Department of Energy:

Advanced Research Projects Agency-Energy Could Improve Its Collection of Information from Applications

GAO-12-407T: Published: Jan 24, 2012. Publicly Released: Jan 24, 2012.

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Franklin W. Rusco
202-512-4597
ruscof@gao.gov

 

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What GAO Found

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 model of the Defense Advanced Research Projects Agency (DARPA), an agency created within the Department of Defense (DOD) in 1958 to direct and perform advanced research and development projects. Award winners must meet cost share requirements, through either in-kind contributions or outside funding sources.

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 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. The testimony today focuses on the key findings and recommendations from a GAO report on ARPA-E being released today by the subcommittee.

We conducted this work in accordance with generally accepted government auditing standards. Congress asked us 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.

In summary, the agency uses several selection criteria in making awards though its requirements for information on private sector funding could be improved. Also, our review suggests that most ARPA-E projects could not have been funded solely by the private sector. Finally, ARPA-E officials have taken steps to coordinate with other DOE offices to avoid duplication.

ARPA-E uses four selection criteria—the impact of the proposed technology relative to the state of the art; the overall scientific and technical merit of the proposal; the qualifications, experience, and capabilities of the applicant; and the quality of the proposed management plan—in awarding funds. ARPA-E’s eight program directors, who are generally scientists and engineers, create and manage funding programs for the agency and apply these selection criteria when reviewing applications. Of the 20 applications we reviewed for award selection criteria, all contained supporting information addressing the agency’s four criteria.

Our review suggests that most ARPA-E-type projects could not be funded solely by private investors. This finding is based on our interviews with representatives of venture capital firms and our analysis of subsequent funding received by contingently selected APRA-E applicants—those applicants that met ARPA-E’s selection criteria but were not selected for an award.

First, venture capital firms generally do not fund projects that rely on unproven technological concepts or lack working prototypes demonstrating the technology. 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. The representatives we spoke with from six venture capital firms indicated that they generally do not fund the types of projects that ARPA-E looks to fund for three reasons. First, venture capital firms generally do not fund projects that rely on unproven technological concepts or lack working prototypes demonstrating the technology. Second, 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. 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.

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: (1) prefunding coordination, (2) coordination of application reviews, and (3) participation in official DOE coordination groups. For 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.

Why GAO Did This Study

This testimony discusses our work on the Department of Energy’s (DOE) Advanced Research Projects Agency-Energy (ARPA-E). In 2007, the America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science (America COMPETES) Act established ARPA-E within DOE to overcome the long-term and high-risk technological barriers in the development of energy technologies.

For more information, contact Frank Rusco at (202) 512-3841 or ruscof@gao.gov.

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