Funding research funds the future

February 7th, 2011

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This piece was originally published in The Hill.

$300 million.

That’s a lot of money to spend on a government program.

But what if that program was in fact an investment, one in which $300 million could bring much more in return? If it yielded even $1 billion it would be an enormously successful investment.

This is exactly the promise that the Advanced Research Projects Agency (ARPA-E) holds for the United States. Today, ARPA-E funding is going out across the country to help develop what were once only-in-America ideas.

These include:

•           An advanced battery technology for electric cars (that does not depend on rare earth metals from China) being developed at Arizona State University;

•           A joint University of Kentucky and Texas A&M effort to make coal-fired power plants cleaner by devising more efficient ways to capture pollution like CO2;

•           An intelligent power substation that would make it easier to get renewable energy to people and businesses by better managing a new smart grid being developed by a North Carolina company called CREE;

•           Biofuels that are being developed from bacteria at the University of Minnesota. If this research succeeds, it would be more efficient than ethanol and could use the U.S.’s existing refining and distribution infrastructure while helping to reduce our dependence on foreign oil.

By investing $300 million now in the nation’s clean energy venture capital effort, we have the potential of creating the new energy technologies that can capture a large portion of the $2 trillion global clean energy market. That’s a huge number of new products, businesses and jobs in America.

But time is running out.

China is rocketing ahead with hundreds of billions of dollars in private and public sector investment that could give it a leg up in competing for the clean tech market. China’s massive clean energy investments are helping to build entirely new universities to create – and entirely new cities to harness – the promise of clean energy. This parallels the scale of our own 19th century investments and laws that created the land grant colleges and railroad towns of the Midwest and Western U.S.

But in the United States of 2011, ARPA-E is on life support because of a budget anomaly that has left it gasping for funds. If Congress fails to act this month to fix its error, ARPA-E will have to close shop, just like so many promising American companies in this recession. This would cut-off a financial lifeline to entrepreneurs across the country who are in desperate need of early stage financing to take their ideas from the garage to the factory or the field.

Failing to fund ARPA-E would not make much of a ripple in Washington. But it would shutter projects that are already underway at universities and businesses across the country. Research in Arizona, Kentucky, Texas, North Carolina and Minnesota that struggled before ARPA-E thanks to a failure in the marketplace would likely stop altogether.

But is research stopping at Tsinghua University or facilities in the cities of Yizhuang and Xi’an? No worries there, thanks to the rate the Chinese government is investing and private capital is flowing to clean energy.

It did not used to be this way. In 1925, a conservative Republican Congress and President created the first federal aviation research agency. In fact, a Republican president oversaw the very model on which ARPA-E is based, the Defense Advanced Research Projects Agency (DARPA), an agency within the Pentagon created in 1958 in response to Sputnik.

Over the years, DARPA has been responsible for some of the most innovative technological breakthroughs of our time. Global Positioning Systems, the Internet and even stealth technology came from research funded by DARPA. ARPA-E was created in 2007 to work the same way – it asks researchers at universities and in the private sector to develop game-changing technologies to meet our clean energy needs. This is exactly the kind of early stage financing for “high-risk, high-reward” research that the private sector does not fund sufficiently.

Given the potential bang for the buck that ARPA-E could yield, its $300 million in funding seems like a no-brainer. It’s a small bet, with reasonable odds, and a huge payoff potential. Moreover, funding ARPA-E is a bet on Americans’ ability to turn game-changing ideas into market-creating, job-growing businesses. That’s a bet we should be willing to take.

Josh Freed is the Director of Third Way’s Clean Energy program, which is focused on significantly expanding federal clean energy innovation to help the U.S. private sector compete in the $2 trillion global clean energy market.