The Department of Energy last month announced $151 million in funding for early stage clean energy projects, the first of several planned funding rounds, providing a jumpstart for venture-backed companies and university labs that are developing batteries, biofuels, LEDs and other technologies that are probably still years away from the market.
The funding comes from a new federal agency, called ARPA-E (Advanced Research Projects Agency-Energy), which the DOE modeled after DARPA, the defense agency that provided the first funding for the Internet. DARPA was created after the former Soviet Union’s 1957 launch of Sputnik, the first satellite to orbit the earth. ARPA-E was created two years ago by the Bush administration, but it wasn’t funded until April after the U.S. Congress passed the American Recovery and Reinvestment Act.
But what exactly the ARPA-E bets mean for the future of cleantech investing is uncertain.
At least one venture firm,
“It reduces our field of investment opportunities,” says DCM General Partner Tom Blaisdell. “We’re looking for a needle in a haystack anyway, that’s what a VC does, and in any market it’s our job to find those needles.”
Blaisdell says that DCM, which does not have a dedicated cleantech fund, will apply the same approach to cleantech that it uses with all its investments—asking if there is disruptive, defensible technology, and what does that mean?
Blaisdell adds: “We don’t expect people to pay extra to be green.”
Nevertheless, ARPA-E is moving full steam ahead. In May, the agency hired David Danielson, a senior associate at
For venture-backed Envia Systems Inc.—which has raised $10 million in funding from
So far, Hayward, Calif.-based Envia has dedicated its resources to developing cathode materials for developing energy storage solutions, but with the ARPA-E grant, Sinkula says that the company will venture into anode technology.
“The idea of high risk, high reward is that we hope to fund innovative projects that could transform the landscape the way the transistor has,” says Energy Secretary Steven Chu, who announced the federal project late last month at the Google campus in Mountain View, Calif.
Chu also called for “a second industrial revolution” in the United States, like the one created by the transistor, but added that “the scale of what has to be done [in cleantech] is staggering.”
Other venture firms whose portfolio companies received agency funding include
Among the recipients of the 37 grants, which average $4 million each, are a developer of an all-liquid metal battery, a bioreactor that may be able to produce gasoline out of sunlight and carbon dioxide, an enzyme that could capture carbon dioxide emissions from factories and power plants, and low-cost crystals for LED lighting.
Of the $151 million in grants announced under ARPA-E, about $33 million has been allocated for green vehicle projects, such as boosting the fuel economy of gas-powered cars to replacing lithium-ion batteries as the technology of choice for electric vehicles.
Two days after Chu’s talk, President Obama handed out $3.4 billion in DOE grants to modernize the nation’s electrical grid, which should help unclog backed up projects for smart meters and other energy efficient technologies.
“The structure of the U.S. stimulus program effectively brought project finance to a halt in the U.S. as developers waited to ensure they qualified for grants or debt guarantees,” wrote Michael Liebreich, CEO of
U.S. venture investments in cleantech rose third quarter, according to data from both Dow Jones and Thomson Reuters (publisher of PE Week) although they’re not back up to where they were a year ago either.