authorization closely modeled on DARPA's strengths, it has not been adequately utilized or implemented, emphasizing the need for congressional oversight of ARPA-E as it begins operations. Among the concerns are a minimal budget, lack of an initial director for approximately one year providing insufficient leadership for start-up in a competitive environment despite the presence of a talented staff, and lack of autonomy and flexibility in making award decisions.

Given the proximity of its name to DARPA, and the statement in the act that HSARPA was "to promote revolutionary changes in technologies," most in the science and technology community believed that HSARPA would be based on the DAPRA model and would focus on innovative research. According to its first director, however, comparisons of HSARPA to DARPA were inappropriate as only about 10 percent of HSARPA's work was comparable to that of DARPA. By this statement, Dr. Bolka might have been implying that 10% of HSARPA's R&D was focused on transformative R&D, while 90% was focused on incremental R&D.

This focus changed as HSARPA evolved. Beginning in 2006, DHS Under Secretary for Science and Technology Cohen redirected the work of HSARPA as part of a general reorganization of DHS' R&D activities. As a result, HSARPA began to focus its efforts on high risk and high reward transformative R&D research activities more similar to that of DARPA . HSARPA R&D focuses on two programs: Homeland Innovative Prototypical Solutions (HIPS), to demonstrate prototypes of high-payoff technologies in two to five years with moderate to high risk; and High Impact Technology Solutions (HITS), to conduct high-risk basic research that provides proofs of concept for potential breakthroughs.

HSARPA is located within the Office of Innovation, whose overall budget was $33 million in FY2008. HSARPA's budget, therefore, is smaller than DARPA's ($2,959 million in FY2008). In addition, HSARPA does not have a dedicated funding stream, which may influence its ability to be autonomous of its parent agency – a key aspect, some experts believe, of DARPA's success.

According to one expert, the failure to implement HSARPA as authorized illustrates several points for the implementation of ARPA-E that Congress should monitor:

• The innovation culture critical to success cannot be created by legislation alone unless the implementing agency shows real leadership, supports the new R&D mission, and is determined to use flexible statutory authorities to create a strong entity.

• An ARPA-E needs its own budget and the ability to control it, rather than taking its funding from other competitor agencies that will dispute the diversion

• An ARPA-E needs technical talent of great skill with leaders who also have experience at the helm of government R&D entities, and so can work with other agency bureaucracies

• An ARPA-E needs a clear mission—breakthrough technology or incremental technology (HSARPA tried both); mixing the two risks having the former become the billpayer for the latter.

Intelligence Advanced Research Projects Activity (IARPA)

The Director of National Intelligence (DNI) established IARPA in 2007. It effectively began operation in February 2008 when its first director, Lisa Porter, began to manage the organization. IARPA is considered one of the DNI's mission support activities. According to IARPA, it does not have an operational mission by design, but rather "its focus is on capabilities that its user community might want in the future, not on the requirements they have today." By user community, IARPA is referring to the Intelligence Community (IC), 16 federal organizations whose focus is national intelligence.

The initial stages of IARPA might be a useful model to examine as ARPA-E begins its operations. Dr. Porter used the following management design elements in developing the IARPA organization:

High-risk, high pay-off research with a clearly defined and measureable 3-5 year end-goal, rather than focusing on "quick wins" or "low hanging fruit"; Autonomy from the IC's current activities, in order to challenge the status quo, but also complementary to existing IC activities rather than duplicating them; Best and brightest technical Program Managers, to identify the best ideas and the best performers to investigate those ideas, and who constantly rotate to continue to bring fresh ideas; Sufficient funding, so program mangers can invest in their ideas to see if they are successful, to incorporate possible failures, and to attract the best Program Managers; Flexibility, rather than specifying a particular organizational design; Full and open competition, including peer or independent review, to select the best projects; Customer involvement, so that the outcomes from IARPA's projects have a transition strategy to an end user; and Acceptance of low success rates, as long as the results are fully documented and the failure was not caused by lack of technical and programmatic integrity.

IARPA uses the "Heilmeier Questions," developed by a former DARPA director to determine whether or not a good idea becomes an IARPA program:

1. What are you trying to do?

2. How does this get done at present? Who does it? What are the limitations of the present approaches? Are you aware of the state-of-the-art and have you thoroughly thought through all the options?

3. What is new about your approach? Why do you think you can be successful at this time? Given that you've provided clear answers to 1 and 2, have you created a compelling option? What does first-order analysis of your approach reveal?

4. If you succeed, what difference will it make? Why should we care?

5. How long will it take? How much will it cost? What are your mid-term and final exams? What is your program plan? How will you measure progress? What are your milestones/metrics? What is your transition strategy?

IARPA has three strategic thrusts: Smart Collection, to dramatically improve the value of collected data; Incisive Analysis, to maximize insight from the information the IC collects in a timely fashion; and Safe and Secure Operations, to counter new capabilities of U.S. adversaries that could threaten the ability of the United States to operate effectively in a networked world. IARPA's budget is classified.

What Might Be the Next Steps in Establishing ARPA-E?

The following are the likely events needed to take place, not necessarily in this order, to establish ARPA-E and begin its operation based on the steps taken by IARPA when it began operation. Concerned members of Congress may be involved in oversight of these activities to ensure that ARPA-E meets the goals outlined in the America COMPETES Act.

Nomination of ARPA-E Director by President Obama. Conduct Senate hearing and vote on confirmation of ARPA-E Director. Identify location for ARPA-E operations, perhaps temporary until permanent space is determined. Employ senior administrative staff. Develop plan for ARPA-E operations including organization design, R&D initiatives, and related program offices. Recruit Program Managers suited to managing the program offices. Post pre-solicitation announcement for each program Host proposer's day for each program to familiarize participants with ARPA-E and its interest in a given program; promote an understanding of proposal submission requirements and process; and foster discussion of synergistic capabilities among potential program participants Soliciting proposals. Review proposals and make awards.

As stated by one expert, "Standing up new energy technologies is a major and complex challenge, perhaps the most difficult technology stand-up challenge we have faced. Ever." If so, Congress might wish to ensure the implementation of ARPA-E meets the goals and principles provided in the America COMPETES Act.

Several management design elements to monitor include the timely appointment of a director for ARPA-E, recruitment of highly qualified technical Program Managers familiar with the DARPA process, maintenance of autonomy from DOE's current activities, and sufficient funding and organizational flexibility. In terms of the research funded, key aspects to monitor are the focus on high-risk, high-payoff, possibly transformational research that has clearly defined and measurable 3-5 year end-goals rather than incremental research or that focused on "quick wins;" full and open competition, so that the best projects are selected; and perhaps most challenging of all, customer involvement so that the outcomes from ARPA-E's projects have a transition strategy to an end user.

Activities in the 111th Congress

Besides the FY2009 appropriations activity described earlier and the likelihood that funding for the ARPA-E in FY2010 will be discussed by Congress, Members of Congress have introduced a number of bills that would impact ARPA-E:

Title IV, entitled Energy Innovation and Workforce Development, of a draft Senate Committee on Energy and Natural Resources bill entitled America Clean Energy Leadership Act of 2009, would amend the America COMPETES Act to give contracting authority to ARPA-E separate from the Department, make technical corrections to reporting requirements, and authorize ARPA-E through 2020. This bill was approved by the Senate Energy and Natural Resources committee on June 17, 2009. The American Clean Energy and Security Act of 2009 ( H.R. 2454 ),as passed by the House, would provide 1.05% of the cap and trade allowances from 2012 to 2050 to fund ARPA-E. In addition, it would require that the Secretary of Energy coordinate the innovation activities of Clean Energy Innovation Centers, created by that proposed act, with ARPA-E, national laboratories, and EFRCs, and within industry, and to avoid duplication of research, by annually issuing guidance regarding national energy research and development priorities and strategic objectives; and convening a conference of DOE staff and others to share research results, program plans, and opportunities for collaboration. The American Conservation and Clean Energy Independence Act ( H.R. 2227 ) would modify the strategic petroleum reserve and use funds generated as a result of this action to fund ARPA-E and a number of other energy-related activities.

Issues for Congress

Besides overseeing the establishment of ARPA-E and its funding, an issue for Congress is how ARPA-E will differ from existing DOE Office of Science activities, including the new Energy Frontier Research Centers, the DOE energy technology offices, and the Energy Innovation Hubs proposed in the FY2010 budget. In addition, several bills introduced in Congress would either provide ARPA-E with additional authority or a source of funds, or require the Secretary of Energy to monitor its interaction with other proposed DOE research and development organizations.

Appendix. Legislative Origins and Policy Debates Prior to ARPA-E Authorization

The DARPA model has frequently been proposed as a structure for improving the management of federal R&D. For example, an "advanced civilian technology agency" was proposed in the 100 th and 101 st Congresses. In 1992, an NAS report recommended that the government consider a civilian technology corporation or a civilian technology agency in limited areas including energy research. In 1993, the Progressive Policy Institute made a similar proposal. In 1992, presidential candidate Bill Clinton and Senator Al Gore proposed the creation of a civilian advanced research agency to support research on renewable technologies and renewable fuels.

From 1977-2000, DOE had an Advanced Energy Projects (AEP) division to "explore the feasibility of novel, energy-related concepts that evolve from advances in basic research," and "high-risk, exploratory concepts which do not readily fit into an existing DOE program area but which could lead to applications that span scientific or technical disciplines." In 1995, DOE placed AEP's activities under a new Computational and Technology Research program. This reorganization was formally stated in DOE's 1997 budget request. Funding for the program was reduced in FY1998 and FY1999, and the AEP program was terminated in FY2000.

Legislative Origins in the 109 th and 110 th Congress

Against this historical backdrop, in October 2005, a committee of the NAS recommended the establishment of ARPA-E in its report Rising Above the Gathering Storm. In November 2005, during the 109 th Congress, House Minority Leader Pelosi released an innovation agenda that proposed to create a new DARPA-like initiative within DOE. In 2007, this same concept was part of an updated "Innovation Agenda" proposed by then Speaker of the House Pelosi at the beginning of the 110 th Congress.

Although some analysts questioned whether ARPA-E was the best policy option to respond to the nation's energy challenges, the proposal recommended in the NAS report became the basis for congressional hearings and debates in the 109 th and 110 th Congresses and eventually served as the outline for ARPA-E as authorized in the America COMPETES Act.

Policy Debates

In the 109 th Congress, the Senate Committee on Energy and Natural Resources and the House Committee on Science held hearings on ARPA-E. Chairman of the House Committee on Science Boehlert stated that he was an "open-minded skeptic" regarding ARPA-E, and pointed out that the recommendation for its establishment was based on four assumptions that he considered questionable:

The problem with the energy market is that the supply of new technologies is insufficient; The supply of new technologies is constrained because of a lack of fundamental research; A sensible way to promote more fundamental research is to apply the DARPA model to a civilian energy sector; and Implementing the DARPA model is the best way to improve energy research, given tight federal budgets.

In the 110 th Congress, Chairman of the House Committee on Science and Technology Gordon held a similar hearing. In his opening statement, Chairman Gordon stated that, among several policy goals and objectives, DARPA has succeeded largely because it continued to foster a culture of innovation. The key for ARPA-E success, he said, is that it be a similarly nimble organization with minimal administrative layers and the ability to quickly start and stop research programs. According to the chair, "Investment in ARPA-E must be seen as the first step in boosting energy research and development to a level that addresses the scale of our challenge, and the true cost of doing transformational research."

The following sections discuss several key questions debated during the House Science and Technology and Senate Committee on Energy and Natural Resources hearings held regarding ARPA-E in the 109 th and 110 th Congress. This analysis incorporates issues discussed in hearing charters, Members' statements and questions, and the statements and responses of those providing expert testimony.

Is ARPA-E Needed?

Is ARPA-E needed when the federal government and industry already invest a great deal in energy R&D? Similarly, is a DARPA model the best research and development policy option for the energy marketplace? A related question is whether In-Q-Tel, the Central Intelligence Agency (CIA) venture capital firm that provides funding to identify, develop, and deliver technologies of interest to the intelligence community, is a better model for the energy marketplace than DARPA. (See Box 4 below .)

Proponents state that ARPA-E will address organizational problems at DOE by being small and flexible, unlike existing DOE organizations, which they believe are risk-averse and do not sufficiently interact with each other to reach the nation's energy goals. In addition, proponents argue that ARPA-E should focus on breakthrough research, using emerging basic research in areas such as nanotechnology to develop totally new technologies, as opposed to existing programs that have already identified paths forward and tend to focus on incremental advances. Further, unlike current programs, ARPA-E is designed to bridge the gap between basic research and industrial development—not to get products to the marketplace, but to transform the marketplace by accelerating research.

In response to the claim that ARPA-E will be more flexible and less risk-adverse, critics point out that the new organization will still be within DOE, so there is no guarantee that DOE management will let it take more risks than existing programs. While proponents contend that ARPA-E would bridge the gap between basic research and industrial development and that existing applied programs tend to focus on incremental advances, some critics argue that reforming DOE's existing programs would be better than creating a new organization.

Advocates for ARPA-E indicated that candidate energy technologies are not yet at a stage where venture capital investment, such as occurs with In-Q-Tel, would provide the best return. At some point, however, ARPA-E research may lead to technologies appropriate for venture capital investment. At that stage, it might be appropriate to incorporate a venture capital component into ARPA-E's design. Just as DARPA has evolved over 50 years, ARPA-E may need to evolve as well, some witnesses said.

How Much Funding Should ARPA-E Receive? How Might ARPA-E Receive Funding?

The America COMPETES Act authorized $300 million for FY2008, and "such sums as necessary" for FY2009 and FY2010. The NAS report proposed that funding for ARPA-E start at $300 million the first year and increase gradually over five or six years to $1 billion per year. At that point, the program's effectiveness would be evaluated and appropriate actions taken, according to the report.

One issue discussed in hearings was whether the level of authorized funding for ARPA-E is sufficient to support the research necessary for ARPA-E to reach its goals. Some noted with concern that the proposed $300 million in FY2008 was less than 0.02% of the transportation and energy industries' annual revenues, a level they believed was insufficient relative to the potential return. Some suggested that if it is to be successful, ARPA-E needs to be funded at a level comparable to DARPA—about $3 billion per year.

Some of those testifying did not believe ARPA-E should be funded due to budget constraints. ARPA-E, they argued, would be funded by shifting resources from DOE's Office of Science. Increasing funding for the DOE Office of Science is also a goal of the America COMPETES Act. Some hearing witnesses expressed concern that dilution of DOE Office of Science resources might influence DOE's acceptance of ARPA-E, and hinder its success. Supporters of ARPA-E agreed that funding for the DOE Office of Science is the highest priority and testified that funding for ARPA-E should not be redirected from that office.

Some witnesses expressed concerns that a risk-tolerant agency like ARPA-E could not survive if it was subject to the annual appropriations cycle, political and financial pressures, and resource fluctuations that might stifle innovation. To overcome this potential challenge, some policymakers and experts have proposed funding ARPA-E outside of the regular appropriations process. This might include, for example, providing an advance appropriation supporting ARPA-E for several years, rather than the usual one-year appropriation. Another option is to identify a dedicated revenue source for ARPA-E. Some of the funding sources that have been proposed are

oil industry tax and other incentives; gasoline tax; oil company profit tax; federal oil and gas royalties; climate change cap-and-trade program; and Strategic Petroleum Reserve funds.

An analogous situation might be research supported through the Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Program, authorized by the Energy Policy Act of 2005 ( P.L. 109-58 ), which receives funding of $50 million per year derived from royalties, rents, and bonuses from federal onshore and offshore oil and gas leases. Based on past experience, however, all of these proposals would face challenges in Congress.

Will ARPA-E Work?

Some critics believe that what is preventing the United States from reaching its energy goals is not federal funding for innovative, high-risk research, but rather a lack of private-sector investment in basic research, failure to effectively transfer new energy technologies to the marketplace, or some combination of these. They point out the lack of a captive customer as a challenge to ARPA-E's ability to be successful: energy has a broad and diverse public and private market, while DARPA has DOD as its single primary customer, guaranteeing a solid base of demand. ARPA-E proponents indicated that ARPA-E is needed for "translational research." This type of research identifies the most pressing market needs, selects and funds the most promising scientific approaches to enable breakthrough products, and brings the best candidates of those products to the brink of production.