On February 1, Secretary of Energy, Steven Chu recently announced that he would leave the Department of Energy (DOE) to return to research and teaching in California. He leaves the department with significant achievements, though not without controversy.
Chief among these accomplishments has been the development of the Advanced Research Projects Agency-Energy (ARPA-E). ARPA-E was envisioned in the 2005 report Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future. In this report, the National Academies warned policymakers that U.S. advantages in science and technology--which made the country a world leader for decades--had already begun to erode. ARPA-E was proposed in this report to “accelerate the process by which research is transformed to address economic, environmental, and security issues. It would be designed as a lean, effective, and agile—but largely independent—organization that can start and stop targeted programs based on performance and ultimate relevance.”
Chu was on the committee that wrote the report, and as he took the helm of the DOE in 2009, he oversaw the transformation of this vision into a program that “advances high-potential, high-impact energy technologies that are too early for private-sector investment.” The program’s success--in the first few years, 11 of the companies funded with $40 million dollars have attracted more than $200 million in combined private investment--can be attributed to its rigorous program design, competitive project selection process, and active program management.
Investment track record
Even the major criticism of the DOE over the last four years—its investment in solar panel maker Solyndra—points to the department’s astounding success rate. While it is true that the DOE invested $535 million in loans to Solyndra, none of which will ever see the inside of the US coffers again, in reality, the DOE’s success rate has been remarkable. The House Committee on Energy and Commerce found that the 5 failed investments made by the DOE came from two DOE programs. In these two programs, a total of 63 companies were funded; 58 of them are still in business—a success rate of 92 percent. In total the DOE has funded 1300 renewable energy companies during the Obama presidency, and less than 1 percent of these companies have gone under.
A department transformed
Matthew Stepp recently wrote about the quieter transformations taking shape at the DOE in an article for Forbes, “The Quiet Clean Energy Innovation Revolution at the Department of Energy.” During the four years of Chu’s tenure at the DOE, two behind-the-scenes changes have led to both better research outcomes and more efficient use of our energy research dollars.
Reorganized program offices
When Chu took office, EERE had ten technology programs under two offices (Energy Efficiency and Renewable Energy). Research affecting the same market could be managed out of different offices, preventing efficiencies and information sharing. In this configuration, vehicle technology research was housed under Energy Efficiency and biomass and fuel cell programs were under Renewable Energy. With the reorganization, these three programs have been combined under an Office of Transportation. The result is better coordination, more focused research goals and the ability to rationalize investment decisions.
Leveraging ARPA-E success throughout the DOE
The second change in department involves leveraging the strong success of the project management processes used by ARPA-E. Instead of the hands-off approach that the Department used to take when providing grants, the EERE now works with research partners to establish milestones for research so that its research spend is aimed at specific and measurable technology outcomes (e.g., cheap solar panels). Program managers now have the ability to terminate research projects that aren’t meeting milestones. These investments are then reallocated to projects with higher potential elsewhere in the department.
For a full accounting of specific accomplishments during Chu’s tenure at the DOE, read his letter to the department announcing his resignation. The conclusion, which provides both a context and vision for renewable energy in the US, is excerpted below.
“The Stone Age didn’t end because we ran out of stones; we transitioned to better solutions.”
“I want to conclude by making a few observations about the importance of the Department of Energy missions to our economic prosperity, dependency on foreign oil and climate change.
- The United States spent roughly $430 billion dollars on foreign oil in 2012. This is a direct wealth transfer out of our country. Many billions more are spent to keep oil shipping lanes open and oil geo-politics add considerable additional burdens. Although our oil imports are projected to fall to a 25 year low next year, we still pay a heavy economic, national security and human cost for our oil addiction.
- The average temperature of our planet is rising, with majority of the temperature increase occurring in the last thirty years. During the three decades from 1980 to 2011, the number of violent storms, floods, droughts, heat waves, wildfires, as tabulated by the reinsurance company Munich Re, has increased more than three-fold. They also estimate that the financial losses follow a trend line that has gone from $40 billion to $170 billion dollars per year. Most of those losses were not insured, and the country suffering the largest losses by far is the United States. As the President said in his recent Inaugural Address, “some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms.”
- The overwhelming scientific consensus is that human activity has had a significant and likely dominant role in climate change. There is also increasingly compelling evidence that the weather changes we have witnessed during this thirty year time period are due to climate change.
- Virtually all of the other OECD countries, and most developing countries including China, India, Mexico, and Brazil have accepted the judgment of climate scientists.
- Many countries, but most notably China, realize that the development of clean energy technologies presents an incredible economic opportunity in an emerging world market. China now exceeds the U.S. in internal deployment of clean energy and in government investments to further develop the technologies.
- While we cannot accurately predict the course of climate change in the coming decades, the risks we run if we don’t change our course are enormous. Prudent risk management does not equate uncertainty with inaction.
- Our ability to find and extract fossil fuels continues to improve, and economically recoverable reservoirs around the world are likely to keep pace with the rising demand for decades. As the saying goes, the Stone Age did not end because we ran out of stones; we transitioned to better solutions.
- The same opportunity lies before us with energy efficiency and clean energy. The cost of renewable energy is rapidly becoming competitive with other sources of energy, and the Department has played a significant role in accelerating the transition to affordable, accessible and sustainable energy.”