    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

                       ESTABLISHING THE ADVANCED RESEARCH
                       PROJECTS AGENCY-ENERGY (ARPA-E) --
                                    H.R. 364

    =======================================================================

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON ENERGY AND
                                  ENVIRONMENT

                      COMMITTEE ON SCIENCE AND TECHNOLOGY
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 26, 2007

                                   __________

                               Serial No. 110-22

                                   __________

         Printed for the use of the Committee on Science and Technology

         Available via the World Wide Web: http://www.science.house.gov

                                     ______

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                      COMMITTEE ON SCIENCE AND TECHNOLOGY

                     HON. BART GORDON, Tennessee, Chairman
    JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
    EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR.,
    LYNN C. WOOLSEY, California              Wisconsin
    MARK UDALL, Colorado                 LAMAR S. SMITH, Texas
    DAVID WU, Oregon                     DANA ROHRABACHER, California
    BRIAN BAIRD, Washington              KEN CALVERT, California
    BRAD MILLER, North Carolina          ROSCOE G. BARTLETT, Maryland
    DANIEL LIPINSKI, Illinois            VERNON J. EHLERS, Michigan
    NICK LAMPSON, Texas                  FRANK D. LUCAS, Oklahoma
    GABRIELLE GIFFORDS, Arizona          JUDY BIGGERT, Illinois
    JERRY MCNERNEY, California           W. TODD AKIN, Missouri
    PAUL KANJORSKI, Pennsylvania         JO BONNER, Alabama
    DARLENE HOOLEY, Oregon               TOM FEENEY, Florida
    STEVEN R. ROTHMAN, New Jersey        RANDY NEUGEBAUER, Texas
    MICHAEL M. HONDA, California         BOB INGLIS, South Carolina
    JIM MATHESON, Utah                   DAVID G. REICHERT, Washington
    MIKE ROSS, Arkansas                  MICHAEL T. MCCAUL, Texas
    BEN CHANDLER, Kentucky               MARIO DIAZ-BALART, Florida
    RUSS CARNAHAN, Missouri              PHIL GINGREY, Georgia
    CHARLIE MELANCON, Louisiana          BRIAN P. BILBRAY, California
    BARON P. HILL, Indiana               ADRIAN SMITH, Nebraska
    HARRY E. MITCHELL, Arizona           VACANCY
    CHARLES A. WILSON, Ohio
                                     ------

                     Subcommittee on Energy and Environment

                       HON. NICK LAMPSON, Texas, Chairman
    JERRY F. COSTELLO, Illinois          BOB INGLIS, South Carolina
    LYNN C. WOOLSEY, California          ROSCOE G. BARTLETT, Maryland
    DANIEL LIPINSKI, Illinois            JUDY BIGGERT, Illinois
    GABRIELLE GIFFORDS, Arizona          W. TODD AKIN, Missouri
    JERRY MCNERNEY, California           RANDY NEUGEBAUER, Texas
    MARK UDALL, Colorado                 MICHAEL T. MCCAUL, Texas
    BRIAN BAIRD, Washington              MARIO DIAZ-BALART, Florida
    PAUL KANJORSKI, Pennsylvania
    BART GORDON, Tennessee               RALPH M. HALL, Texas
                      JEAN FRUCI Democratic Staff Director
                CHRIS KING Democratic Professional Staff Member
             SHIMERE WILLIAMS Democratic Professional Staff Member
             ELAINE PAULIONIS Democratic Professional Staff Member
            MICHELLE DALLAFIOR Democratic Professional Staff Member
              ELIZABETH STACK Republican Professional Staff Member
                        STACEY STEEP Research Assistant

                                C O N T E N T S

                                 April 26, 2007

                                                                       Page
    Witness List.....................................................     2

    Hearing Charter..................................................     3

                               Opening Statements

    Statement by Representative Bart Gordon, Chairman, Committee on
      Science and Technology, U.S. House of Representatives..........     7
        Written Statement............................................     9

    Statement by Representative Gabrielle Giffords, Vice Chairman,
      Subcommittee on Energy and Environment, Committee on Science
      and Technology, U.S. House of Representatives..................     6
        Written Statement............................................     7

    Statement by Representative Bob Inglis, Ranking Minority Member,
      Subcommittee on Energy and Environment, Committee on Science
      and Technology, U.S. House of Representatives..................    10
        Written Statement............................................    10

    Prepared Statement by Representative Roscoe G. Bartlett, Member,
      Subcommittee on Energy and Environment, Committee on Science
      and Technology, U.S. House of Representatives..................    11

                                   Witnesses:

    Mr. John Denniston, Partner, Kleiner Perkins Caufield & Byers
        Oral Statement...............................................    13
        Written Statement............................................    14
        Biography....................................................    21

    Mr. William B. Bonvillian, Director, Washington Office,
      Massachusetts Institute of Technology
        Oral Statement...............................................    21
        Written Statement............................................    23
        Biography....................................................    28

    Dr. Stephen R. Forrest, Vice President for Research, University
      of Michigan
        Oral Statement...............................................    28
        Written Statement............................................    30
        Biography....................................................    33

    Dr. Richard Van Atta, Research Staff Member, Science & Technology
      Policy Institute, Institute for Defense Analyses
        Oral Statement...............................................    34
        Written Statement............................................    37
        Biography....................................................    47

    Discussion
      Nuclear Research...............................................    47
      Technology Commercialization...................................    48
      Homeland Security Advanced Research Projects Agency (HSARPA)...    51
      ARPA-E Reporting Structure.....................................    52
      ARPA-E Study...................................................    54
      Renewable Energy Technology Industry...........................    57
      ARPA-E Program Structure.......................................    61
      Energy Research Funding........................................    63
      Recoupment.....................................................    64
      Fostering an Innovative Culture................................    66
      Funding........................................................    68

                  Appendix: Additional Material for the Record

    H.R. 364, To provide for the establishment of the Advanced
      Research Projects Agency-Energy (ARPA-E).......................    74

    Section-by-Section Analysis of H.R. 364..........................    83

     ESTABLISHING THE ADVANCED RESEARCH PROJECTS AGENCY-ENERGY (ARPA-E) --
                                    H.R. 364

                                  ----------

                            THURSDAY, APRIL 26, 2007

                      House of Representatives,
                Subcommittee on Energy and Environment,
                           Committee on Science and Technology,
                                                        Washington, DC.

        The Subcommittee met, pursuant to call, at 2:00 p.m., in
    Room 2318 of the Rayburn House Office Building, Hon. Gabrielle
    Giffords [Acting Chairwoman of the Subcommittee] presiding.

                                hearing charter

                     SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

                      COMMITTEE ON SCIENCE AND TECHNOLOGY

                         U.S. HOUSE OF REPRESENTATIVES

                       Establishing the Advanced Research

                       Projects Agency-Energy (ARPA-E) --

                                    H.R. 364

                            thursday, april 26, 2007
                              2:00 p.m.-4:00 p.m.
                       2318 rayburn house office building

    Purpose

        On Thursday, April 26, 2007 the House Committee on Science &
    Technology, Subcommittee on Energy and Environment will hold a hearing
    to receive testimony on H.R. 364, Establishing an Advanced Research
    Projects Agency for Energy.
        Chairman Gordon introduced H.R. 364 on January 10, 2007. H.R. 364
    follows on the recommendation of the National Academies of Science
    report, Rising Above the Gathering Storm, which called for establishing
    a new energy research and technology development agency within
    Department of Energy patterned after the successful Defense Advanced
    Research Projects Agency (DARPA) within the Department of Defense. H.R.
    364 establishes such an agency, known as the Advanced Research Projects
    Agency for Energy, or ARPA-E.
        This hearing will seek to address the following issues relating to
    H.R. 364:

              What are the limitations of the current energy R&D
            enterprise in addressing the most pressing energy-related
            challenges? Is ARPA-E as laid out in H.R. 364 structured to
            address these limitations?

              Which areas of energy research should be explored by
            ARPA-E?

              What organizational elements of DARPA make it an
            attractive model for energy research and technology
            development? Are there advantages and drawbacks of other
            organizational models that should be examined in developing an
            ARPA-E?

              Does the level of investment prescribed in H.R. 364
            match the magnitude of challenges in energy research and
            development?

    Background

        H.R. 364 establishes the Advanced Research Projects Agency-Energy
    (ARPA-E), and sets up an Energy Independence Acceleration Fund to
    conduct activities under the Act. H.R. 364 was first introduced as H.R.
    4435 in the 109th Congress. In the 109th Congress the House Committee
    on Science held a hearing on March 9, 2006 examining the concept of an
    ARPA-E (HOUSE REPT. 109-39). H.R. 364 follows on the recommendation of
    the National Academies 2005 report, Rising Above the Gathering Storm,
    also known as the ``Augustine Report'' for its chair, retired Lockheed
    Martin CEO Norman Augustine. This report called on the Federal
    Government to create a new energy research agency within Department of
    Energy patterned after the successful Defense Advanced Research
    Projects Agency (DARPA) within the Department of Defense. Several
    similar bills calling for an ARPA-E have since been introduced in both
    the House and Senate (including S. 696 and S. 761).
        According to the Gathering Storm report, ARPA-E should be
    structured to ``sponsor creative, out-of-the-box, transformational,
    generic energy research in those areas where industry itself cannot or
    will not undertake such sponsorships, where risks and potential payoffs
    are high, and where success could provide dramatic benefits for the
    Nation. ARPA-E would 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.''
        The primary motivations for establishing an ARPA-E are the need for
    the U.S. to obtain more energy from domestic sources, become more
    energy efficient, and become less reliant on energy sources and
    technologies that have an adverse effect on the environment. The drive
    for new technologies is especially urgent given the geo-political
    forces that threaten global energy supplies and economic stability, the
    looming threat of global climate change, and probable regulation of
    carbon dioxide emissions. In addition to addressing the Nation's energy
    challenges, the Gathering Storm report concluded that ARPA-E should
    also contribute to U.S. competitiveness by playing an important role in
    ``advancing research in engineering, the physical sciences, and
    mathematics; and in developing the next generation of researchers.''
        ARPA-E is intended to pursue energy research and technology
    development with a structure that is fundamentally different from the
    traditional energy research enterprise. Critics of the Department of
    Energy's management of research programs contend that the stove-piped
    and bureaucratic structure of DOE is not conducive to quickly
    developing cross-cutting energy solutions, or translating energy
    research into commercial technologies. ARPA-E will instead have a
    relatively flat organization, similar to the small, flexible, non-
    hierarchical reporting structure at DARPA that fostered a successful
    culture of innovation. Furthermore, because the director of ARPA-E
    reports directly to the Secretary of Energy, as is written in H.R. 364,
    it is not beholden to any one particular technology area or research
    program within DOE. To further insulate ARPA-E from bureaucratic
    impediments, some stakeholders have suggested that ARPA-E should not be
    housed within DOE at all, but may be more appropriate as an independent
    government corporation which can still choose to fund projects within
    DOE.
        ARPA-E's unique role is best described as a ``marriage broker''
    that can identify people and capabilities within industry,
    universities, and the national labs, and put them together in hybrid
    teams, coordinate research, and quickly develop novel solutions to
    pressing energy problems. Key to this function is the program manager.
    As with DARPA, these individuals would ostensibly be very talented,
    knowledgeable, experienced in industry, and passionate in pursuing
    their mission. Because of the flexible hiring authority that is written
    into Section 2 of the bill, talented program managers can be recruited
    from a variety of fields and experiences, hired for a term of
    approximately 2-5 years, and paid a salary commensurate with what they
    would make in the private sector. Program managers and their superiors
    are given extraordinary freedoms and resources to pursue technologies
    quickly, as well as freedom to just as quickly stop research if it does
    not look fruitful. This is probably the biggest departure from the
    current DOE model.
        There is some disagreement on which stage of research and
    development ARPA-E should be focused--early stage basic research, or
    late stage demonstrations and commercial applications. This assumes
    that one is exclusive of the other, as is usually the case in the
    traditional energy R&D enterprise. However, a truly mission-driven
    ARPA-E will leverage its resources and institutional capabilities to
    pursue multiple stages of R&D in a ``whatever it takes'' approach to
    moving a potentially transformational technology from the laboratory
    bench to the marketplace. If adequately funded and directed, ARPA-E
    would engage in basic research into fundamental concepts with possible
    technology applications, and later-stage technology prototyping and
    large-scale demonstrations.
        Both critics and proponents of an ARPA-E agree that, for the
    program to be successful, it must be funded at levels to match the
    magnitude of energy challenges, and the high costs of energy research
    and technology demonstration. Despite the recent attention to energy
    challenges, R&D investment in energy remains far below the historically
    high levels of the 1970's. A recent GAO report commissioned by Chairman
    Gordon and Congressman Honda noted that ``DOE's total budget authority
    for energy R&D dropped by over 85 percent (in real terms) from 1978 to
    2005, peaking in the late 1970's but falling sharply when oil prices
    returned to lower levels in the mid-1980's.'' (GAO-07-106) Investment
    in ARPA-E should be seen in the context of increasing overall energy
    R&D expenditures enough to truly address the challenge. The Gathering
    Storm report calls for ARPA-E to be authorized at $300 million in the
    first year, and quickly escalate to $1 billion within five years. H.R.
    364 currently has a similar funding profile. Some suggest that the only
    way a high-cost, risk-tolerant program like ARPA-E would survive is if
    it has dedicated funding of some kind, and therefore would not be
    subject to annual appropriations or other political/financial pressures
    and resource fluctuations that stifle innovation.

    Witnesses

              Mr. William Bonvillian is the Director of the
            Washington Office of the Massachusetts Institute of Technology.
            Previously he served as Legislative Director and Chief Counsel
            to Sen. Joseph Lieberman, where he worked on a wide range of
            science & technology issues including those related to DARPA,
            and the establishment of a similar program at the Department of
            Homeland Security. Mr. Bonvillian will testify on the strengths
            and weaknesses of the DARPA model as it applies to energy
            research, and experiences with other models that should be
            considered in establishing an ARPA-E.

              Mr. John Denniston is a partner in the venture
            capital firm of Kleiner Perkins Caufield and Byers, based in
            Silicon Valley California, where his portfolio includes
            investments in clean energy and ``greentech'' businesses. Mr.
            Denniston previously served as Salomon Smith Barney's Managing
            Director and head of Technology Investment for Western U.S. He
            will address the role of the investment community in working
            with industry, universities, and DOE to commercialize promising
            energy technologies, and the policies that will spur innovation
            in this field.

              Dr. Stephen Forrest is the Vice President for
            Research at the University of Michigan, which recently
            established the Michigan Memorial Phoenix Energy Institute.
            Prior to joining the university, Dr. Forrest held positions at
            Bell Laboratories, University of Southern California, and
            Princeton. He will to testify on the proposed structure of
            ARPA-E, and how the role of university/industry partnerships
            can enhance energy R&D in the U.S.

              Dr. Richard Van Atta is at the Science & Technology
            Policy Institute of the Institute for Defense Analysis. Dr. Van
            Atta has conducted several studies on DARPA's research programs
            and their impact, as well as defense research projects under
            DARPA sponsorship. He will to testify on the organizational
            aspects of DARPA that fostered a successful culture of
            innovation.
        Chairwoman Giffords. I call the hearing to order. Good
    afternoon, everyone. It is an honor to be here today, and to
    have such an esteemed panel of witnesses. I also want to thank
    Mr. Chairman, Bart Gordon, for allowing me to step in to chair
    the Subcommittee hearing, instead of Congressman Nick Lampson,
    who unfortunately, is not with us right now, but I know he is
    recuperating very quickly, and will be back with us soon.
        We are here today to discuss H.R. 364, the bill to
    establish an Advanced Research Projects Agency for Energy, also
    known as ARPA-E, introduced by Chairman Gordon earlier this
    year.
        Despite passage of an Energy Bill in the 109th Congress,
    interest in energy, its production, its distribution, and its
    use, remain incredibly high. This is because we have not yet
    addressed the key challenges our society faces that are linked
    to our present energy sources and our present patterns of
    energy use.
        We want to reduce our dependence on foreign sources of
    energy to ensure our economic and national security, and to
    improve our balance of trade. We also need to address the
    environmental consequences associated with the emissions of
    greenhouse gases from fossil fuel use that have initiated the
    global warming and regional climate changes that we are now all
    experiencing.
        We must take steps to reduce our greenhouse gas emissions,
    and to diversify our energy sources. Part of that solution lies
    in getting more of the alternative energy sources and
    technologies to improve energy efficiency directly and
    immediately into the marketplace. But we must also make a
    greater investment in research and development to discover and
    to develop new energy sources, new energy-saving technologies,
    and new methods of reducing carbon emissions associated with
    fossil fuel use.
        The investments that we must make must support a wide range
    of ideas, and foster creative thinking that will develop the
    full range of energy technologies. We need these technologies
    to continue to support a vibrant economy and the quality of
    life that we all enjoy today, and that is what H.R. 364 is all
    about.
        My home State of Arizona, that I like to talk about so
    much, is rich in sunshine. We all know that. And solar
    technology has the potential to make significant contributions
    to our available energy resources. Within the last two years,
    researchers have found ways to use polymers and nanoparticles
    to create solar cells that capture infrared as well as visible
    light. With more efficient solar cells, sunshine-rich states
    like Arizona could exchange fossil fuel-produced electricity
    for electricity generated by clean, renewable solar power. We
    need to support this kind of creative application of
    nanotechnology to energy research to find the breakthroughs
    that will yield more than incremental improvements in current
    energy technologies. Also at the University of Arizona is
    Professor Roger Angel, who is doing a lot of innovative
    research on optics, using this technology to harness solar
    technology.
        One of the recommendations of the 2006 National Academy of
    Sciences report, Rising Above the Gathering Storm, was to
    create an energy projects research agency, using the successful
    model of the Defense Advanced Research Projects Agency, DARPA,
    that we are all very familiar with, and that has supplied many
    breakthrough technologies in the areas of defense, information
    technologies, and communications, among other things.
        Chairman Gordon has taken the National Academies' advice,
    and incorporated their recommendations into H.R. 364. We are
    pleased to have a very knowledgeable and distinguished panel of
    witnesses with us this afternoon to offer their thoughts on the
    ARPA-E concept, and on how H.R. 364 can guide our efforts to
    achieve our goals of energy efficiency, fuel diversification,
    energy independence, greater economic and national security,
    and environmental protection.
        Thank you all for being with us this afternoon. It is an
    honor to have you here in this subcommittee, and at this time,
    I will yield to the author of H.R. 364, Congressman, Chairman,
    Mr. Gordon.
        [The prepared statement of Ms. Giffords follows:]
            Prepared Statement of Representative Gabrielle Giffords
        Good afternoon. We are here today to discuss H.R. 364, the bill to
    establish an Advanced Research Projects Agency for Energy--ARPA-E--
    introduced by Chairman Gordon earlier this year.
        Despite passage of an energy bill in the 109th Congress, interest
    in energy--its production, its distribution, and its use remain high.
    This is because we have not yet addressed the key challenges our
    society faces that are linked to our present energy sources and our
    present patterns of energy use.
        We want to reduce our dependence on foreign sources of energy to
    ensure our economic and national security and to improve our balance of
    trade. We also need to address the environmental consequences
    associated with the emissions of greenhouse gases from fossil fuel use
    that have initiated the global warming and regional climate changes we
    are now experiencing.
        We must take steps to reduce our greenhouse gas emissions and to
    diversify our energy sources. Part of the solution lies in getting more
    of the alternative energy sources and technologies to improve energy
    efficiency into the marketplace.
        But we must also make a greater investment in research and
    development to discover and develop new energy sources, new energy-
    saving technologies, and new methods of reducing carbon emissions
    associated with fossil fuel use. The investments we make must support a
    wide range of ideas and foster creative thinking that will develop the
    full range of energy technologies that we need in the future to
    continue supporting a vibrant economy and the quality of life that we
    enjoy today. That is what H.R. 364 is all about.
        My home State of Arizona is rich in sunshine, and solar technology
    has the potential to make a significant contribution to our available
    energy resources. Within the last two years, researchers have found
    ways to use polymers with nanoparticles to create solar cells that
    capture infrared as well as visible light. With more efficient solar
    cells, sunshine-rich states like Arizona could exchange fossil fuel
    produced electricity for electricity generated by clean, renewable
    solar energy.
        We need to support this type of creative application of
    nanotechnology to energy research to find the breakthroughs that will
    yield more than incremental improvements in current energy
    technologies. Also, at the University of Arizona, Professor Roger Angel
    is doing innovative research on using optics to harness solar energy.
        One of the recommendations of the 2006 National Academy of Sciences
    Report: Rising Above the Gathering Storm was to create an energy
    projects research agency using the successful model of the Defense
    Advanced Research Projects Agency (DARPA) that we are now familiar with
    and that has supplied many breakthrough technologies in areas of
    defense and communications, among others. Chairman Gordon has taken the
    National Academy's advice and incorporated their recommendation into
    H.R. 364.
        We are pleased to have a very knowledgeable and distinguished panel
    of witnesses with us this afternoon to offer their thoughts on the
    ARPA-E concept and on how H.R. 364 can guide our efforts to achieve our
    goals of energy efficiency, fuel diversification, energy independence,
    greater economic and national security, and environmental protection.
    Thank you all for appearing before the Subcommittee this afternoon.

        Chairman Gordon. Thank you, Chair Giffords. I knew you
    would find a way to work Arizona into your statement.
        Let me welcome, very warmly welcome, this distinguished
    panel here today. As I mentioned to you earlier, this is sort
    of the getaway day. We finished votes earlier, and folks often
    are off back to their districts. That is, I guess, the bad
    news.
        The good news is that all of our energy staff is here, and
    quite frankly, you are better off talking to them than to us
    anyway. So, you got the folks here that are the most important
    in developing this bill. So, we very much appreciate you
    coming.
        As we all know, so I won't go into it but just a little
    bit, approximately two years ago the former Chairman of the
    Science Committee, behind you there on the wall, Sherry
    Boehlert, myself, as Ranking Member at that time, Lamar
    Alexander, and Jeff Bingaman, asked the National Academies to
    do a report on competitiveness of America in the 21st Century.
    We didn't like the news they gave us, but it was realistic.
    They also gave us some good suggestions for the future.
        Interestingly, yesterday, well, earlier, we passed
    unanimously out of this committee the math and science
    recommendations. They passed almost unanimously on the floor
    just yesterday. We have come out of Committee unanimously with
    the research suggestions, in terms of increasing the amount of
    funding to NSF and NIST yesterday, and they will be on the
    Floor next week. And so, we are moving forward, but this is an
    important piece of that. The other piece was, I won't say
    energy independence, that is going to be a little much to ask
    for, but to reduce our dependency on foreign energy.
        And ARPA-E was their suggestion. I unashamedly plagiarized
    it, and we put it into legislation last year. We reintroduced
    it this year. You are here with us today to help us fine-tune
    it, to make it as good a bill as we possibly can, because it is
    very important for this country, and we thank you for being
    here.
        Before this committee hearing, I set up something called
    Call Your Congressman. I sent out letters to about 85,000 homes
    to call me these next two days, and so we have been doing that,
    and I am going to have to go back and do some more of that.
        One thing, and I am going to ask you something a little bit
    controversial, as you give your input. We live in a pay-as-you-
    go world now here in Congress, which makes things difficult. We
    would like to have doubled the National Science Foundation
    sooner than ten years. We would like to have doubled NIST in a
    quicker time than ten years, but we are trying, again, we are
    on a pay-as-you-go budget, so it is more difficult.
        And so, we have to think in those terms, and one of the
    things that I would like to give some thought to is recoupment
    of some of the funds. And I know that probably you are all, in
    all likelihood, going to be opposed to that one way or the
    other, but I think that if we, in the political sense, thought
    almost of our investment as somewhat of a revolving fund over a
    long period of time, it would make it easier for us to get
    additional funds.
        And I know this is something that is not often used, and
    maybe Mr. Denniston will speak to some of that. Whether there
    could be a way to structure the program so the Federal
    Government could take a share, maybe at the end. Don't you wish
    we had a little bit of the Internet? We wouldn't have to do
    pay-as-you-go, we would just, we would have it already.
        But the point is, you know, is there a way to structure
    this in a responsible way that does not disincentivize people
    from investing and getting involved in this? And that would
    help us, in a political sense, make it more palatable to put
    more dollars in up front, and it won't be a completely
    revolving fund.
        So, in my absence, I hope that, and you can all badmouth
    it, because I am going to be gone, but if there is anything,
    you know, if there is a way, among all the bad stuff that you
    might think about how we might do that, just we would like to
    have that for that information.
        And again, we welcome you all here, and thank you for
    joining us, and I yield back my time.
        [The prepared statement of Chairman Gordon follows:]
                   Prepared Statement of Chairman Bart Gordon
        I would like to welcome everyone to this Energy and Environment
    Subcommittee hearing on my bill, H.R. 364 which establishes an Advanced
    Research Projects Agency for Energy.
        I would also like to thank our distinguished panel of witnesses for
    testifying. I believe your perspectives from the private investment and
    university communities, and your experiences with DARPA and similar
    technology agencies are critical to developing the most effective ARPA-
    E possible. I look forward to your testimony.
        I first introduced this bill in the 109th Congress in response to
    recommendations in the National Academies report, Rising Above the
    Gathering Storm, chaired by the eminent Norm Augustine, former head of
    Lockheed Martin.
        Along with Senators Alexander and Bingaman and others, I requested
    that the National Academies look into and report on the factors that
    threaten the U.S. global competitiveness and our leadership in
    technological innovation.
        In addition to strengthening our education and research system, the
    Gathering Storm panel recognized that the U.S. dependence on
    traditional energy sources and outdated technologies puts us in a
    perilous position.
        Not only do we face threats to our national security and economic
    volatility because of our reliance on unstable foreign regimes for oil
    and gas, we now must acknowledge that our energy use is directly tied
    to global climate change.
        This is an untenable position, and it simply must change.
    Conservation is the first element in addressing this challenge. But we
    must also be aggressive in developing the next generation of
    technologies to get beyond our current energy paradigm.
        The Augustine Commission recommended establishing ARPA-E, modeled
    DARPA's successful innovation model, to sponsor creative, out-of-the-
    box, transformational energy research in those areas where industry by
    itself cannot or will not undertake on it's own.
        DARPA succeeded largely because it continued to foster a culture of
    innovation. We cannot legislate an agency's culture. But we can provide
    the resources and the institutional structure to give exceptionally
    talented people the opportunity to pursue high-risk, but high-payoff
    energy research.
        A nimble organization with minimal administrative layers and the
    ability to quickly start and stop research programs is key to the
    success of ARPA-E.
        As imperative as it is, transforming our energy economy is a
    challenge that is unfathomable to most folks. We cannot afford to wait
    until we face severe disruptions to fossil energy supplies or serious
    impacts from climate change to address this challenge.
        Federal investment in energy technology R&D is down 85 percent from
    the 1980's. We must reverse this trend.
        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.
        We all agree that energy research and development is key to energy
    independence, innovation, workforce development and saving the
    environment.
        The question is how far are we willing to go to enact real change
    that garners tangible results?
        Establishing an ARPA-E in H.R. 364 is a bold step, but we've got to
    be willing to push the envelope and think outside the box to get the
    job done.
        I appreciate the Committee's support, and look forward to the
    witness' testimony.

        Chairwoman Giffords. Thank you, Chairman Gordon. At this
    time, I would like to yield to our distinguished Ranking
    Member, Mr. Inglis, for an opening statement.
        Mr. Inglis. And I thank the Chair, and thank the Chairman
    of the Full Committee for holding this hearing on the
    establishment of an ARPA-E.
        I think we share the same vision, America serving the
    world, and succeeding as the leading technological innovator.
    We also share the same goal, creating incentives for technology
    advancement. We share some of the same strategies and tactics
    toward the attainment of the goal and the fulfillment of that
    vision.
        There may be some wisdom in setting up a separate federal
    agency within, or create a new federal agency within the
    Department of Energy to mimic the risk-embracing and
    entrepreneurial activities of the DARPA program. It is possible
    that an ARPA-E research could eventually offer big payoff in
    the commercial energy market. At the same time, we are seeing
    some payoffs coming from existing DOE research, especially in
    hydrogen, nuclear, wind, and solar programs. My concern is that
    the ARPA-E could possibly divert funds away from these existing
    programs, and jeopardize the advances that we are seeing in
    those areas. I hope that we can find a way to ensure that that
    doesn't happen.
        Also, unlike DARPA, DOE doesn't have the contracting power
    to require private companies and utilities to use the
    technologies that an ARPA-E might produce. We are still not
    sure how best to clear the hurdle from basic, applied research
    in our National Labs, to applying that research in the
    commercial market. It is reasonable to think that without the
    ability to mandate applications, the higher risk ARPA-E
    programs would be able to conquer that tech transfer challenge.
    It is the question.
        So, hopefully, these questions, the one about whether it
    would siphon off funds, and the one about whether the lack of
    contracting power will affect the success of an ARPA-E, are two
    questions that we can discuss here today, as well as
    refinements to the bill.
        In any event, I think we can all agree that science and
    technology holds some of the solutions to the most pressing
    problems that we face, especially our dependence on fossil
    fuels from the most unstable regions of the world make us a
    nation at risk. We must break through to alternative sources of
    energy, and I hope that ARPA-E, if we create an ARPA-E, that it
    can be a big part of that story of success and progress.
        So, thank you again for holding the hearing, and I look
    forward to discussing these questions, and hearing what the
    panel has to say about a new ARPA-E.
        [The prepared statement of Mr. Inglis follows:]
                Prepared Statement of Representative Bob Inglis
        Good afternoon. Thank you, Mr. Chairman, for holding this hearing
    on the establishment of the Advanced Research Projects Agency-Energy
    (ARPA-E).
        Mr. Chairman, we share the same vision: America serving the world
    and succeeding as the leading technological innovator.
        We share the same goal: creating incentives for technological
    advancement.
        We share some of the same strategies and tactics toward the
    attainment of the goal and the fulfillment of the vision.
        I'm not opposed to creating a federal agency within the Department
    of Energy to mimic the risk-embracing and entrepreneurial qualities of
    the DARPA program. It is possible that the ARPA-E research could
    eventually offer a big payoff in the commercial energy market. At the
    same time, I already see real payoffs coming from existing DOE
    research, especially hydrogen, nuclear, wind, and solar programs. I'm
    concerned that the ARPA-E fund will divert funds away from these
    existing programs and jeopardize the advances we're already seeing in
    these areas. I hope that we can find a way to ensure that this doesn't
    happen.
        Unlike DARPA, DOE doesn't have the ``contracting power'' to require
    private companies and utilities to use the technologies ARPA-E might
    produce. We're still not sure how best to clear the hurdle from basic,
    applied research in our national labs to applying that research in the
    commercial market. Is it reasonable to think that, without the ability
    to mandate applications, the higher risk ARPA-E programs would be able
    to conquer that tech transfer challenge?
        Hopefully, these questions will be addressed in this hearing today
    and in refinements to the bill.
        In any event we can all agree that science and technology hold some
    of the solutions to the most pressing problems we face. Our dependence
    on fossil fuels from the most unstable regions in the world make us a
    nation at risk. We must break through to alternative sources of energy,
    and I hope that ARPA-E can be part of that process.
        Thank you again for holding this hearing, Mr. Chairman, and I look
    forward to discussing these questions with you and with the panel.

        Chairwoman Giffords. Thank you, Mr. Inglis, and if there
    are Members who wish to submit additional opening statements,
    their statements will be added to the record.
        [The prepared statement of Mr. Bartlett follows:]
            Prepared Statement of Representative Roscoe G. Bartlett
        Energy is the biggest challenge facing America and the world in the
    21st Century. Energy, particularly our reliance upon cheap energy and
    specifically, fossil fuels, is a high-stakes problem that is the
    foundation of concerns about peak oil, climate change, geopolitical
    stability, national security, and economic prosperity. These issues
    alone and certainly combined support the imperative to develop
    sustainable, renewable sources of energy as alternatives to fossil
    fuels. In response to this complex situation, the U.S. needs to invest
    in particularly high risk, high potential research.
        I am a co-sponsor of Chairman Gordon's bill, H.R. 364, that seeks
    to do this by establishing an Advanced Research Projects Agency for
    Energy (ARPA-E) within the DOE. This new program would be charged with
    the mission of reducing U.S. dependence on oil through the rapid
    development and commercialization of transformational clean energy
    technologies.
        An array of new possibilities needs to be explored with more
    research. Research and development is currently tremendously under-
    invested in this area. I understand that only one-tenth of one percent
    of the transportation industry's $1.8 trillion annual revenues is
    dedicated to R&D compared to an industry standard of five percent to 10
    percent. In the past three decades, energy R&D spending has dropped by
    two-thirds. H.R. 364 proposes $300 million in research funding, but
    this would amount to less than 0.02 percent of these industries' annual
    revenues.
        We are very much like the lucky couple with a big inheritance that
    provides them with 85 percent of their income. They realize that the
    inheritance will run out long before their retirement so they will have
    to earn more or spend less or a combination of both. That is about
    where we are with energy. Fossil fuels provide 85 percent of the energy
    we consume. In order to make substantial strides, we need to establish
    ARPA-E and invest much more in conservation, efficiency and alternative
    renewable sources of energy.
        As the bill states, similar to the Department of Defense's
    successful Advanced Research Projects Agency (DARPA), the proposed
    organizational structure will be better positioned to support
    innovative and transformational energy research where risk and pay-offs
    are both high. Dr. William Bonvillian testified that the key to DARPA's
    success has been its innovative culture. Key to DARPA's success has
    been identifying and supporting revolutionary technology breakthroughs.
    DARPA has adapted to create the means for more easily crossing the
    ``Valley of Death'' between innovations in the lab and success in the
    marketplace.
        We need more investment in addressing the ``DARPA-hard problems''
    and enormous challenges in the transition that we have to make from
    fossil fuels to sustainable, renewable sources of energy. We are so far
    behind what needs to be done. We are 37 years past peak oil in the
    United States. Global peak oil is inevitable and most experts in a GAO
    report that I requested project it could occur anytime between now and
    2020. We do not have anymore time to waste. ARPA-E would be a beginning
    in emulating the structure and success of DARPA by attracting talent to
    solve DARPA-hard energy problems. We need to have this in order to
    solve the energy crisis of the 21st Century.
        I was one of the scientists and researchers whose imagination was
    captured and galvanized by President Kennedy's challenge to land a man
    on the Moon by the end of the decade. I worked on the Mercury, Gemini
    and Apollo programs. It showed me that government leadership makes a
    difference in working to overcome unimaginable challenges.
        The father of America's nuclear navy, Admiral Hyman Rickover, said
    in a speech almost 50 years ago that fossil fuels are finite. Once
    burned, they're gone. We are about 150 years--I believe halfway--
    through the age of oil. Rickover describes it as a golden age. The
    energy from oil is incredible. We have built a civilization that is
    utterly dependent upon oil. However, in 5,000 years of recorded
    history, the oil age will be a blip.
        What energy source will come next? We have an obligation to future
    generations to preserve prosperity. This will not happen unless we lead
    a transition from finite fossil fuels to sustainable, renewable sources
    of energy. This situation is similar to a farmer eating seed corn; we
    are compromising our future harvest. We are endangering our prosperity
    and personal obligation to our children and grandchildren and
    compromising their potential for a safe and prosperous world.
        This energy crisis poses a threat to our national survival similar
    to what prompted the creation of DARPA in 1957. We should feel the same
    urgency as there was in 1957 and be willing to invest in our future.
    The creation of ARPA-E will help us to overcome this momentous
    challenge.

        Chairwoman Giffords. At this time, I would like to
    introduce our witnesses. I would like to start with Mr. John
    Denniston, who is a partner at the venture capital firm of
    Kleiner, Perkins, Caufield & Byers, where his portfolio
    includes investments in clean energy and greentech businesses,
    and has a particularly valuable perspective as an experienced
    investor in cutting edge technologies. Mr. Denniston recently
    met with the Governor of the State of Arizona, Janet
    Napolitano, so hopefully, we will have a chance to hear a
    little about that as well.
        Our next witness is Mr. William Bonvillian, and he is the
    Director of the Washington Office of the Massachusetts
    Institute of Technology. Previously, he served as legislative
    director and chief counsel to Senator Lieberman, where he
    worked on, among other things, the establishment of a DARPA-
    like program at the Department of Homeland Security.
        Dr. Stephen Forrest is the Vice President for Research at
    the University of Michigan. Dr. Forrest has held a number of
    positions in academia and industry, and we look forward to his
    discussion of the role of university and industry partnerships
    in energy research and development. Thank you for being here
    Dr. Forrest.
        And our final witness is Dr. Richard Van Atta. He is a
    Senior Research Analyst with the Science & Technology Policy
    Institute of the Institute for Defense Analyses, and one of the
    preeminent experts on the ARPA model for technology
    development.
        And our witnesses should know that spoken testimony, we
    like to try to limit it to about five minutes, but obviously,
    we are going to give you the time that you need, and we
    certainly, we have questions, and I am looking forward to a
    really good dialogue.
        So, let us get going with Mr. Denniston.

       STATEMENT OF MR. JOHN DENNISTON, PARTNER, KLEINER PERKINS
                            CAUFIELD & BYERS

        Mr. Denniston. Good afternoon, Chair Giffords, Ranking
    Member Inglis, Chairman Gordon. I am John Denniston. I am a
    partner with the venture capital firm Kleiner Perkins Caufield
    & Byers, based in Silicon Valley California. I am honored to be
    here today.
        Kleiner Perkins is a founder of TechNet, a network of
    technology entrepreneurs and CEOs, and a member of the National
    Venture Capital Association. My testimony today reflects my own
    views.
        Together with so many other Americans, venture capital
    professionals are deeply concerned about the risks to our
    nation's welfare posed by our energy dilemmas. We see three
    distinct challenges, each of them urgent: the dangers resulting
    from climate change, our foreign oil dependency, and the risk
    to American competitiveness if we fail to lead the global race
    to develop clean energy technologies. Yet, we also have faith
    these challenges present new opportunities to create jobs and
    prosperity. Over the past seven years, at Kleiner Perkins, we
    have focused on a new industry, dubbed greentech, which
    encompasses clean power, transportation, and water. Throughout
    the world today, greentech progress is already shaping the
    newest industrial revolution. The only question is, will
    America once again lead the way?
        I have addressed your specific questions in depth in my
    written testimony, and added some additional thoughts on the
    particulars of H.R. 364. In the interests of time this
    afternoon, I would like to focus my oral remarks on three
    issues: ARPA-E's mission, research funding levels, and some
    reasons for optimism that a new public-private partnership can
    create solutions to our energy predicaments.
        My first point is ARPA-E's mission should be to fund
    results-oriented translational research for renewable energies,
    energy efficiency, and carbon capture and sequestration
    technologies. I do not believe Congress should include within
    ARPA-E's charter any other fossil fuel technologies or nuclear
    power. They already dominate our energy system, needing no
    regulatory push to achieve market acceptance. Further, the
    translational research process is much better suited to
    identifying breakthrough technologies in emerging areas, rather
    than introducing incremental improvements in mature ones.
        Second, I will speak to energy research funding. Total
    federal spending on renewable energy research, the clean
    technologies essential for a healthy, prosperous future,
    amounts to little more than $1 billion per year. Frankly, this
    is inadequate relative to the scope of our problems, and the
    sheer size of the energy and transportation industries, which
    amount to over $1.8 trillion annually. We are way off scale.
    Big challenges demand commensurate responses. Our history shows
    how well Americans understand this.
        When the Soviet aerospace lead threatened U.S. prestige, we
    devoted $140 billion, in current dollar terms, for the Apollo
    Project. When DARPA was established in 1958, to combat Soviet
    troop superiority with superior military technology, it
    received an initial budget appropriation of $500 million. That
    was equivalent to $3.5 billion in 2007 dollar terms, and that
    was more than 16 times the federal budget share devoted to
    renewable energy research today.
        A final, more recent point of comparison. Years ago,
    Congress decided to prioritize finding cures to human disease
    and quintupled medical science research through the NIH, which
    today stands at $28 billion annually. During the same period,
    energy R&D declined by two thirds. I want to be clear. This is
    not to suggest that the NIH budget should be reduced. That
    would be a mistake. My point is, current federal renewable
    energy research funding, and with all due respect, the proposed
    funding levels under H.R. 364, are dangerously deficient. I do
    empathize with the difficulty of finding new appropriations in
    the current budget environment. We can discuss that, Chairman
    Gordon, afterwards, but we simply must find a way to treat our
    energy predicaments as a top national priority.
        Finally, I would like to speak to the economic opportunity
    for the United States. I am very optimistic. Increased federal
    sponsorship of clean energy will pay off not just in terms of
    climate stability and national security, but also in American
    prosperity. In Silicon Valley, we often refer to a principle
    known as Moore's Law, the idea that semiconductor performance
    doubles every 24 months. This rule is the fundamental
    underpinning of the information revolution, and today, we are
    seeing something remarkably similar in the energy field, a
    rapid cost reduction curve promising exponential growth and
    technological solutions we can't even imagine today.
        American scientists are ready to innovate our way out of
    our energy dilemmas, but the speed at which they do so will
    depend on government policy that is as bold and creative as
    they are. I am grateful for your leadership with this
    initiative today, and I am happy to be at your disposal, to
    help build a cleaner, more secure energy future that will allow
    America to lead the next industrial revolution.
        [The prepared statement of Mr. Denniston follows:]
                      Prepared Statement of John Denniston

    Introduction

        Good morning, Chairman Lampson, Ranking Member Inglis, and Members
    of the Subcommittee. My name is John Denniston. I am a partner at the
    venture capital firm Kleiner Perkins Caufield & Byers, based in Silicon
    Valley California. Founded in 1972, Kleiner Perkins is one of America's
    oldest and most successful venture capital firms. I'm honored to be
    here today and to have the chance to share my views on federally-
    sponsored energy research.
        Along with the rest of America, venture capital professionals--
    Republicans and Democrats alike--are deeply concerned about the risks
    to our nation's welfare posed by our energy dilemmas. Worried as we
    are, however, we are also in a unique position to recognize that each
    of these challenges offers new opportunities to build our economy,
    creating innovation, jobs and prosperity.
        Our daily work at Kleiner Perkins is to recognize emerging
    technology and market trends. We've funded more than 500 start-up
    companies over the years, backing entrepreneurs who have introduced
    innovative advances in such vital growth industries as information
    technology, medical products and services, and telecommunications. More
    than 170 of our companies have gone public, including Amazon.com, AOL,
    Compaq Computer, Electronic Arts, Genentech, Google, IDEC
    Pharmaceuticals, Intuit, Juniper Networks, Millenium Pharmaceuticals,
    Netscape, Sun Microsystems, Symantec, and VeriSign. Today, our
    portfolio companies collectively employ more than 275,000 workers,
    generate $90 billion in annual revenue, and contribute more than $400
    billion of market capitalization to our public equity markets.
        We now see a similar promise in the energy field--the potential to
    create jobs and new prosperity for generations to come. We refer to
    this emerging industry, encompassing clean power, transportation and
    water technologies, as ``greentech.''
        Kleiner Perkins is a member of the National Venture Capital
    Association and a founding member of TechNet, a network of 200 CEOs of
    the Nation's leading technology companies. I serve on TechNet's Green
    Technologies Task Force, which last month released a detailed set of
    policy recommendations to drive the development and adoption of
    technologies we believe can help solve some of the world's most
    pressing energy and environmental problems. My testimony today reflects
    my own views.
        You've asked me specifically to address energy research and
    development, and in particular, H.R. 364, which proposes the
    establishment of ARPA-E. I applaud your consideration of this critical
    issue. I do believe focused federal funding through a new agency, in
    addition to increased research funding from the Department of Energy,
    should be an element of America's new energy plan, and am happy to
    offer some suggestions as to how that might happen. In my view, we will
    not be able to address our energy problems unless there is a strong
    public-private energy partnership, one element of which must be a new
    commitment to federal leadership, including bold new policies and
    financial resources.
        Before answering your questions, I'd like to first say something
    about the overall objectives of federal energy research. Specifically,
    I want to articulate what I believe are the energy dilemmas we need to
    resolve. Clarity of purpose will help shape our policy initiatives.

    The Challenges

        I believe there is an unprecedented degree of consensus in America
    today as to our three main energy challenges: the climate crisis, our
    dependence on oil, and the risk of losing our global competitive edge
    by failing to champion new technologies that are becoming a huge new
    source of economic growth, jobs and prosperity.
    The Climate Crisis
        In February of this year, a report of the more than 2,000 scientist
    members of the Intergovernmental Panel on Climate Change warned us,
    once again, that the planet is warming, glaciers are melting and sea
    levels are rising. The panel concluded, with ninety percent certainty,
    that human greenhouse gas emissions are fueling these dangerous trends.
        The IPCC released a second report earlier this month, in which it
    predicted dire consequences for our increasingly unstable climate.
    Areas already without sufficient rain will become even drier, leading
    to less food production and more hunger. The world will face more
    serious floods and more severe storms. There's increased risk of
    disease.
        Last week, a panel of a dozen of America's most respected retired
    military generals and admirals warned global warming poses a serious
    threat to America's national security. They urged the United States to
    commit to a stronger national and international role to help stabilize
    climate change at levels that will avoid significant disruption to
    global security and stability.
        Many scientists predict we have only a short period of time to make
    dramatic cuts in our greenhouse gas emissions or risk irrevocably
    changing the climate. In fact, the IPCC report concludes temperatures
    and sea levels would continue to rise even if we were somehow able to
    immediately stabilize atmospheric concentrations. To date, we have
    failed to heed such warnings.
    Energy Security
        As for our energy security dilemma, this subcommittee is well aware
    the U.S. imports about 30 percent of its overall energy needs,
    including approximately 60 percent of its oil. Rapid growth in
    worldwide energy demand has stretched supplies, tripling the price of
    both crude oil and natural gas. And there is a significant risk this
    trend will continue, as world population and energy demand increase.
    Global Competitiveness
        Finally, our future prosperity is at risk, and here I speak from
    personal experience. In the past year, as I've traveled on business to
    China and Europe, I've witnessed how the rest of the world is striving,
    and often succeeding, to emulate the technology innovation that has
    been a hallmark of the U.S. economy and perhaps the single most
    important driver of our enviable standard of living. Increasingly,
    entrepreneurs overseas enjoy advantages in the form of determined
    government policies, including financial incentives and large
    investments in research and development.
        Credible economic studies suggest our technology industries are
    responsible for roughly one-half of American GDP growth. Our country
    would look quite a bit different today had we not, several decades ago,
    become a global leader in biotechnology, computing, the Internet,
    medical devices, semiconductors, software and telecommunications.
        Today, as our global energy challenges become ever more pressing,
    it's clear future economic growth throughout the world will depend to a
    great degree on new technologies to help us preserve our environment.
    Green energy technologies could very well become the economic engine of
    the 21st Century. Given its potentially massive market size,
    ``greentech'' could be the most powerful economic force of our lives.
    But will America again lead the way?

    Subcommittee Questions

        I'll proceed now to your specific questions:

    1.  If ARPA-E is established, what technology areas should be explored?

        I believe there are two dimensions to this question: what stage of
    energy research should ARPA-E target, and what types of energy research
    projects should this new agency fund?
        First, I believe there's a critical need for the Federal Government
    to pursue translational research in the energy field. Translational
    research differs from basic and applied research in that it begins with
    the project management team members identifying the most pressing
    market needs. Next, they select and fund the most promising scientific
    approaches that might enable breakthrough products, and finally work to
    push the best candidates through to the brink of production. This
    process is also known as ``right to left'' research since the ends
    determine the means.
        Translational research is by no means a substitute for basic or
    applied research--both of these are also critically important. But when
    it comes to energy issues, translational research has received only
    scant federal support--thus, this is where a new research agency could
    make the biggest difference. Translational research on defense issues
    at DARPA, after all, has resulted in the commercialization of many
    important technologies, including the precursor to the Internet,
    robotics, high-energy lasers, computer hardware, software and
    semiconductor fabrication.
        To whatever degree possible, the legislation creating the new
    energy research agency should support a distinct culture and
    structure--with both, ideally, mirroring DARPA's successful traits.
    Like DARPA, the new agency should be small, nimble, unafraid of risk,
    and ``flat''--i.e., non-hierarchical. It should also have cabinet-level
    sponsorship and support. This separate structure and identity would
    allow the new agency to create and sustain a culture suitable for
    translational research.
        With respect to the energy source question, I recommend ARPA-E fund
    renewable energies and energy efficiency technologies, including
    advanced batteries, fuel cells, solar, wind, geothermal, and biofuels.
        Given the urgency of reducing carbon emissions from coal-fired
    power plants, I believe ARPA-E should additionally have funding
    oversight for carbon capture and sequestration research. Other than
    this, however, I do not believe Congress should include fossil fuel
    technologies or nuclear power in ARPA-E's charter.
        ARPA-E's mission should be to fund projects that can solve our
    urgent energy challenges: climate change, energy security and American
    competitiveness. And our best hope of doing so is to rapidly develop
    clean, alternative energy sources. Our experience with DARPA should
    encourage us to expect ARPA-E to identify and develop innovative and
    commercially viable energy technologies we have not yet even
    considered.
        Fossil and nuclear energy sources already dominate our energy
    system, needing no regulatory push to achieve market adoption. Nor is
    the translational research process I've described above, and which I so
    strongly recommend for ARPA-E, designed to make incremental
    improvements to mature technologies such as these. On the other hand,
    translational research would be an excellent fit for emerging renewable
    energy, energy efficiency and carbon capture and sequestration
    technologies.
        Finally, there is a question as to whether ARPA-E should also fund
    demonstration projects. There is no doubt the Federal Government should
    significantly increase its support for demonstration projects. In
    theory, ARPA-E could be the vehicle to do so. However, some have
    questioned whether this would confuse ARPA-E's mission and be contrary
    to the goal of creating a small, nimble organization. DARPA benefited
    enormously over the years from its focused mission and consistent
    culture. The Subcommittee should be mindful of this history as it
    thinks through the optimal approach to demonstration projects. One
    potential strategy would be to create a separate division within DOE to
    manage demonstration projects.

    2.  What value can federal resources bring to technology investors and
    the private sector in developing innovative energy technologies?

        Federal resources can accelerate the adoption of innovative energy
    technologies in three ways: provide a level of research funding
    commensurate with the scope of our challenges; impose a price on carbon
    emissions that reflects their actual costs; and help create market
    conditions that are receptive to new energy solutions.

    Accelerate Renewable Energy and Energy Efficiency Technologies by
    Substantially Increasing Federal Research Funds

        The Federal Government should significantly increase funding for
    energy research and development. My understanding, based on a recent
    review by the American Association for the Advancement of Science, is
    the Federal Government currently provides roughly $1 billion annually
    for all non-nuclear, clean and renewable energy research. This is for
    our fast-changing energy and transportation industries, which account
    for more than $1.8 trillion of our current gross domestic product
    annually. Senior personnel at many of the top U.S. academic
    institutions have emphasized to me how little federal energy research
    funds are available for non-nuclear technologies--the cleanest, safest
    way out of our energy predicament.
        In the health care sector, in contrast, the National Institutes of
    Health annually provide $28 billion in research funding. In the past
    three decades, while energy R&D spending has dropped by two-thirds,
    health care R&D has more than quintupled. The research-dollar
    discrepancy between the energy and health care fields is particularly
    striking when you consider that each accounts for roughly 15 percent of
    U.S. GDP. I want to be clear--I am not suggesting for a moment the NIH
    budget should be reduced. That would be a mistake. My point is we must
    find a way to increase federal sponsorship of clean energy research,
    several-fold, to build up this young industry sufficiently to give
    ourselves a fair chance of solving our three serious energy problems of
    climate change, energy security and global competitiveness.
        Solving these problems will take all the leadership and financial
    commitment we can muster. Consider: America, in current purchasing
    power, spent over $20 billion on the Manhattan Project and over $135
    billion on the Apollo Project. Further, when DARPA was created in 1958,
    it received a budget appropriation of $500 million, which is the
    equivalent of $3.5 billion in current dollar terms. This amounted to
    .67 percent of total federal spending that year. Today, our spending on
    all renewable energy represents less than .04 percent of current
    federal outlays. In other words, DARPA's initial appropriation was more
    than 16 times the federal budget share devoted to renewable energy
    research today.
        Beyond increasing overall energy research funding, Congress should
    ensure the vast majority of new funding targets renewable energy and
    energy efficiency. Over the past 50 years, nuclear energy has received
    over 95 percent of U.S. funds spent on non-fossil fuel energy sources.
    We need to level the playing field.
        Boosting our commitment to renewables today is the best investment
    we can make to guarantee our future economic competitiveness. I'm
    convinced the next global industrial revolution will depend on the
    substitution of renewable energy for incumbent sources. Countries that
    develop strong domestic greentech industries will surely advance their
    economies and provide the jobs of the future.
        Will we be one of these leaders? After all, our standard of living
    today is the highest in the world, largely due to our leadership in
    technology innovation over the past half-century. But if we don't act
    decisively while we still have the time, we could easily be left behind
    in this new wave of innovation, eventually becoming a buyer, not a
    seller, of the pioneering energy technologies the world will demand.

    Impose A Price On Carbon Emissions

        Economists have been urging us for years to put a price on carbon
    that would accurately reflect its costs to society. Making fossil fuels
    more expensive will make newer, cleaner power sources relatively less
    costly, thus increasing demand for them. There are two ways to
    accomplish this: a carbon tax, and a carbon cap-and-trade system.
        A carbon tax has the advantage of simplicity and speed of
    implementation, but there are two key shortcomings: taxes of any sort
    are politically unpopular, and we will not know for certain the
    reduction in carbon emissions that will result from any given level of
    taxation. As to the political issue, however, I would argue public
    sentiment has changed so dramatically in just the past couple of years,
    which brought us Katrina, ``An Inconvenient Truth,'' and the last two
    IPCC reports, that policies once considered unacceptable may now be
    possible. Al Gore, when he was here, advocated an innovative ``tax
    shift'' that would achieve tax revenue neutrality by eliminating the
    payroll tax simultaneously with the adoption of a carbon tax. I
    recommend Congress explore Mr. Gore's idea.
        A well-designed cap-and-trade system would address the second
    problem with a carbon tax: it would offer certainty in emissions
    reduction. An additional advantage is that while it penalizes companies
    that continue to pollute, it also rewards those that make progress in
    adopting clean energy. America had success with a cap-and-trade system
    in the 1990s, when it was used to curb sulfur-dioxide emissions causing
    acid rain.
        In my view, Congress should consider a combined carbon tax/cap-and-
    trade package that would offer the implementation speed of a carbon
    tax, along with the predictable environmental outcome of a cap-and-
    trade system. This combination strategy would not result in a ``double
    tax.'' Instead, it would ensure we establish a carbon price level that
    achieves the reduction target as quickly as possible. If the carbon tax
    reduces carbon emissions to at least the level required by the cap-and-
    trade system, there simply won't be as many trades.

    Create Market Conditions Supporting Renewable and Energy Efficiency
    Solutions

        There are several measures Congress should enact to accelerate the
    adoption of renewable energy sources, including:

              Renewable Portfolio Standard and Expanded Renewable
            Fuel Standard. A new federal RPS, and a substantially higher
            RFS threshold, would send a powerful signal to the private
            market. Entrepreneurs and investors could be confident a market
            will exist for innovative new products, even if they have not
            yet had a chance to achieve economies of scale.

              Federal Incentives to Drive Clean Energy Development.
            Potential mechanisms include tax credits, subsidies, and loan
            guarantees. In addition, Congress should consider creating
            incentives for U.S. greentech companies to manufacture their
            products in this country. European and Asian countries offer
            incentives for U.S.-based companies to establish manufacturing
            operations overseas, in some cases including government payment
            of 40 percent of upfront capital costs and 15-year tax
            holidays.

              Energy Efficiency Standards. The United States could
            make great headway in solving our energy challenges by simply
            combating wastefulness. To this end, Congress should strengthen
            CAFE standards, require energy efficiency standards for
            electronic equipment and appliances, and work with states to
            create similar standards for buildings. Congress should also
            evaluate how to work with utilities so their profit potential
            is driven as much by introducing energy efficiency as it is by
            selling power.

              Federal Procurement. The Federal Government is the
            single largest U.S. energy consumer. As such, it can lead our
            energy transition by becoming the single largest green-
            technology user.

              Biofuels. Congress could take several steps to
            strengthen the rapidly emerging biofuels market. One of these
            should be an increase in the Renewable Fuels Standard
            consistent with President Bush's call to reduce gasoline
            consumption by 20 percent over the next ten years. Another
            contribution would be to restructure the existing blender's
            credit so it is paid to ethanol producers rather than gasoline
            distributors, provides a credit level that is inversely related
            to the price of gasoline (creating a safety net for ethanol
            producers in the case of a sudden drop in gasoline prices), and
            is made available to all alternative fuels, not just ethanol
            and specific molecular formulations of butanol.

    3.  Can you comment on the relationship between the federal, university
    and private industry sectors in energy research and technology
    development? Would an ARPA-E enhance this relationship to get more
    technologies into the marketplace?

        Historically, the Federal Government, American research
    universities and private industry have collaborated to unleash
    innovation in the information technology and life science sectors. The
    Federal Government's indispensable role has been to fund basic and
    applied research, and in some cases, translational research.
        I will share two examples. In the 1960's and 1970's, NIH funding
    for basic research in genetics at many U.S. universities helped launch
    what is today's flourishing biotechnology industry. Similarly, in the
    1970's and 1980's, DARPA provided funding to U.S. universities to first
    research, and later create, a communications network to tie together
    the Department of Defense and the various groups around the country
    performing defense research. That network, known as DARPANET, was the
    precursor to the Internet. The Federal Government's funding role has
    had a mighty impact: without it, U.S. biotechnology and Internet
    industries would surely not be as advanced as they are today.
        Today, however, with only a few exceptions, such as nuclear
    technology, the DOE provides very little energy research funding to
    American universities. As a result, there is very little government-
    university-industry collaboration in the alternative energy world. In
    fact, today's state of affairs may be discouraging American scientific
    talent from entering this important sector. Many senior university
    researchers have told me scientific talent would immediately flow into
    the renewable energy field if only federal research dollars were
    available to support projects.
        Congress now has a chance to revive the productive partnership of
    the past. It can create a new agency to pursue translational research
    focused on renewable energy, energy efficiency, and carbon capture and
    sequestration projects. It can also demonstrate its commitment to
    solving our urgent energy predicaments by significantly boosting
    overall renewable energy funding--both within DOE and in this new
    agency--to a level commensurate with the scope of the challenge.

    4.  Is there a concern in the business and financial communities about
    commercializing technologies developed by the Department of Energy? If
    so, what steps should be taken to ensure that the technologies
    developed within ARPA-E will make a comfortable transition to
    commercial application?

        The only concern of which I am aware is there have historically
    been few opportunities to commercialize breakthrough energy
    technologies sponsored by the Department of Energy outside of the
    nuclear field. I can assure you private industry will be eager to do
    its part if the volume of DOE-sponsored renewable projects increases.
        As for the second part of this question, I'll repeat what I've said
    above. ARPA-E can play a vital role in ensuring technologies cross the
    divide from laboratory to market by introducing a translational
    research approach to federal research funding, focused on renewable
    energy, energy efficiency, and carbon capture and sequestration.

    Additional Comments on H.R. 364

        I'd like now to offer my thoughts on a few specific provisions of
    H.R. 364.
    Goal
        The expressed goal of H.R. 364 is to ``reduce the amount of energy
    the United States imports from foreign sources by 20 percent over the
    next 10 years.'' There is a great advantage to having this kind of
    clarity, but I urge you to expand your objectives. While our reliance
    on foreign oil is a serious issue, it's just one part of our energy
    predicament. I do believe we must also keep in mind the serious
    problems looming for our nation if we don't act boldly to solve climate
    change and re-establish our technological leadership by leading the new
    green industrial revolution.
        Furthermore, I see that part of the goal of the bill is to
    accelerate innovation in ``both traditional and alternative energy
    sources. . .'' As I have explained above, I strongly suggest ARPA-E's
    mandate focus on renewable energies, efficiency strategies and carbon
    capture and sequestration techniques.
    Structure
        H.R. 364 proposes placing ARPA-E within the Department of Energy.
    Others have suggested the agency might have more success if established
    as a quasi-independent agency outside of DOE. I'm not an expert in this
    area, but would urge Congress to adopt the organizational structure
    that would give the new agency maximum autonomy so it can foster a
    nimble, fast-moving, risk-taking culture, and at the same time, provide
    it with cabinet-level protection and support to keep it adequately
    funded and effective.
    Funding
        H.R. 364's proposal to create a fund which will receive $300
    million in appropriations in 2007 and scale up to $915 million in 2012
    is far short of what is required to solve our energy problems. I refer
    you to my answer to Question 2, above. While I do appreciate the
    difficulty of finding resources for new projects, we need to bear in
    mind the massive scale of the American energy and transportation
    industries, which account for more than $1.8 trillion in combined
    annual revenue, amounting to roughly 15 percent of U.S. GDP. The
    proposed $300 million in research funding would amount to less than
    0.02 percent of these industries' annual revenues. We need to do much
    more, and move much faster, if we're to have any chance of solving our
    problems while we still can. We can and must do better than that.
    Recoupment
        Frankly, I believe the recoupment provision in H.R. 364 is
    inappropriate for translational research funding projects. It appears,
    moreover, to be a departure from past practices, with many unanswered
    questions about how it would work. Would an ARPA-E aim to recoup its
    investment from our research universities? From industry partners? The
    provision will likely deter some potential industry collaborators and
    almost certainly slow down the commercialization process. Let's not
    attach a string to these funds. If ARPA-E succeeds in commercializing
    breakthrough technologies, the Federal Government will be compensated
    many times over in the form of income and payroll tax revenues.
    Review
        H.R. 364 calls for the President's Council of Advisors on Science
    and Technology to evaluate ARPA-E just two and a half years after it is
    established, to determine whether it should be discontinued. To me,
    this seems counterproductive. If ARPA-E isn't working as well as it
    should, let's fix it. Let's not structure this new agency so that all
    translational research for renewable energy, energy efficiency and
    carbon capture and sequestration might cease because the agency fails
    to produce results in short order. Setting an unrealistic timeline
    would surely also make it difficult to hire top-flight talent.

    Reason For Hope: The Opportunities

        I would like to conclude my remarks by saying how confident I am we
    can solve our energy challenges through a new public-private
    partnership.
        Kleiner Perkins has been investing in greentech for the past seven
    years, backing more than 15 innovative companies in the fields of
    biofuels, coal gasification, energy efficiency, energy storage, fuel
    cells, solar energy, thermoelectrics and transportation. In the
    process, we've witnessed how technological progress is already
    revolutionizing our relationship with energy, solving problems that
    only recently seemed all but intractable. Solar manufacturers are
    innovating their way around silicon shortages, with next-generation
    materials including pioneering thin-film technologies. The agriculture
    industry is producing transportation fuels from plant matter--even from
    microscopic algae--and is developing exciting new way to convert weeds
    to biofuels. Nanotechnology breakthroughs are creating the promise of
    new ways to store energy, which in turn could dramatically speed up
    market adoption of solar and wind power.
        At Kleiner Perkins, four accelerating trends have encouraged us to
    make greentech a core investment sector:

              We're already seeing exponential growth in the energy
            technology field, with a rapid cost-reduction curve sure to
            become ever steeper over time, making emerging sources of
            energy increasingly competitive;

              Rising prices for fossil fuels--oil and natural gas--
            are making competing alternative energy sources more
            attractive;

              World-class talent, with both missionary and monetary
            motives, is racing into the greentech sector;

              Americans are growing much more aware of and
            concerned by our energy crises, a development we believe will
            lend support to more sweeping policy solutions.

    Moore's Law & The Pace of Technological Progress
        In Silicon Valley, we often refer to a principle known as Moore's
    Law, which I'd like to explain briefly here, as it's fortunately quite
    relevant to what we see happening in the energy field. Intel co-founder
    Gordon Moore has been credited with predicting, back in the 1960s, that
    semiconductor performance would double every 24 months. That prediction
    was spot on, and helps explain the information technology revolution of
    the past three decades. Better, faster, and cheaper silicon chips led
    our transition from an era--remember, it was just 25 years ago!--of
    big, mainframe computers used principally by university researchers, to
    our capacity today to read the morning's headlines on our cell phones.
        Today, we can already see a Moore's Law dynamic operating in the
    energy sector, giving us confidence the rate of greentech performance
    improvement and cost reduction will offer new energy solutions we can't
    even imagine right now. At Kleiner Perkins, we are excited by the
    technical breakthroughs we have seen in a host of scientific
    disciplines relating to the energy sectors, including material science,
    physics, electrical engineering, synthetic chemistry, and even
    biotechnology. We are particularly encouraged by innovations resulting
    from a combination of breakthroughs in several of these separate
    disciplines into single products.
        Witness some of these examples of the greentech equivalent of
    Moore's Law:

              The price of wind power has plummeted by an order of
            magnitude since 1980, to the point where, in some regions, it
            is now very close to being able to compete with coal and gas
            power;

              Solar power costs have fallen by more than 60 percent
            over the past fifteen years;

              Ethanol production efficiencies per gallon have
            improved by more than 45 percent since 1982.

        These and other improvements have occurred over a period of time in
    which there was relatively little government policy or entrepreneurial
    focus on these sectors.
        Today, the high cost of many new energy sources, relative to the
    incumbent competition, represents the most serious barrier to greater
    capital investment and more rapid adoption of clean power. Why does
    green power cost more? Primarily because it's so new. Being new, it is
    still at the very early stages of its cost-reduction curve, and is
    being produced in such low volumes that the industry has yet to benefit
    from economies of scale.
        We can be certain American scientists and engineers will
    continually innovate to improve the performance and reduce the costs of
    these technologies going forward. But the speed at which they do so
    will depend to a large degree on government policy that is as bold and
    innovative as they are. With strong Federal Government leadership,
    imagine what American ingenuity will be able to accomplish in the
    future as more and more of our best and brightest devote their life's
    work to the greentech field.
        Once again, I want to thank the Subcommittee for inviting me here
    today. I believe we all have an opportunity to be part of the solution
    to our country's energy crises. I look forward to today's hearing and
    to learning about how we can work together to build a more secure
    future.

                          Biography for John Denniston
        John Denniston came to KPCB from Salomon Smith Barney, where he was
    a Managing Director and head of Technology Investment Banking for the
    Western U.S., and also served on the Investment Committee for Salomon's
    direct investment venture fund and its venture capital fund-of-funds.
    Prior to Salomon, John was a Partner with the law firm Brobeck, Phleger
    & Harrison, where he was the head of Brobeck's Venture Capital Practice
    Group, Co-head of its Information Technology Practice Group and a
    member of the Investment Committee for its venture capital fund.

        Chairwoman Giffords. Thank you, Mr. Denniston. Next, we are
    going to hear from Mr. Bonvillian.

     STATEMENT OF MR. WILLIAM B. BONVILLIAN, DIRECTOR, WASHINGTON
             OFFICE, MASSACHUSETTS INSTITUTE OF TECHNOLOGY

        Mr. Bonvillian. Thank you, Madam Chairman, Ranking Member
    Inglis, Chairman Gordon, Members of the Subcommittee. I
    appreciate the opportunity to talk with you today. I want to
    note at the outset that the views I am going to express are not
    necessarily those of my employer, MIT.
        Let me first discuss the energy technology challenge. John
    has summarized that this is a high stakes challenge. Some have
    called for a Manhattan Project, some have called for an Apollo
    Project. Those famous technology development projects were
    focused on single technologies to be stood up in a
    comparatively short period of time, with a single customer with
    very deep pockets, the government. They were not designed for
    deeply embedded, stratified, highly competitive private sector
    markets. We are going to need an array of new technologies
    launched over a period of time, and there is going to be no
    short-term single energy silver bullet.
        You know, getting to the Moon in some ways starts to look
    fairly simple, given the complexities of the task that we have
    in front of us. Do we have the right institutional models that
    are going to put us in a place to handle this kind of
    challenge? And I would argue that the translational model is
    potentially an applicable model for this energy innovation
    challenge. Over the last half century, the big problem that we
    have had in launching new technologies has been to bridge the
    valley of death between the research side and the innovation
    side.
        The most successful model, as the Subcommittee well knows,
    has been DARPA, established by President Eisenhower in '57. It
    is sort of a model that works right to left, it looks at the
    right side of the innovation pipeline, the kind of results that
    may be needed, and then reaches back to the left side to figure
    out the fundamental science breakthroughs that are going to get
    us to the responses that we need to have on the right side. To
    borrow a phrase from MIT's President Susan Hockfield, it is
    very important that science sow lots of fields of wildflowers,
    but in addition to that, it is very important to bring those
    wildflowers into a garden occasionally, and gardening has been
    DARPA's business.
        Erich Bloch, who was President Reagan's very noted head of
    NSF, pointed out, research that collects dust on a shelf is not
    worth much to society. DARPA has attempted, not always
    successfully, but attempted to move things off the shelf. Let
    me emphasize, too, that an ARPA-E is not going to be able to
    impose technology solutions on the private sector. Its role is
    going to be to expand those options, to reduce the technology
    standup barriers and risks, to make them within range of
    private sector acceptance. This is going to have to be a
    collaborative effort.
        Let me dig a little deeper into the DARPA culture, because
    I think there are some lessons here, if we are going to have an
    institution that is workable. First, DARPA has used something
    called a hybrid model. It creates collaborative teams with the
    best university researchers, and connects them with outstanding
    firms, often small or mid-sized startup firms.
        These teams have created the connectedness that has enabled
    better movement across the valley of death that I talked about
    before. Now, you can't legislate culture. But you probably can
    put some management guidance into this legislation, and there
    are parts of the DARPA ruleset that I think will be critical to
    making the culture of this translational model work. I will
    just cite a few.
        Keep it small, keep it flexible. Make it flat, non-
    hierarchical. Allow the entity autonomy and freedom from
    bureaucratic impediments. Get a world-class technical staff.
    Create outstanding teams and networks among the researcher
    teams. Ensure in hiring both staff continuity and change. Put
    the leadership in the hands of outstanding program managers.
    Emphasize acceptance of failure and willingness to take risks.
    Set an orientation to revolutionary breakthroughs. And create a
    mix of connected collaborators that represent a series of
    disciplines that come to bear on problems.
        Now, in my written testimony, I have a description of some
    other organizational models, which the Committee asked me to
    talk about. Those are complex and complicated, and I have only
    a limited amount of time. Hopefully, we can come back to those,
    particularly the sort of government corporation model and the
    experience at HSARPA, because I think there are lessons here,
    but let me emphasize, I think, some of what John was talking
    about.
        We need to operate at scale here if we are going to stand
    this up. The energy sector is a trillion dollar sector. A
    modestly funded R&D effort is just not going to drive
    transformational shifts, and we are not to get there on the
    cheap. So, the funding at the outset is the critical issue.
    Recoupment only solves a later end problem. I agree we can talk
    about some of the alternative revenue sources that might be
    possibilities.
        Let me try and summarize a few key points here. Energy
    technology is a major, complex challenge, probably the most
    difficult technology challenge we have ever faced. There is a
    gap in our federal innovation institutions for energy, and we
    will call that a translational research gap. A way of filling
    that gap is to follow the DARPA-like model with an ARPA-E,
    build it around a translational model that combines, in a
    hybrid approach, great university, and great firm researchers,
    and make them compete. The culture of DARPA is going to
    determine its success, not the legislative framework, so
    getting that culture right is crucial.
        DARPA could be stood up inside DOE, it could be stood up
    outside it. In either case, it is probably going to have to
    follow what is known as an ``island bridge'' model. You want to
    allow this entity a substantial amount of autonomy to be
    creative, but it has to be connected back by a bridge to
    leaders that are going to encourage it and protect it. And you
    must ensure that it has support and funding. So, you need the
    island and the bridge.
        Energy R&D is underfunded, and ARPA-E is going to need to
    operate at significant scale to achieve success. We should not
    do ARPA-E unless we are prepared to meet that challenge. An
    ARPA-E is not going to focus on short-term problems. We have a
    long-term focus that we need to tackle here.
        Thank you.
        [The prepared statement of Mr. Bonvillian follows:]
                  Prepared Statement of William B. Bonvillian
    Mr. Chairman, Ranking Member Inglis, Members of the Subcommittee:

        I appreciate the opportunity to speak with you today. I should note
    the outset that the views I express today are my own, and I am not
    speaking for my employer, MIT. I ask that my Comments to the Committee
    submitted on April 2nd elaborating on this issue be included in the
    hearing record.

    THE ENERGY TECHNOLOGY CHALLENGE:

        Energy is a high-stakes problem with much hanging in the balance--
    energy security and resource dependency on the Middle East, climate
    change, economy-wide shake-downs from high cartel-imposed prices,
    disruptive trade imbalances, and macroeconomic trade costs.\1\ In
    response, some have called for a Manhattan Project for new energy
    technology, or for the equivalent of the Apollo Moon Mission. But those
    famous technology development projects were focused on single
    technologies to be stood up in comparatively short-term multi-year
    projects. They were simple compared to the energy technology challenge.
    The technologies launched then were for a single customer with the
    deepest pockets, for the government sector, not for deeply imbedded,
    stratified and highly competitive private sector markets. Energy
    challenges require a very different development model in which a
    complex mix of energy technologies must evolve over decades into the
    private sector. As some have noted, there will be no short-term energy
    silver bullet.
    ---------------------------------------------------------------------------
        \1\ This testimony draws on points from my Comments to the House
    Committee on Science and Technology on ARPA-E Legislation (April 2,
    2007), from W.B. Bonvillian, Power Play, The American Interest (Nov.-
    Dec. 2006), pp. 38-49, and from a pending article on transitioning new
    energy technologies.
    ---------------------------------------------------------------------------
        An array of new energy technology is needed. Some of these
    technologies have been tested at economic scale and are ready for
    demonstration and implementation, others require breakthrough research,
    still others both breakthroughs and large-scale development. These
    technologies show that a new energy economy is possible if we have the
    political will to make it happen. A key point is that we will need many
    strands of technology development in multiple time dimensions; there
    cannot be a single technology focus. And the technology development
    system we create will need to consider and retain room for evolving
    advances over time--there will be next generation batteries and solar
    but there will be third and fourth generation advances that will
    displace the first and second generations, so there must be space for
    promoting both incremental advance and disruptive new technologies;
    technology arterial sclerosis must be avoided. We have a complex
    systems problem--there will be multiple energy technology pathways that
    must evolve over time, and each path will be different, although many
    will have to be complementary. This is perhaps the most complex
    technology evolution problem the U.S. has ever faced. It makes getting
    to the Moon start to look simple by comparison.

    THE TRANSLATIONAL MODEL FOR ENERGY TECHNOLOGY INNOVATION:

        Over the past half century, the most difficult step in a
    technological revolution has been to bridge the ``valley of death''
    between research and innovation. The government has played a major role
    in this bridge-building, on the innovation ``front end'' by support for
    R&D, and on the ``back end'' by supporting technology prototyping and
    initial market creation, largely though its pervasive role in the
    defense technology sector.
        The most successful model, as the Subcommittee is aware, for
    bridging the gap between research and innovation, for moving from the
    front end close to back end, in the U.S. innovation system has been the
    Defense Advanced Research Projects Agency (DARPA), established by
    President Eisenhower in 1957. While DARPA has played many roles over
    many years, its most important role is sometimes described as working
    ``right-left.'' DARPA represented a change from the ``basic science
    only'' model of most U.S. R&D agencies and aimed for a ``connected''
    model that bridges the ``Valley of Death,'' reaching between research
    and late stage technology development up to the prototyping stage. In
    other words, DARPA has connected the stages in the U.S. R&D pipeline
    that traditionally have been institutionally separated and has put R&D
    and technology on a continuum. It has done this by following the
    ``right-left'' model--deciding up front on a breakthrough technology
    that must be achieved on the right side of the innovation pipeline,
    then reaching back to the left side of the pipeline to seek the most
    promising breakthroughs in science that must be found and nurtured to
    get there. This is the opposite of the curiosity-driven-research-
    without-regard-to-technology-objective that dominated the ethos of most
    U.S. fundamental science agencies. To borrow a phrase from MIT's
    President Susan Hockfield, for science success it is important to sow
    fields of wildflowers; sometimes it is also important to bring those
    wildflowers into a garden.
        A good term for DARPA's role is ``translational''--translating
    science breakthroughs into technology that gets stood up and
    implemented. As Erich Bloch, President Reagan's famed NSF Director,
    once pointed out, research that collects dust on a shelf is not worth
    much to our society. DARPA's role has been in nurturing technology to
    make sure it gets off the shelf. A DARPA-like translational ``connected
    science'' technology development role is not currently performed at
    DOE; there is an institutional gap there. Given the need for
    breakthrough energy technologies and transitioning them--and this is
    truly the grand technology challenge of our time--this is arguably an
    institutional gap that should be considered. This would be the central
    mission of an ARPA-E.
        Let me emphasize that an ARPA-E cannot impose technology solutions
    on the private sector. Its role will be to expand the options, and
    reduce the technology stand-up barriers and risks, for private sector
    firms. It will need to work with the private sector to evaluate what
    the energy technology leverage points are, what technology paths could
    have maximum impact, and collaboratively explore and nurture technology
    opportunities.

    CAPTURING THE DARPA CULTURE--THE HYBRID MODEL AND THE DARPA RULESET:

        The key to DARPA's success has been its innovative culture. A DARPA
    clone will not work unless it is able to build a strong innovation
    culture. DARPA provides some important lessons. A key has been its
    creation of ``hybrid'' collaborative teams, combining the best
    university researchers on the research side with outstanding firms
    (usually startups, small or mid-sized firms hungry for technology
    advance) on the development side. This university-industry hybrid
    approach has proven a key mechanism for DARPA's success particularly on
    revolutionary technology breakthroughs--these teams create the
    capability for more readily crossing the ``Valley of Death.'' DARPA
    also competes its research, looking for and regularly obtaining the
    country's most talented research teams. An ARPA-E must find new
    entrants and talent to supplement the existing research base working on
    energy R&D if we are to have the breakthroughs we need; a competitive
    hybrid model is a way to achieve this.
        Let me emphasize that you can't legislate culture--but you can put
    management guidance into legislation, encourage an ARPA-E to hire from
    those with translational research experience (basic research background
    is not enough), and find researchers who have stood up or worked in
    innovative companies and know how to bridge R and D. It is important,
    too, for Congress to exercise strong oversight, particularly at the
    time of standup. It should also be pointed out that it takes two to
    translate--the Administration is going to have to affirmatively want to
    do this and to do it right for it to work.
        Other rules from the DARPA ruleset that create its culture and are
    relevant to an ARPA-E include:

              Keep it small and flexible: DARPA consists of only
            100-150 professionals; some have referred to DARPA as ``100
            geniuses connected by a travel agent.''

              Create a flat non-hierarchical organization.

              Allow the entity autonomy and freedom from
            bureaucratic impediments: DARPA operates outside the complex
            and slow government hiring process and standard government
            contracting rules, which gives it unusual access to talent,
            plus speed and flexibility in organizing R&D efforts.

              Hire an eclectic, world-class technical staff.

              Create outstanding teams and networks among its
            researchers.

              Ensure in hiring both continuity and change: DARPA's
            technical staff are hired or assigned for 3-5 years. Like any
            strong organization, DARPA mixes experience and change. It
            retains a base of experienced experts that know their way
            around DOD, but rotates most of its staff from the outside to
            ensure fresh thinking and perspectives.

              Place leadership in the hands of outstanding program
            managers: In DARPA's words, ``The best DARPA Program Managers
            have always been freewheeling zealots in pursuit of their
            goals.'' The DARPA director's most important job historically
            has been to recruit highly talented program managers and then
            empower their creativity to put together great teams around
            great advances.

              Emphasize acceptance of failure and willingness to
            take risk.

              Set an orientation to revolutionary breakthroughs in
            a connected approach: DARPA historically has focused not on
            incremental but radical innovation. It emphasizes high-risk
            investment, moves from fundamental technological advances to
            prototyping, and then hands off the production stage.

              Create a mix of connected collaborators from a range
            of disciplines.

    OTHER ORGANIZATIONAL MODELS:

        The Subcommittee requested that I review several other
    organizational models for ARPA-E.

        Wholly Owned Government Corporation: For all innovation entities in
    the business of standing up new technologies, historically the best
    model has been to put them on a protective island free to experiment
    apart from contending bureaucracies, but to ensure a strong bridge back
    to overall organization leaders prepared to defend the entity. If ARPA-
    E is not housed in DOE, an alternative option is to make it a wholly-
    owned government corporation entirely outside of DOE.\2\ Government
    corporations appear best at pursuing limited programs of limited
    visibility that do not tangle with major interests or other parts of
    the national power structure; ARPA-E will likely have a much more
    prominent role because of the importance of energy as a national issue.
    Programs housed in government corporations that reach high levels of
    visibility can flounder without strong connections to national
    leadership. If a government corporation model is selected for ARPA-E, a
    connection to the government leadership could be attempted by naming
    the Secretary of Energy as chairman of its board with government
    control of the board.
    ---------------------------------------------------------------------------
        \2\ See, generally, Michael Froomkin, Reinventing the Government
    Corporation, 1995 Ill. Law Rev. 543 (1996).
    ---------------------------------------------------------------------------
        Locating ARPA-E in a government corporation assures more hiring
    flexibility, and competitive salary structures more comparable to the
    private sector, than if it is a DOE entity. It also frees the entity
    from sometimes slow-moving government procurement requirements. (DARPA
    offsets these problems by specific legislative authorities, which could
    be authorized for ARPA-E.)

        In-Q-Tel: In-Q-Tel was established in 1999 as an independent, not-
    for-profit corporation to help the CIA find, obtain and deploy new
    technologies. In-Q-Tel attempts to act as, in effect, a venture capital
    firm, making equity investments in and contracting with IT technology
    firms that have advances In-Q-Tel views as promising. Although
    financial return is not its priority, it can produce investment gains
    when a company in its portfolio matures and exits through a buy-out or
    IPO; gains must be reinvested in new firms with new technologies. In-Q-
    Tel believes its model gives it a flexibility that traditional
    government contract approaches do not allow, to gain from the fast pace
    of developments in the IT and related technology fields.
        Because In-Q-Tel is small it can't really be accused, despite the
    financial positions it takes in emerging firms, of affecting markets
    and ``picking winners and losers.'' If an ARPA-E, is stood up and
    acquires funding comparable to DARPA's, however, it would be operating
    at a far larger scale and its market interventions could affect
    competitive outcomes. This could be a problem. In addition, while In-Q-
    Tel is operating in a very dynamic largely IT sector with new
    technologies rapidly emerging from firms, that is not the situation
    with new energy technology. ARPA-E, therefore, would not have such a
    fertile seedbed to operate in. An ARPA-E also cannot really take the
    late stage venture capital-type approach In-Q-Tel uses because it needs
    to nurture breakthrough technology from an earlier R&D stage. While In-
    Q-Tel can focus on technologies already being stood up in companies,
    ARPA-E can't; it needs to back R&D, not to simply tilt later stage
    prototyping, late stage design, and products, as In-Q-Tel does. In-Q-
    Tel's model is interesting for the tasks it faces, but the potential
    funding scale of an ARPA-E could be viewed as overly interventionist in
    energy technology if it was organized like In-Q-Tel, and it faces a
    breakthrough technology R&D mission not a late stage mission like In-Q-
    Tel. The technology needs in the two sectors, energy and intelligence,
    don't allow the models to match.

        Skunkworks: A third model would be a skunkworks, an engineering
    term that describes a group separated out of an overall organization
    that is left largely autonomous and free of bureaucratic constraints to
    build advanced technology prototypes and products. The most famous
    example is aircraft designer Kelly Johnson's skunkworks at Lockheed
    which created such famous aircraft as the P-80 Shooting Star, the U-2,
    the SR-71 Blackbird, and the F-117 Stealth Fighter. IBM's rapid stand
    up of its original PC also followed a skunkworks model. However, the
    skunkworks concept traditionally has been aimed at the engineering
    stage not the breakthrough translational research stage that an ARPA-E
    would also need to pursue. The traits of autonomy and freedom from
    bureaucratic controls are also inherent in the DARPA model.

        HSARPA: The Science Committee, working with the Senate Committee on
    Homeland Security and Governmental Affairs, previously authorized a
    DARPA model in the context of the Homeland Security Science and
    Technology Directorate. While the Committee provided HSARPA with a
    strong and flexible authorization closely modeled on DARPA's strengths,
    HSARPA has never been adequately utilized or implemented. It currently
    exists as a shell with a minimal budget. While a talented initial staff
    was recruited for HSARPA, a director was not named for approximately a
    year, so it lacked leadership for the start-up process in a competitive
    atmosphere. HSARPA was never allowed autonomy and flexibility and
    instead was closely controlled by a budget and policy bureaucracy
    within the S&T Directorate that limited HSARPA's funding and
    effectively made all R&D investment and award decisions. The failure to
    implement HSARPA as authorized illustrates several points. An
    innovation culture is critical to success, and legislation alone can't
    create this unless the implementing agency shows real leadership,
    supports the new R&D mission, and is determined to use flexible
    statutory authorities create a strong entity. An ARPA-E will need its
    own budget and the ability to control it, and not take its funding from
    other competitor agencies which will dispute the diversion. It will
    need technical talent of great skill who also have experience at the
    helm of government R&D entities so can work with other agency
    bureaucracies. And it will need a clear mission--breakthrough
    technology or incremental technology (HSARPA tried both); mixing the
    two risks having the former become the bill-payer for the latter. The
    HSARPA implementation problems also underscore the need for ongoing
    Committee oversight over any implementation of an ARPA-E.

    THE NEED TO OPERATE AT SCALE:

        The energy sector is a trillion dollar sector. A modestly funded
    R&D effort will not drive transformational shifts in this sector, one
    of the largest in our economy. Federal energy R&D has fallen by more
    than half since a high point in 1980, and private sector energy R&D
    similarly fell. These levels of R&D expenditure compare poorly to other
    major federal R&D efforts (the Manhattan Project, the Apollo Project,
    the Carter-Reagan Defense buildup, and NIH Doubling),\3\ which in many
    ways were simpler and more straightforward from an economic standup
    basis than the complex technology focus for energy. Without
    significantly improved investment, we will not meet our need for energy
    technology advance, despite our energy security and climate challenges.
    We are not going to get there on the cheap.
    ---------------------------------------------------------------------------
        \3\ Daniel Kammen and Gregory Nemet, Reversing the Incredible
    Shrinking Energy R&D Budget, Issues in Science and Technology (Fall
    2005).
    ---------------------------------------------------------------------------
        R&D will not be the most expensive aspect of launching new energy
    technologies--research is low cost compared to the costs of prototyping
    and initial production. An ARPA-E must nurture a wide range of
    technologies in a wide range of energy and efficiency fields, a task
    certainly comparable to the complexity of DARPA's task. DARPA's budget
    of $3 billion a year, provides a rough benchmark of a range an ARPA-E
    should reach, after an initial phase in period. ARPA-E will need to
    operate at scale or it will not be taken seriously by the best
    potential researchers or by talented potential employees. Unless
    appropriators as well as authorizers are prepared to find generous
    start-up funding for ARPA-E on a bipartisan basis, the entity simply
    will not work.
        If an effective macro-pricing system for carbon, such as a cap and
    trade program, is adopted by the U.S. because of climate change
    concerns, this program could, depending on how structured, generate
    revenues of up to many billions each year, as a carbon permitting
    system is put in place. Although this macro-pricing step is still
    likely some years away, when adopted it will not work unless there is a
    strong innovation system foundation placed under it. Much of these new
    revenues will be needed for R&D and to leverage large scale industry
    transition to non-CO2 emitting energy systems. It is
    important that innovation system reforms be adopted now if these future
    resources are to efficiently and soundly invested in new technologies.
    ARPA-E is potentially part of that innovation institution story.

    SUMMARY OF KEY POINTS:

            1)  Standing up new energy technologies is a major and complex
            challenge, perhaps the most difficult technology stand-up
            challenge we have faced. Ever.

            2)  There is a gap in the federal innovation institutions for
            energy around translational research. There is a need for new
            institutional arrangements to evolve and transition new
            breakthrough technologies. An ARPA-E modeled on DARPA could
            help fill that gap.

            3)  If an ARPA-E entity is formed its performance will require
            high performance from outstanding new research entrants,
            following the DARPA hybrid model of outstanding university and
            firm researchers.

            4)  The culture of ARPA-E will determine its success;
            authorizing legislation should include management guidelines
            following key points in the DARPA ruleset that have created an
            effective culture there.

            5)  ARPA-E could be stood up either inside DOE or outside it,
            through a federally owned corporation. In either case it will
            need to follow an island-bridge model, performing R&D on an
            island creative autonomy but tied to the most senior DOE
            leadership who can assist on research and political support.

            6)  Energy R&D is underfunded based on the technology needs we
            now see; we need to expand the federal R&D portfolio in energy.
            An ARPA-E will need to operate at large scale to achieve
            success in helping to transform our energy technology menu.

            7)  An ARPA-E should not be stood up unless R&D funding is
            available adequate to the significant size of the energy
            technology development task. The Committee should seek
            assurance for Appropriations funding and Executive Branch
            policy support if this program is to work well.

            8)  New energy technology will not be a short-term project. The
            program should maintain a long-term focus.

                      Biography for William B. Bonvillian
        William B. Bonvillian, since January 2006, has been Director of the
    Massachusetts Institute of Technology's Washington, D.C. Office. Prior
    to that position, he served for seventeen years as Legislative Director
    and Chief Counsel to U.S. Senator Joseph Lieberman. He has also taught
    in the area of science, technology and innovation policy.
        Prior to his work on Capitol Hill, he was a partner at a large
    national law firm. Early in his career, he served as the Deputy
    Assistant Secretary and Director of Congressional Affairs at the U.S.
    Department of Transportation, working on major transportation
    deregulation legislation. His recent articles include, ``Power Play--
    The DARPA Model and U.S. Energy Policy'' in American Interest,
    ``Meeting the New Challenge to U.S. Economic Competitiveness'' and
    ``Organizing Science and Technology for Homeland Security,'' both
    published in Issues in Science and Technology, and ``Science at a
    Crossroads,'' published in Technology in Society and reprinted in the
    FASEB Journal. At MIT, he works to support MIT's strong and historic
    relations with federal R&D agencies, and its role on national science
    policy. His legislative efforts at Senator Lieberman's office included
    science and technology policies and innovation issues. He worked
    extensively on legislation creating the Department of Homeland
    Security, and more recently on Intelligence Reform and national
    competitiveness legislation.
        He received a B.A. from Columbia University with honors, an M.A.R.
    from Yale Divinity School in religion; and a J.D. from Columbia Law
    School, where he also served on the Board of Editors of the Columbia
    Law Review. Following law school, he served as a law clerk to a Federal
    Judge in New York. He is a member of the Connecticut Bar, the District
    of Columbia Bar and the U.S. Supreme Court Bar and serves on the Board
    on Science Education of the National Academies of Sciences. He has
    lectured and given speeches before numerous audiences on science and
    technology issues, and has taught previously in this area at
    Georgetown, MIT and George Washington.

        Chairwoman Giffords. Thank you, Mr. Bonvillian. Dr.
    Forrest, please. Dr. Forrest, excuse me, could you push your
    button?

        STATEMENT OF DR. STEPHEN R. FORREST, VICE PRESIDENT FOR
                    RESEARCH, UNIVERSITY OF MICHIGAN

        Dr. Forrest. Oh, there we are. Thank you, Madam Chairman
    Giffords and Ranking Member Inglis for this invitation to
    testify.
        Few challenges are more important today than curbing the
    unsustainable threat to our fossil fuels dependent energy
    infrastructure. To meet this challenge, which extends also to
    the threat to our environment, almost all agree that a bold and
    broad approach is needed.
        Renewable, inexpensive, and carbon-free energy solutions
    must be found. My own research in solar power and solid-state
    lighting has made me confident that many economically
    environmentally sound solutions do exist. It has been proposed
    here that a crucial tool for meeting these challenges is the
    establishment of ARPA-E, a flexible and independent agency at
    DOE to sponsor R&D to address the grand challenges that now
    face the energy sector, but in structuring such an agency, we
    must take care to achieve the goals of independence from
    carbon-emitting and foreign fuel dominated supply of fossil
    fuels.
        My personal experience, and that of many of my university
    colleagues around the Nation, suggests that a successful model,
    as you heard twice before today, would be based on DARPA, which
    is highly mission-oriented, and nurtures long-term, innovative
    R&D investments, in ways that no other governmental agency has
    been so successful in accomplishing. DARPA has proven to be a
    critical bridge between universities and industry who can
    provide the technological solutions to the needs of the
    Department of Defense.
        While DOD is its client, DARPA research has inevitably led
    to many commercial successes, of which most of us are well
    aware, for example, the Internet, cellular telephony, et
    cetera. Like DARPA, ARPA-E should position itself to identify
    the largest challenges facing our energy future. How can our
    energy future be cut loose from its dependence on the caprices
    of marginally stable foreign countries, and how can it create a
    portfolio of energies that reduce carbon emissions that are
    proving so destructive to our planet?
        To accomplish this task, like DARPA, which was created to
    counter the Soviet threat, ARPA-E must have autonomy and
    freedom from bureaucratic impediments. Its mission must be to
    fund collaborations to develop new technological advances, and
    to solve a wide range of immense and common problems. This
    entrepreneurial model for project identification will
    inevitably lead to a generation of robust private industry that
    provides us with energy alternatives, while strengthening our
    domestic markets.
        In this context, universities stand to play a key role as
    incubators for highly innovative ideas that the private sector
    often cannot afford to undertake. ARPA-E can assume the role of
    connecting universities with companies that, with their more
    practical perspectives, could bring the most innovative ideas
    rapidly into the marketplace. I would point out that DOE's
    current research portfolio, managed by the Office of Science,
    is critical to advancing innovation within the energy sector.
    Indeed, DOE provides two thirds of federal investment in the
    physical sciences, and supports thousands of researchers in
    fields such as computer science, engineering, and material
    science. However, today's energy predicament needs a new
    perspective.
        Primarily, DOE's research structure is almost completely
    focused on funding the many superb National Labs. While the
    Labs are vital in areas such as nuclear weapons development,
    fundamental physics, and material studies, these large scale
    facilities are not organized to conduct high risk
    transformational research whose function is primarily in
    changing the energy status quo in an agile and unbureaucratic
    manner.
        Furthermore, programs in which universities and National
    Labs are both allowed to compete are often dominated by the
    immediate need to fully support operation of the Labs. As a
    result, universities and the private sector are often
    inadequately resourced to effectively contribute to solving
    larger problems, thus discouraging the novel ideas that
    naturally emerge from their research.
        Returning to the DOD model, DARPA rapidly brings innovation
    to the military community at comparatively low cost by focusing
    almost entirely on universities and the private sector. For
    example, over the last ten years, less than five percent of
    DARPA's budget has gone to DOD labs, the remainder being split
    about two to one for industry and academia. To achieve the same
    success, ARPA-E must follow a similar model. Its focus must be
    on moving innovations from universities into industry, and then
    from industry into the marketplace.
        The Labs' institutional knowledge, however, should and can
    play a constructive role, by helping ARPA-E define the very
    challenges that need to be addressed, then subcontract these
    projects to the most innovative and cost-effective bidders. The
    depth of knowledge in the National Labs has long played this
    role of guiding energy research. As advisor to ARPA-E, it will
    continue to deepen and strengthen to our nation's immense
    profit.
        To accomplish its mission, ARPA-E cannot be subordinate to
    other DOE entities. The Agency's director should report
    directly to the Secretary of Energy, again following the highly
    successful DARPA model, where the Director reports to the
    Secretary of Defense. Also, a cap on personnel and short terms
    of service would keep ARPA-E dynamic, and would ensure a
    continual infusion of new ideas.
        Obviously, adequate funding is essential. In tough
    budgetary times, this will be hard to come by, but changing our
    energy dependencies is critical, not only to our national
    security, but also to our economy and our global
    competitiveness, hence the time to act decisively is upon us.
    In addition to Congress providing appropriations that would not
    be found by taxing existing DOE agencies and labs, independent
    revenue streams should be considered.
        Thank you again for this opportunity to testify. I look
    forward to contributing further in this debate.
        [The prepared statement of Dr. Forrest follows:]
                    Prepared Statement of Stephen R. Forrest

    Introduction

        Chairman Lampson, Ranking Member Inglis and Members of the
    Subcommittee, thank you for the invitation to testify today. It is my
    great pleasure to contribute to the ongoing debate over the
    establishment of a new energy research agency at the Department of
    Energy (DOE) to fill an unmet need: the nimble transfer of
    revolutionary energy research results out to the commercial
    marketplace. I know Congress first started working on this issue last
    year and I would like to take this opportunity to commend you for your
    leadership in the campaign to find new ways to address American's
    energy crisis.
        As you may know, I joined the University of Michigan in January
    2006 as its Vice President for Research. Prior to moving to Ann Arbor,
    I held several positions in academia and in industry. Over the years I
    have worked at places ranging from Bell Labs to USC and Princeton. I
    have more than 150 U.S. patents and have published over 400 papers in
    scientific journals, many of them in the field of energy generation and
    use, and have co-founded several successful companies, including
    Sensors Unlimited, Epitaxx, Inc., Global Photonic Energy Corp.,
    Universal Display Corporation, and Apogee Photonics.
        It is an honor to be part of higher education, but with that honor
    also comes responsibilities. Universities must contribute their wealth
    of intellectual depth and productivity to help the Nation survive what
    will be a disruptive and long-term transition in its energy use away
    from traditional fossil fuel sources. Thus, one of first acts of the
    university after I joined as Vice President for Research has been to
    initiate a unique research institute called the Michigan Memorial
    Phoenix Energy Institute. It is named after our Physics Memorial
    Laboratory, home of the Ford Nuclear Reactor that was founded by the
    Atoms for Peace Program started in the 1950s. The name of the institute
    historically honors University of Michigan alumni, students and faculty
    who gave their lives in World War II. The new Energy Institute's goal
    is to convene world experts in energy, science and technology to
    explore how to best find alternatives to fossil fuel to meet the
    growing the energy needs of our nation. Unlike other university-based
    energy research centers, our institute combines science, engineering,
    economics and public policy expertise to address the challenges facing
    us. Its interdisciplinary culture is essential simply because, as the
    Subcommittee knows all too well, the pathway to successful
    implementation of technological solutions in our communities is guided
    by public policy decisions, economics and societal change.

    Our Nation's Energy Crisis

        There are few contemporary challenges facing the Nation--and the
    world--more threatening than the unsustainable nature of our current
    energy infrastructure. Our communities are dependent upon the
    continuing availability of clean, affordable and flexible energy
    resources.
        Yet, our current fossil fuels-dependent energy infrastructure is
    unsustainable. This is a problem with potentially catastrophic
    consequences. Global oil production is expected to peak within the next
    several decades, with natural gas production peaking soon thereafter.
    While there are substantial reserves of coal and tar sands, the mining,
    processing and burning of these fossil fuels poses increasingly
    unacceptable biological and environmental risks, particularly within
    the context of global climate change. Furthermore, the security of our
    nation is threatened by our reliance on foreign energy imports from
    unstable regions of the world.
        At this critical juncture, a bold and broad approach is needed to
    radically transform how the United States meets its energy needs.
    Inexpensive and carbon-free energy solutions that are renewable must be
    found--and I am confident that they are out there.
        To just put things into context, in 20 minutes enough energy to
    power the earth to meet mankind's demand for a solid year is provided
    by the sun. If you want to think of it another way, if we constructed
    six solar cell fields 120 miles on a side and placed them in the
    temperate zones of the Earth, we would more than exceed today's demand
    for electrical energy. The problem with solar, and other forms of
    renewable energy, is that they still are not cost-competitive with that
    supplied by fossil fuels purchased on the world's markets.
        To uncover practical applications of new ideas such as solar
    energy, we must harness the brain power of scientists and entrepreneurs
    across the country. The problems confronting mankind through the use of
    energy are far greater than any one institution, or one sector of our
    scientific and industrial infrastructure can solve. This is not a time
    to go it alone.

    ARPA-E: Essential to Meeting the Grand Challenge

        I strongly support the National Academies recommendation made in
    its 2005 report, Rising Above the Gathering Storm: create an Advanced
    Research Projects Agency for Energy, or ARPA-E--a small flexible and
    independent federal agency that ``would be charged with sponsoring
    research and development programs to meet the Nation's long-term energy
    challenges.'' \1\ According to the report, the new agency ``would
    support creative `out-of-the-box' transformational generic energy
    research.'' \2\
    ---------------------------------------------------------------------------
        \1\ The National Academies, Rising Above the Gathering Storm:
    Executive Summary, Washington, DC (2005), page 7.
        \2\ Ibid.
    ---------------------------------------------------------------------------
        ARPA-E would be modeled on the Pentagon's successful Defense
    Advanced Research Projects Agency (DARPA). Created in response to the
    Soviet technological threat, DARPA became a critical bridge between the
    defense needs of the time and experts at universities and private
    corporations who could provide the answers.\3\ While its main client
    has been the Department of Defense, DARPA also has supported the
    collaborative development of defense-based technologies for the
    commercial sector. Over the course of its history, it has nurtured
    long-term innovative research and development investments in a way that
    private industry could not always afford to. Through DARPA's financial
    awards came ground-breaking technological advances such as the
    Internet, GaAs technology that is now the backbone of cell phones, and
    wavelength division multiplexed high volume optical communications.
    ---------------------------------------------------------------------------
        \3\ William Bonvillian, Power Play: the DARPA Model and U.S. Energy
    Policy, The American Interest, Washington, DC (November/December 2006),
    p. 44.
    ---------------------------------------------------------------------------
        Today, the United States faces an even bigger and more tangible
    threat to our environment, our economic and intellectual
    competitiveness, and our national security. A new independent research
    agency at DOE would bring together the best minds from around the
    country to guide us in developing solutions for the future. It would
    have the autonomy and freedom from bureaucratic impediments to
    encourage flexibility and collaboration to solve immense and common
    problems facing the energy sector. Ultimately, funding from this new
    agency would lead to the generation of a robust private industry that
    would provide solutions while strengthening our domestic markets.
        Universities also stand to play a key role in achieving the ARPA-E
    agenda. The academic environment is one in which professors are
    rewarded for work that their peers believe makes significant
    contributions to the existing foundation of knowledge. For this reason,
    universities have traditionally been incubators for out-of-the-box
    ideas that the private sector by itself often cannot afford to
    undertake because the risks may outweigh potential payoffs. Today,
    universities are looking for solutions to the energy independence
    challenge from all vantage points--hydrogen research, improved lighting
    sources, biofuels, energy storage, urban planning, semiconductors,
    alternative fuel cars, and solar cells to name a few.
        An agile, mission-oriented ARPA-E would, like DARPA, connect
    universities with large and small industry hungry for new advances in
    technology. With their more practical perspectives, the companies can
    take the universities' advances through to commercialization. With
    ARPA-E as abridge between the two worlds, the best ideas would rapidly
    emerge to find their place in the commercial marketplace.
        Furthermore, ARPA-E sponsorship of university research would
    contribute to the training of the workforce--helping to ensure a steady
    stream of future scientists, engineers and entrepreneurs who would
    continue to bring talent and innovation to solving the energy crisis in
    years to come. As America fights to maintain its competitive edge in
    the world, this next generation of experts will become increasingly
    important.

    DOE Research: Flexibility and Agility Needed

        I would like to take a moment to talk about the division of
    research at DOE. As you know, DOE does play a critical role in
    advancing U.S. scientific interests. Today, it is the leading source of
    federal funds and resources for research in the physical sciences--
    providing two-thirds of the federal investment in this area.\4\ In high
    energy and nuclear physics, nuclear medicine, heavy element chemistry,
    plasma physics, and magnetic fusion, DOE is the primary government
    sponsor. It also ranks high in overall federal support for research in
    computer science and engineering and sponsors significant research in
    biology and environmental sciences.
    ---------------------------------------------------------------------------
        \4\ American Association for the Advancement of Science, DOE
    Science Leads the Pack in 2008, Washington, DC (March 21, 2007), page
    6.
    ---------------------------------------------------------------------------
        DOE's programs and facilities have promoted the work of thousands
    of researchers and played vital roles in many significant discoveries.
    However, to face today's energy predicament head on, the Department
    must take a new perspective on how it supports research.
        Essentially, DOE's research is segmented into two parts. The Office
    of Science supports basic research. Applied research is conducted in
    the offices organized around fuel sources, such as Energy Efficiency
    and Renewable Energy, Fossil Energy and Electricity Delivery and Energy
    Reliability.
        These research programs conduct high quality and important work.
    However, gaps and shortcomings exist. For example, the Office of
    Science, which has long been the key federal sponsor of physical
    sciences research, does not have the opportunity to cover all fields--
    often leaving important disciplines, such as nuclear energy and
    environmental sciences, insufficiently addressed. Furthermore, there is
    little communication or coordination between the offices responsible
    for the two types of research supported by DOE. Another critical aspect
    of DOE research is that its structure is almost completely focused on
    supporting its very costly National Laboratories, to the exclusion of
    universities and the private sector. Nearly half the DOE Science
    research and development budget goes to operating and constructing
    facilities.\5\
    ---------------------------------------------------------------------------
        \5\ Ibid, page 2.
    ---------------------------------------------------------------------------
        The National Laboratories play a vital role in a wide range of
    important issues such as nuclear weapons development, energy security,
    computational power, new energy sources, determining molecular
    structure, and homeland security. They set standards, plot specific
    directions the energy community should follow, implement solutions and
    provide massive and often costly resources to bear on energy problems.
    However, these large-scale facilities are not organized, nor
    structured, to conduct high-risk transformational research in an agile
    and unbureaucratic manner--nor do their missions cover finding
    revolutionary ways of solving energy problems.
        Furthermore, historically, federal programs in which universities
    and the National Laboratories are both allowed to compete are heavily
    dominated by the Laboratories. Particularly, universities are often not
    provided with adequate resources to contribute to solving larger
    problems. This discourages creativity and novel ideas that naturally
    emerge from the enormous intellectual resources that exist in our
    academic institutions.
        In contrast, DARPA has succeeded because it brings ``new blood'' at
    comparatively low prices into the defense field by focusing its awards
    almost entirely on universities and individual companies. Indeed, over
    the last 10 years, less than five percent of the DARPA budget has gone
    to DOD labs, the reminder being split approximately two to one for
    industry and academia.\6\ To achieve the same degree of sustained
    success as DARPA, ARPA-E must follow a similar model. That is, to
    guarantee that ARPA-E truly encourages cutting-edge research, the role
    of the National Laboratories in this new agency must be limited. Only
    in unique cases should the national laboratories, in partnership with
    private and educational enterprises, be recipients of ARPA-E funds.
    ---------------------------------------------------------------------------
        \6\ Kei Koizumi, American Association for the Advancement of
    Science, Washington, DC (April 19, 2007); and National Science
    Foundation, Division of Science Resources Studies, Federal Funds for
    Research and Development, Detailed Historical Tables: Fiscal Years
    1951-2002, Arlington, VA (August 2003).
    ---------------------------------------------------------------------------
        The institutional knowledge of the Labs, however, could play a
    constructive role. With their advice, ARPA-E could define new
    challenges to be addressed. These projects would then be subcontracted
    out to the most innovative and cost-effective members of the broadest
    sector of the energy community.

    Guaranteeing a Strong ARPA-E

        Other improvements are necessary to solidify ARPA-E's leadership in
    innovative energy research. I will briefly touch on a few of them. For
    example, to ensure that the agency does not become subordinate to
    larger DOE research and development entities, the agency's head should
    report directly to the Secretary of Energy. This again follows the
    DARPA model, where the Director reports to the Secretary of Defense.
    Also, a cap on the number of personnel and a relatively short term of
    service would help keep ARPA-E dynamic and flexible, supported by a
    continual infusion of new ideas.
        Furthermore, adequate funding would be essential. In a tight
    budget, this will be hard to come by, but the necessity of acting on
    changing our energy dependencies is of deep national and global
    concern, and hence the time to act decisively is upon us now. In
    addition to a ``start-up'' appropriation from Congress (one that would
    not be found by 'taxing' existing DOE agencies and labs), independent
    revenue streams should be considered. These include a trust fund set up
    from federal oil and gas royalties.\7\ Another suggestion is adoption
    of a macro-pricing system for carbon, such as a cap and trade program,
    by the United States to address global warming threats.\8\
    ---------------------------------------------------------------------------
        \7\ Melanie Kenderdine, Gas Technology Institute, ``Hearing on
    ARPA-E Before the House Committee on Science'' (March 9, 2006), page.
    6.
        \8\ William Bonvillian, letter to the House Science and Technology
    Committee, April 2, 2007, page 14.
    ---------------------------------------------------------------------------
        Finally, steps must be taken to ensure that DOE does not then use
    ARPA-E's grants, cooperative agreements or contracts to return funds
    back into DOE. DOE should ensure that most of the agency's budget is
    spent outside of the Department--whether at universities, large energy
    companies, start-ups or consortia of academia and industry.

    Conclusion

        Thank you again for the opportunity to testify today. I look
    forward to continuing this discussion. Bringing alternative energy
    technologies to the marketplace is vital as the Nation faces the likely
    collapse of our traditional fossil fuel economy in the not-too-distant
    future. There is much to be done, with no apparent simple solution, but
    our nations health can only be assured by making the shift away from a
    dominant reliance on these fuels our top priority. ARPA-E would play a
    central role in finding the tools to make this shift.
        There is no doubt that successfully creating a new agency at DOE
    will face profound challenges. It will require careful writing of
    legislation and directives, sufficient funding, and an energetic and
    creative staff. But it must be done. If truly given the opportunity,
    ARPA-E could make a significant contribution to our national energy
    solutions.

                        Biography for Stephen R. Forrest
        Education: B.A. Physics, 1972, University of California, M.Sc. and
    Ph.D. Physics in 1974 and 1979, University of Michigan. First at Bell
    Labs, he investigated photodetectors for optical communications. In
    1985, Prof. Forrest joined the Electrical Engineering and Materials
    Science Departments at USC where he worked on optoelectronic integrated
    circuits, and organic semiconductors. In 1992, Prof. Forrest became the
    James S. McDonnell Distinguished University Professor of Electrical
    Engineering at Princeton University. He served as director of the
    National Center for Integrated Photonic Techology, and as Director of
    Princeton's Center for Photonics and Optoelectronic Materials (POEM).
    From 1997-2001, he served as the Chair of the Princeton's Electrical
    Engineering Department. In 2006, he rejoined the University of Michigan
    as Vice President for Research, and as the William Gould Dow Collegiate
    Professor in Electrical Engineering, Materials Science and Engineering,
    and Physics. A Fellow of the IEEE and OSA and a member of the National
    Academy of Engineering, he received the IEEE/LEOS Distinguished
    Lecturer Award in 1996-97, and in 1998 he was co-recipient of the IPO
    National Distinguished Inventor Award as well as the Thomas Alva Edison
    Award for innovations in organic LEDs. In 1999, Prof. Forrest received
    the MRS Medal for work on organic thin films. In 2001, he was awarded
    the IEEE/LEOS William Streifer Scientific Achievement Award for
    advances made on photodetectors for optical communications systems. In
    2006 he received the Jan Rajchman Prize from the Society for
    Information Display for invention of phosphorescent OLEDs, and is the
    recipient of the 2007 IEEE Daniel E. Nobel Award for innovations in
    OLEDs. Prof. Forrest has authored 400 papers in refereed journals, and
    has 155 patents. He is co-founder or founding participant in several
    companies, including Sensors Unlimited, Epitaxx, Inc., Global Photonic
    Energy Corp., Universal Display Corp. (NASDAQ: PANL) and ASIP, Inc.
    (now Apogee Photonics).

        Chairwoman Giffords. Thank you, Dr. Forrest. Dr. Van Atta.

       STATEMENT OF DR. RICHARD VAN ATTA, RESEARCH STAFF MEMBER,
     SCIENCE & TECHNOLOGY POLICY INSTITUTE, INSTITUTE FOR DEFENSE
                                ANALYSES

        Dr. Van Atta. Thank you very much, Madam Chairman and
    Congressman Inglis.
        I kind of come at this from the standpoint of a historical
    perspective, and I guess also a security perspective, since I
    have been involved in national security issues and concerns for
    most of my career at the Institute for Defense Analyses, and
    now at the Science & Technology Policy Institute. My testimony
    here is my own views, not of those two organizations.
        We have heard a lot about the interrelationship between the
    universities and the private sector and finance here, and in
    fact, the generation of this community of interest around key,
    crucial problems is one of the major advantages, and I would
    say one of the major breakthroughs, in terms of innovation that
    DARPA created for the country.
        In fact, one of the examples is the relationship between
    Stanford University and Kleiner Perkins, with the development
    of a program by DARPA, called the Stanford University Network,
    which became Sun Microsystems, is an example of one of many of
    these types of fundamental new relationships that was created,
    and the new products and capabilities that came from that.
        My testimony covers the following questions. First of all,
    how similar are the types of research that DARPA has engaged in
    over the past, and the issues of addressing energy and
    environmental concerns. Second, what are DARPA's key
    organizational features that have contributed to its success,
    and could those features be replicated within the political and
    economic environment surrounding energy and environment? Third,
    are DARPA's cultural features, which Bill Bonvillian
    specifically referred to, and central to DARPA's success,
    replicable within the energy environment?
        Others have recognized that energy and environment are
    issues that are very different in some ways from that which DOD
    and DARPA confronted. We had a well-defined, known enemy that
    galvanized our issues and concerns, that in fact, we could say
    our nation's future was at stake. I think the panel here has
    tried to make something very clear, which I try to make clear
    in my classes at Georgetown on emerging technologies and
    security, and that is energy and environment is now a security
    issue, a fundamental energy security issue, that is worth the
    kind of investments and focus of our attentions that we are
    talking about today.
        My testimony covers several things that are historical in
    nature, in terms of the DARPA model. What is the DARPA model?
    Also, the basic question of, which DARPA? Because of the things
    which many people don't realize or understand is that one of
    the key elements of DARPA is its flexibility and adaptability.
    It has moved across the spectrum. It has done many different
    things, ranging all the way from the most advanced research in
    things that are today equivalent to nanotechnology and
    biotechnology and in microelectronics, to applications of true
    weapons systems in the field, as with the DARPA Project AGILE
    in Vietnam. So, it is a mistake to say that DARPA is only one
    thing. It is a flexible, adaptive entity, seeking to apply the
    best technological innovation to the most daunting problems in
    the defense world.
        DARPA's successes are well known. We have talked about the
    Internet, their stand-off precision strike, their Stealth. One
    of the most impressive things about those is the range that
    they encompass. The other thing is the scale that they
    encompass. Stealth itself, implemented in four years by DOD
    after the HAVE BLUE proof-of-concept demonstration, changed the
    way in which we confronted the Soviets, and in fact, created a
    secret weapon. The Internet, through the iterative development
    of new technologies, was based upon J.C.R. Licklider's vision
    of man-computer symbiosis. We are still getting there.
        But we have to understand that these are all based upon
    visions and scopes of change-state capabilities that would make
    a fundamental difference. I think we can come up with the same
    notions in the energy world, in terms of changing the way in
    which we deal with our energy and our economy, in an affordable
    and effective livable manner.
        And then, we can say that, you know, the DARPA activities
    that we have talked about, in terms of its culture and all,
    that was developed over time, but I think the most important
    characteristics of that which we can talk about, are first of
    all, that it was independent of the other existing
    organizational structures. In that case, it was the military
    services. The military service R&D structures dominated and
    were dominated by their own priorities--ships and airplanes and
    tanks. DARPA created a whole new set of capabilities, in terms
    of missiles and satellites, in terms of the Internet and
    communications systems, in terms of joint technological
    capabilities like the stand-off precision strike capabilities
    with the JSTARS and things like that.
        The services would not have done those. It was not in their
    interest. It was not in their funding portfolios, and only a
    new organization on the outside could do that. I think when we
    look at the energy environment, we can say that the existing
    energy systems and providers will not create those new
    breakthrough capabilities, or are unlikely to do so without
    this kind of external capability providing support for it. We
    are talking here about what is often called high risk, high
    payoff research. DARPA program managers are encouraged to
    challenge existing approaches, and seek results, rather than
    just explore ideas. In fact, one of the concerns earlier in
    this history that Johnny Foster, as the Department of Defense's
    Chief Technology Officer of the DDR&E, exclaimed as a real
    concern was that DARPA was becoming DOD's NSF, and the point
    here is that DARPA must stick to its mission. It must stick to
    its future of applying new technologies, not just playing with
    new things.
        That expectation is built within the culture, and within
    the program managers themselves. It is designed, in that sense,
    to be something very different, and as Peter Cannon, who was
    the head of Rockwell Sciences, in some work with me said,
    basically, in order to do something different, you have got to
    do something different, and that is what this is all about, I
    think.
        If you think that the current incremental and traditional
    approaches of science and technology are meeting our energy
    problems, fine. If you don't think so, then we have to think of
    new ways of doing things. We need to innovate in our
    organizational structures, as well.
        I will pass over the discussions I have about the origins
    of DARPA and all, because you know that, and we have heard some
    about it. I do want to emphasize that as you look at DARPA, you
    have to look at some key characteristics, and Bill has already
    mentioned some of those, and Dr. Forrest as well. First of all,
    it is independent, purposely and decisively so, meaning that it
    only reports to the top, and it doesn't go through a lot of
    bureaucracy. Keeping it from that bureaucracy is crucial and
    important. It is lean and agile, with a risk-taking culture. It
    is tolerant of failure, and open to learning. DARPA actually
    iterates ideas. Dr. Tether, who I just recently interviewed,
    talked about how they are revisiting artificial intelligence,
    under the terms cognitive computing. They did work in AI,
    succeeded to a point, came back, and now are looking at it
    again. So it is also open to iterating in the ideas as well. It
    has learned to manage risk, not avoid it.
        The DARPA program manager is, in fact, the key. He or she
    is the technical champion who conceives and owns the program.
    He is not told what to do, though he does have to have approval
    from his office director, and from the DARPA Director. Once he
    starts that program, it is his, and he makes it happen, and he
    has to make the choices involved in that. So, in essence, they
    are risk-taking, idea-driven entrepreneurs heading up their own
    practice. It is an idea-driven and outcome-oriented
    organization, where the gating notion isn't that the idea is
    well-proven, but that it has high prospects for making a
    difference. The research is outcome-driven, to achieve results
    towards an identifiable goal, not to pursue science per se.
        So, when I look at this, and I say what kinds of things are
    going on, or have gone on in DARPA that have made it
    successful, I would say is that it is not identified as success
    because of a particular program or a particular technology, but
    rather, it is successful for its ability to rapidly take on and
    assess new ideas and concepts, directing towards daunting
    challenges, and evaluate and test those in a rapid manner.
        Those are the kind of things that we want to create. So, if
    we want to do that, what are the kind of roles? First of all,
    there is a fundamental role of finding the new ideas, turning
    basic science into emerging technologies. Second of all,
    exploring disruptive capabilities, pursuing them to a point of
    saying can they make a difference, how can they make a
    difference? Thirdly, developing a technology strategy around
    those potential change-state ideas, that can then lead to a
    broader overall strategy. And finally, fostering a revolution
    or fundamental transformation in the domain of technology.
        So, I would conclude by saying first of all, the kind of
    things that made DARPA successful, and would make an ARPA-E
    successful if allowed to do so, would be one, to create the
    technology surprise, don't just seek it or avoid it, just don't
    seek to avoid it. Second of all, build a community of change-
    state advocates, which is what Bill and Mr. Denniston and all
    pointed to, creating the interrelationship of the people who
    want to make a difference. DARPA had more success in terms of
    finding a community of innovative people, who could both think
    of the ideas and implement and integrate those ideas, than any
    other organization I can think of. Third, defining fundamental
    challenges, developing solution concepts, working in concert
    with experts, and then, developing demonstrations of them.
        This demonstration role is crucial, but you also have to be
    careful to bound those, so that you don't become caught in the
    massive draw of funding major demonstrations that keep asking
    for more and more money. DARPA has had a problem itself in
    modulating the scale and scope of those demonstration programs,
    and in the energy area, these could be daunting and very
    expensive. I think you will have to find a way of doing what
    DARPA did, which says our demonstrations are proof-of-concept.
    Implementation demonstrations need to go somewhere else.
    Finding mechanisms to do that is a crucial issue, and one that
    goes to the point that Congressman Inglis was saying, which is
    that commercialization implementation mode.
        Something I want to emphasize, and that is, DARPA does not
    work in a vacuum. It works in a science and technological
    ecostructure, both in the DOD and outside, in terms of NSF, et
    cetera. You cannot expect an ARPA-E to succeed if it is only
    there by itself. It has to be done within a strategy, and
    within a concept of leadership, drawing upon the science and
    technology strengths across the whole country.
        I hope these ideas have at least given you some concepts of
    the prospects of successfully implementing an ARPA-E. I will be
    happy to answer any questions you have.
        [The prepared statement of Dr. Van Atta follows:]
                   Prepared Statement of Richard Van Atta\1\
    ---------------------------------------------------------------------------
        \1\ Richard Van Atta is a research staff member at the Science and
    Technology Policy Institute of the Institute for Defense Analyses. The
    views expressed in this testimony are his own and they do not represent
    the views of the Institute for Defense Analyses, the Department of
    Defense or any other individual or organization.
    ---------------------------------------------------------------------------
        With energy and climate issues increasingly the focus of public
    policy discussions, the notion that a special research organization--
    referred to as ARPA-E--should be created has been proposed in several
    venues, including H.R. 364. More specifically, there have been calls to
    create a new entity, modeled on the notably successful Defense Advanced
    Research Projects Agency, DARPA, to perform advanced R&D directed at
    finding technological solutions to energy security and environmental
    challenges.\2\
    ---------------------------------------------------------------------------
        \2\ The DARPA model--sometimes referred to as ARPA-E, or E-ARPA--
    has been suggested in several venues, most notably in the National
    Academies' Rising Above the Gathering Storm, Energizing and Employing
    America for a Brighter Economic Future, National Academies, Committee
    on Science, Engineering, and Public Policy (COSEPUP), 2006.
    ---------------------------------------------------------------------------
        Having spent a fair amount of time looking at DARPA's research
    program over the years I have been asked what would it take for such an
    organization to be established and be successful drawing from the
    historical perspective of the unique organization that it would
    emulate--DARPA. This will be the focus of my remarks today.
        Some key questions we might consider are:

            1.  How similar are the type of research tasks of DARPA to
            those entailed in addressing energy and the environment and how
            are they different?

            2.  What are DARPA's key organizational features that have
            contributed to success and could those features be replicated
            within the political and economic environment surrounding
            energy and the environment in the executive branch, Congress,
            and private industry?

            3.  Are DARPA's 'cultural features' that have been central to
            its success reproducible under the various possible
            contemporary arrangements for addressing energy and the
            environment?

    Understanding DARPA

        We begin this discussion with the following questions:

            --  What is the ``DARPA Model,'' which, as we will explain,
            raises the question ``Which DARPA?''

            --  What was the original charter of DARPA and how has it
            evolved?

            --  What have been DARPA's ``successes''--why is it so well
            regarded?

            --  What is the basic ``motif'' of DARPA success and what are
            key factors in achieving success?

            --  What is relevance of DARPA model for other policy areas--
            particularly energy and climate research?

    The ``DARPA Model''

        DARPA's primary mission is to foster advanced technologies and
    systems that create ``revolutionary'' advantages for the U.S. military.
    Consistent with this mission, DARPA is independent from the military
    Services and pursues higher-risk research and development (R&D)
    projects with the aim of achieving higher-payoff results than those
    obtained from more incremental R&D. DARPA program managers are
    encouraged to challenge existing approaches to war fighting and to seek
    results rather than just explore ideas. Hence, in addition to
    supporting technology and component development, DARPA has on occasion
    funded experiments in the integration of large-scale ``systems of
    systems'' in order to demonstrate what we call today ``disruptive
    capabilities.''
        Underlying this ``high-risk--high payoff'' motif of DARPA is a set
    of operational and organizational characteristics that many have
    referenced. These include its relatively small size; its lean, non-
    bureaucratic structure; its focus on potentially change-state
    technologies; its highly flexible and adaptive research program.

    What is important to understand at the outset is that in contrast to
    the then existing Defense research environment, ARPA was manifestly
    different. It did not have labs. It did not focus on existing military
    requirements. It was separate from any other operational or
    organizational elements. It was explicitly chartered to be different,
    so it could do fundamentally different things than had been done by the
    Military Service R&D organizations.
        The reason for this dramatic departure was that President
    Eisenhower and his key advisors had determined that the existing R&D
    system had failed to respond to the realities of the emerging national
    security threat embodied by the Soviet Union. This threat was manifest
    in a crescendo event--the launching in 1958 of the Sputnik satellite.
    The response to this was not only the creation of a research entity to
    perform research that others had not adequately pursued, but to embed
    this organization within a newly created oversight structure reporting
    to the Secretary of Defense--namely the Director, Defense Research and
    Engineering, or DDR&E.

    DARPA's origins: Strategic Challenges 1958

        ARPA\3\ was initially chartered in response to the orbiting of the
    Sputnik satellite, which raised the specter of the Soviet Union as a
    technological as well as political threat to the United States. Sputnik
    itself demonstrated that the USSR not only had ambitions in space, but
    also had developed the wherewithal to launch missiles with nuclear
    capabilities to strike the continental United States. Therefore, at the
    outset ARPA was focused initially on three key areas as Presidential
    Issues: space, missile defense and nuclear test detection.
    ---------------------------------------------------------------------------
        \3\ The original name, Advanced Research Projects Agency, ARPA, was
    changed in 1972 to Defense Advanced Research Projects Agency, DARPA.
    Briefly in 1993-95 the Clinton Administration reverted back to ARPA,
    but in 1996, the Congress mandated that the name be changed back to
    DARPA. In historical references I use the name of the organization at
    that time, either ARPA or DARPA, but for general discussion the current
    title, DARPA, is used.

              Regarding the first issue, space, soon after its
            birth a large element of ARPA was spun off to become NASA,
            based on President Eisenhower's determination that space
            research should not be directly under the DOD.\4\
    ---------------------------------------------------------------------------
        \4\ Herbert York states it was well understood in ARPA that its
    broad role in space programs was temporary, with the creation of NASA
    already in the works both in the White House and in Congress, see
    Herbert York, Making Weapons, Talking Peace, Basic Books, New York,
    1987, p. 143.

              By 1959 ARPA had assignments on ballistic missile
            defense (DEFENDER) and nuclear test detection (VELA), and also
            pursued research in solid propellant chemistry, and materials
            sciences. Soon after ARPA initiated a program on information
            processing ``techniques'' with a focus on possible relevance to
            command and control also began. These became the major elements
    ---------------------------------------------------------------------------
            of ARPA's program over the next decade.

              Based on the initiative of Director of Defense
            Research and Engineering (DDR&E), John S. Foster, a counter-
            insurgency program (AGILE) was started as the Vietnam War
            heated up.

        DARPA was first established as a research and development
    organization immediately under the Secretary of Defense, reporting to
    the Director of Defense Research and Engineering, then the third
    highest official in the department with the mission to

            --   assure that the U.S. maintains a lead in applying state-
            of-the-art technology for military capabilities

             and

            --  prevent technological surprise from her adversaries.

    DARPA's Unique Mission

        ARPA was created to fill a unique role, a role which by definition
    and in its inception put it into contention and competition with the
    existing Defense R&D establishment. As the Advanced Research Projects
    Agency, ARPA was differentiated from other organizations by an explicit
    emphasis on ``advanced'' research, generally implying a degree of risk
    greater than more usual research endeavors. Former ARPA Director Dr.
    Eberhardt Rechtin emphasized that research, as opposed to development,
    implies unknowns, which in turn implies the possibility of failure, in
    the sense that the advanced concept or idea that is being researched
    may not be achievable. Were the concept achievable with little or no
    risk of failure, the project would not be a research effort, but a
    development effort.
        DARPA over its history has grappled with how to interpret or pursue
    advanced research, both in contrast to the broad array of research
    being conducted within and for DOD, and relative to its perception of
    the needs at the time.
        Recently DARPA stated its mission as follows:

             DARPA is a Defense Agency with a unique role within DOD. DARPA
            is not tied to a specific operational mission: DARPA supplies
            technological options for the entire Department, and is
            designed to be the ``technological engine'' for transforming
            DOD. . .. a large organization like DOD needs a place like
            DARPA whose only charter is radical innovation. DARPA looks
            beyond today's known needs and requirements.

        It is clear from DARPA's history that within the scope of this
    mission the emphasis and interpretation of advanced research have
    varied, particularly in terms of (1) the degree and type of risk\5\ and
    (2) how far to go toward demonstration of application. At times with
    changing circumstances the agency has had to reassess its project mix
    and emphasis due to determinations both internally and within the
    Office of the Secretary of Defense regarding the appropriate level of
    risk and the need to demonstrate application potential. In a sense
    these somewhat contradictory imperatives serve as the extreme points on
    a pendulum's swing. As DARPA is pulled toward one of the extremes,
    often by forces beyond itself, including Congressional pressures, there
    are countervailing pressures stressing DARPA's unique characteristics
    to do militarily relevant advanced research.
    ---------------------------------------------------------------------------
        \5\ Risk has several dimensions: (1) lack of knowledge regarding
    the phenomena or concept itself; (2) lack of knowledge about the
    applications that might result if the phenomena or concept were
    understood; (3) inability to gauge the cost of arriving at answers
    regarding either of these; and (4) difficulty of determining broader
    operational and cost impacts of adopting the concept. As answers about
    (1) become clearer through basic research, ideas regarding applications
    begin to proliferate, as do questions of whether and how to explore
    their prospects. DARPA is at the forefront of this question and has the
    difficult job of determining whether enough is known to move toward an
    application and, if so, how to do so. At times this can be very
    controversial, as researchers may feel they do not know enough to
    guarantee success and are concerned that ``premature'' efforts may in
    fact create doubts about the utility and feasibility of the area of
    research, resulting in less funding and (from their perspective) less
    progress. DARPA, however, has a different imperative than the
    researcher to strive to see what can be done with the concepts or
    knowledge, even if it risks exposing what is not known and what its
    flaws are. This tension is endemic in DARPA's mission and at times has
    put it at odds with the very research communities that it sponsors.
    ---------------------------------------------------------------------------
        At the other end of the spectrum, as projects demonstrate
    application potential, DARPA runs into another set of tensions, not
    with the researcher, but with the potential recipient of the research
    product. Given that the ideas pursued are innovative, perhaps
    revolutionary, they imply unknowns to the user in terms of how they
    will be implemented and how this implementation will affect their, the
    implementer's, overall operations. To this end the potential users seek
    to reduce their uncertainty, in what is a highly risk-intolerant
    environment, by encouraging DARPA, or some other development agency, to
    carry forward the concept until these risks are minimized, or simply
    ignoring, delaying or stretching out its pursuit. While achieving
    transition can be increased by additional risk reducing research, this
    also entails substantial additional cost and raises the issue of
    mission boundaries.
        There have been several occasions in DARPA's history when its
    management has determined that it has done enough in an area to
    demonstrate the potential of a specific concept--such as Unmanned Air
    Vehicles (UAVs)--and that it is thus time for others to fund
    development of its application and acquisition. These decisions have at
    times resulted in a potential concept becoming a victim of the ``valley
    of death,'' with the application either failing to be realized, or, as
    in the case of UAVs, taking over a decade with special high-level
    attention of OSD to come to fruition. Developing mechanisms to engage
    potential ``customers'' in an emerging concept and working with these
    prospective developers and users as the ideas mature is a key aspect of
    DARPA project management.

    DARPA's Key Characteristics

        It was recognized from the outset that DARPA's unique mission
    required an organization with unique characteristics. Among the most
    salient of these:

              It is independent from Service R&D organizations

        DARPA neither supports a Service directly nor does it seek to
    implement solutions to identified Service requirements. Its purpose is
    to focus on capabilities that have not been identified in Service R&D
    and on meeting defense needs that are not defined explicitly as Service
    requirements. This does not mean that DARPA does not work with the
    Services, but it does mean that it does not work the requirements that
    drive Service R&D.

              It is a lean, agile organization with risk-taking
            culture

        DARPA's charter to focus on ``high risk; high payoff'' research
    requires that it be tolerant of failure and open to learning. It has
    had to learn to manage risk, not avoid it. Because of its charter, it
    has adopted organizational, management and personnel policies that
    encourage individual responsibility and initiative, and a high degree
    of flexibility in program definition. This is one reason that DARPA
    does not maintain any of its own labs.
        A primary aspect of DARPA's lean structure is that it centers on
    and facilitates the initiative of its Program Managers. The DARPA
    Program Manager is the technical champion who conceives and owns the
    program. As the Program Manager is the guiding intelligence behind the
    program, the most important decisions of DARPA's few Office Directors
    are the selection of and support of risk-taking, idea-driven Program
    Managers dedicated to making the technology work.

              It is idea-driven and outcome-oriented

        The coin of the realm at DARPA is promising ideas. The Project
    Manager succeeds by convincing others--the Office Director and the
    DARPA Director--that he or she has identified a high potential new
    concept. The gating notion isn't that the idea is well-proven, but that
    it has high prospects of making a difference. The DARPA Program Manager
    will seek out and fund researchers--usually in competition with one
    another--within U.S. defense contractors, private companies, and
    universities to bring the incipient concept into fruition. Thus, the
    research is out-come driven to achieve results toward identified goals,
    not to pursue science per se. The goals may vary from demonstrating
    that an idea is technically feasible to providing proof-of-concept for
    an operational capability. To achieve these results the Program Manager
    needs to be open to competing approaches, and be adroit and tough-
    minded in selecting among these.

    Which DARPA?

        While the concept of DARPA as a ``high-risk--high pay-off''
    organization has been maintained, it also has been an intrinsically
    malleable and adaptive organization. Indeed DARPA has morphed several
    times. DARPA has ``re-grouped'' iteratively--often after its greatest
    ``successes.'' The first such occasion was soon after its establishment
    with the spinning off of its space programs into NASA. This resulted in
    about half of the then ARPA personnel either leaving to form the new
    space agency, or returning to a military service organization to pursue
    military-specific space programs. A few years later then DDR&E John S.
    Foster required ARPA to transition its second largest inaugural
    program--the DEFENDER missile defense program--to the Army, much to the
    consternation of some key managers within ARPA. Also early in its
    history ARPA was tasked by Foster, acting at the behest of Secretary of
    Defense McNamara, to conduct a program of applied research in support
    of the military effort in Viet Nam. At the same time ARPA began what
    was to become its most famous program--the information technology
    program that among other things spawned the Internet.
        More important than the variety of the programs is that they
    demonstrate the quickness that DARPA took on a new initiative and also
    how rapidly its programs will move--sometimes more rapidly than its
    supporters within DARPA desire. However, rather than particular
    programs or technologies becoming the identifier of what DARPA is, its
    key distinguishing characteristic is its rapidly taking on and
    assessing new ideas and concepts directed at daunting military
    challenges or overarching application prospects. While the dwell time
    on new ideas may vary and DARPA may return to the concept iteratively
    over its history--most notably with its return to missile defense in
    the 1970s leading to SDI in the 1980s--its hallmark is to explore and
    create new opportunities, not perfect the ideas that it has fostered.
        This quick synopsis of DARPA's history leads to me to the
    conclusion:

             There is not and should not be a singular answer on ``what is
            DARPA''--and if someone tells you that--they don't understand
            DARPA.

        DARPA's unique focus is ``high risk--high payoff'' research. But,
    clearly this has not been the only focus. Moreover, the content and
    focus of that research has changed with the circumstances and need. A
    crucial element of what has made DARPA a special, unique institution is
    its ability to re-invent itself, to adapt, and to avoid becoming wedded
    to the last problem it tried to solve.

    DARPA roles

        While we have emphasized DARPA's adaptability, this is not to say
    that there aren't some underlying elements to what DARPA does. While
    there have been some additional ad hoc activities thrown in over time,
    such as its oversight of SEMATECH, DARPA has had significant roles--
    with a varying mix--in the following:

              Turning basic science into emerging technologies

              Exploring ``disruptive'' capabilities (military and
            more generic)

              Developing technology strategy into a Defense
            strategy

              Fostering revolution or fundamental transformation in
            a domain of technology application (e.g., the Internet or
            stand-off precision strike).

    Key elements of DARPA's success

        There are several 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 they 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. This has been true in the military realm from the
            outset. DARPA-sponsored researchers under Project DEFENDER
            conducted detailed assessments of intercontinental missile
            phenomena for both defense and offense.\6\ Later in the late
            1970s, DARPA funded studies to understand how the Warsaw Pact
            was postured against Western Europe in order to determine how
            technology could provide a means to offset the Warsaw Pact's
            numerical and geographic advantages. This planning led to DARPA
            research in both stealth and stand-off precision strike, which
            provided the basis for Secretary of Defense Harold Brown's and
            Director of Defense Research and Engineering William Perry's
            ``Offset Strategy.'' \7\
    ---------------------------------------------------------------------------
        \6\ For example, in the 1960s and 1970s DARPA funded studies at the
    then new Institute for Defense Analyses on missile offense and defense
    first under the STRAT-X project on ICBM offense-defense followed by
    then PEN-X study which assessed both U.S. and Soviet capabilities to
    penetrate missile defense systems.
        \7\ Richard Van Atta and Michael Lipptiz, Transformation and
    Transition: DARPA's Role in fostering an Emerging Revolution in
    Military Affairs, IDA Paper P-3698, (Alexandria, VA: Institute for
    Defense Analyses, March 2003).

               Such detailed conceptual work also facilitated DARPA's non-
            military research--explicitly that in information technology.
            JCR Licklider came to DARPA as head of the Information
            Processing Techniques Office with a vision on man-computer
            symbiosis that grew in specificity as he collaborated with
            others, especially Robert Taylor, to present a perspective of
            internetted computers providing capabilities for collaboration
            and data interchange amongst researchers.\8\ Overtime IPTO grew
            this initial concept into an increasingly inter-connected
            strategy.
    ---------------------------------------------------------------------------
        \8\ JCR Licklider, ``Man-Computer Symbiosis,'' IRE Transactions on
    Human Factors in Electronics, volume HFE-1, pages 4-11, March 1960 and
    JCR Licklider and Robert Taylor, ``The Computer as a Communications
    Devise,'' Science and Technology, April 1968.

    Tension between DARPA roles

        DARPA has been a pursuer of new breakthrough technologies
    independent of defined needs. It also has been a developer of concept
    prototypes and demonstrations that address needs (but not defined
    requirements). While complementary, these are substantially different
    roles requiring different management approaches and different types of
    researchers. The first type of endeavor requires an exploratory,
    somewhat unstructured approach seeking out alternatives amongst
    competing ideas. The latter focuses on taking a specific set of
    emerging capabilities and combining them into a demonstration of proof-
    of-concept. Such demonstrations are generally larger in scale and more
    resource intensive than exploratory research. Moreover, rather than
    exploratory, they are aimed at assessing the merit of a specific
    concept. Indeed, demonstration prototype efforts can be ``resources
    sumps,'' as they are both uncertain and costly. Therefore the DARPA
    Director has needs to attentively oversee these while maintaining and
    protecting the more exploratory research efforts.

    DARPA's Successes

        Over the nearly fifty years since its inception DARPA has had
    several major accomplishments that distinguish it as an innovative
    organization. While these have been recounted elsewhere, it may be
    useful here to summarize to illustrate the scale, scope, and varying
    types of innovative capabilities that DARPA helped to instigate.\9\
    ---------------------------------------------------------------------------
        \9\ DARPA's most notable past technical accomplishments have been
    documented in several prior studies. For an overview of many of DARPA's
    programs from its inception see Richard Van Atta, et al., DARPA's
    Technical Accomplishments, Volumes I-III, IDA Papers P-2192, 1990, P-
    2429, 1991, and P-2538, 1991. For a more in-depth review of a set of
    key programs in the 1970s and 1980s that had transformational impact on
    U.S. military capabilities see Richard Van Atta and Michael Lippitz, et
    al., Transformation and Transition: DARPA's Role in Fostering an
    Emerging Revolution in Military Affairs, IDA Paper P-3698, (Alexandria,
    VA: Institute for Defense Analyses, March 2003). DARPA's formative role
    in information technology has been reviewed in detail by Arthur L.
    Norberg and Judy E. O'Neill. Transforming Computer Technology:
    Information Processing for the Pentagon, 1962-1986 (Baltimore, 1996)
    and M. Mitchell Waldrop, The Dream Machine: JCR Licklider and the
    Revolution that Made Computers Personal, New York Viking Penguin, 2001.
    ---------------------------------------------------------------------------

    3rd Generation Info Tech-the Creation of Interactive Information\10\
    ---------------------------------------------------------------------------

        \10\ M. Mitchell Waldrop. The Dream Machine.
    ---------------------------------------------------------------------------
        The singularly most notable technology accomplishment that DARPA is
    known for is the development of what is now known as modern computing,
    as embodied in the personal computer and the Internet. While this
    achievement had its origins in remarkable vision of one man, JCR
    Licklider, its coming to fruition speaks volumes for the nature of
    DARPA as an organization and the willingness of its management to
    support and nurture the pursuit of such an extraordinary perspective.
        The vision that Licklider brought to DARPA was one of a totally
    revolutionary concept of computers and how they could be used. He
    foresaw that rather than being fundamentally highly automated
    calculating machines, computers could be employed as tools in
    supporting humans in creative processes.\11\ However, to do so would
    require entirely new, yet non-existent computer capabilities that
    included the underpinnings for:
    ---------------------------------------------------------------------------
        \11\ JCR Licklider, ``Man-Computer Symbiosis.''

    ---------------------------------------------------------------------------
              interactive computers

              Internetted computing

              Virtual reality

              Intelligent systems

        Licklider's extraordinary notion of ``man-computer symbiosis'' was
    a fundamental vision that foresaw using new types of computational
    capabilities to achieve first augmented human capabilities and then
    possibly artificial intelligence.
        He then identified prerequisites that were the underpinnings for
    this entirely new approach to using computers, which included:

            --  Entirely new types of data-processing equipment and
            programs that facilitated researchers interacting with their
            computers in real-time.

            --  Taking advantage of the speed mismatch between the
            computer, which can perform nearly instantaneously and the
            slower and more deliberative human. To overcome this mismatch,
            the computer must divide its time amongst several users [the
            concept of time-sharing].

            --  The creation of the ``Thinking Center'' ``a Network of
            libraries and information storage connected by wideband
            communications. . .to individual users''

            --  Memory and memory organization developed and optimized for
            search and retrieval

            --  Entirely different computer language that is ``goal
            oriented'' rather than step by step process oriented

            --  Completely novel input and output mechanisms to overcome
            the cumbersome punch cards and reams of computer printout with
            such radical notions as touch-screen displays and even speech
            recognition.

        Licklider brought these inchoate notions to DARPA when he was named
    Director of its Information Processing Techniques Office (IPTO). He
    brought a powerful vision of what could be and used this as the basis
    for sustained investment in the underlying technologies to achieve the
    vision. These investments were aimed at adventurous innovators in
    academia and in industry--mostly small enterprises on the fringe of the
    information processing industry then dominated by IBM, such as Bolt,
    Baranek and Newman (BBN). Moreover, there was an underlying concept of
    how this investment would lead to applications relying on an
    entrepreneurial dynamic. This effort became the gestation of a
    concerted effort that culminated in the ARPANET, as well as a number of
    technological innovations in the underlying computer graphics, computer
    processing, and other capabilities that led to DARPA's fundamental
    impact on ``making computers personal''. . .a truly change-state vision
    which had fundamental impact in fostering a transformational concept
    and the creation of an entire industry.

    DARPA's Role in Creating a Revolution in Military Affairs\12\
    ---------------------------------------------------------------------------

        \12\ This section draws upon Richard Van Atta and Michael Lippitz,
    et al., Transformation and Transition: DARPA's Role in fostering an
    Emerging Revolution in Military Affairs, IDA Paper P-3698, (Alexandria,
    VA: Institute for Defense Analyses, March 2003).
    ---------------------------------------------------------------------------
        DARPA has been instrumental in developing a number of technologies,
    systems and concepts critical to what some have termed the Revolution
    in Military Affairs (RMA) that DOD implemented in the 1990s based on
    R&D DARPA conducted over the prior fifteen years. It did so by serving
    as a virtual DOD corporate laboratory: a central research activity,
    reporting to the top of the organization, with the flexibility to move
    rapidly into new areas and explore opportunities that held the
    potential of ``changing the business.'' It was a virtual laboratory
    because DARPA did not perform research directly but rather acted as a
    catalyst for innovation by articulating thrust areas linked to overall
    DOD strategic needs, seeding and coordinating external research
    communities, and funding large-scale demonstrations of disruptive
    concepts. In doing so, the DARPA programs presented senior DOD
    leadership with opportunities to develop disruptive capabilities. When
    these programs received consistent senior leadership support, typically
    from the highest levels of the Office of the Secretary of Defense, they
    transitioned into acquisition and deployment. At other times, without
    this backing from highest reaches of the department, only the less
    disruptive, less joint elements moved forward.
        An example of one of the most successful DARPA programs is its
    championing of stealth. While a radical and controversial concept,
    DARPA's stealth R&D had most of the properties listed above. DARPA
    harnessed industry ideas. Low-observable aircraft had been built
    before, for reconnaissance and intelligence purposes, but not pursued
    for combat applications. The Air Force had little interest in a slow,
    not very maneuverable plane that could only fly at night. After
    considerable engineering work, the HAVE BLUE proof-of-concept system
    enabled top OSD and Service leadership to proceed with confidence to
    fund and support a full-scale acquisition program. OSD leadership kept
    the subsequent F-117A program focused on a limited set of high priority
    missions that existing aircraft could not perform well--e.g.,
    overcoming Soviet integrated air defenses--and worked with Congress to
    protect its budget, with a target completion date within the same
    administration. The result was a ``secret weapon'' capability--exactly
    what DARPA and top DOD leadership had envisioned.

    VISION: DARPA conception, development and demonstration of disruptive
                        capabilities

        DARPA's higher-risk, longer-term R&D agenda distinguishes it from
    other sources of defense R&D funding. Perhaps the most important effect
    of DARPA's work is to change people's minds as to what is possible. A
    fundamental tension for DARPA is balancing its pursuit of high-risk
    research independent of a defined need with its demonstration of
    capabilities that address a specific strategic problem (but not defined
    requirements). Although integration projects may be just as ``high
    risk'' as research projects, philosophically, culturally, and
    managerially, these are very different processes. The DARPA Director
    needs to mediate between these missions and, more importantly, bridge
    the two communities. DARPA has been effective in part because a strong
    axis between DARPA and top OSD leadership formed around ambitious
    outcomes, not technologies per se. An outcome orientation is
    particularly important in explaining to Congress what DARPA is doing
    and why.

    LEADERSHIP: Acquisition and Deployment of Disruptive Capabilities

        DARPA's history shows that if fielded disruptive capabilities are
    the objective, it is insufficient for DARPA to create an example and
    then rely upon the traditional Service acquisition system to recognize
    its worth and implement it. Because acquisition and deployment of
    disruptive capabilities challenge existing programs and bureaucracies,
    it is difficult to find eager Service customers for them. Also, because
    new capabilities are not technically mature or operationally robust,
    the Services will generally be reluctant to take on the significant and
    potentially costly risk reduction efforts required to move them into
    acquisition. Hence, rapid acquisition and deployment of disruptive
    capabilities requires an integrated and consistent senior leadership
    effort, typically from the Director of Defense Research and Engineering
    or the Under Secretary of Acquisition, Technology and Logistics. These
    senior OSD leaders must judiciously exercise their authority to
    overcome the resistance of people to new ideas, of acquisition
    organizations to perceived competition, and of requirements and
    acquisition organizations to uncertainty and risk.

    Energy and the Environment--A DARPA Model?

        DARPA's successes in spurring technological innovation have led to
    numerous calls for applying ``the DARPA model'' to other issues than
    national defense. As noted above, one area that has received particular
    attention is energy technology. Does the DARPA model provide a useful
    approach to address issues of energy research and development? The
    foremost question is what is the imperative for radical, transformative
    R&D in energy technology equivalent to DARPA's national security
    concern? Are energy security and stemming climate change and its
    effects comparable motifs?
        DARPA is chartered to identify and pursue potential technological
    capabilities that could provide fundamental advantage to the U.S.
    relative to existing or potential adversaries. The need to be ahead of
    all others to ``avoid technological surprise'' in the interest of
    national security is a recognized imperative for making exploratory
    high-risk investments. Do such interests as ``energy independence'' or
    ameliorating climate change provide sufficient imperatives for energy-
    related advanced research?
        DARPA has had the imprimatur of the Secretary of Defense to both
    engage in highly uncertain R&D not explicitly focused on identified
    requirements and to promote the application of emergent, often
    disruptive capabilities based on such research. In essence the
    Secretary of Defense has played the role of the Chief Executive Officer
    protecting and supporting the Director of DARPA as the director of
    innovation--seeking new technological capabilities that can redirect
    and revitalize an enterprise. While the Department of Energy has
    pursued advanced S&T in its Office of Science, DOE has not had the type
    of implementation-focused efforts of advanced technology that have been
    promoted by DOD leadership in bringing DARPA developments into
    fruition. While DOE clearly has an important, perhaps dominant role in
    current energy research, and this research has repercussions for
    climate change, the two are not synonymous. For example, most of the
    current energy research agenda is driven by energy efficiency and
    security concerns focusing on incremental improvements of existing
    approaches. Also, the scope of climate change R&D goes well beyond the
    scope of DOE.
        Thus, the organizational question for ``ARPA-E'' is much more
    problematic than that faced by DARPA. DARPA's job explicitly is
    national security--and the main government focus has been the
    Department of Defense. DARPA has been stretched into broader venues
    including support for the intelligence community and also the support
    of more generic commercially-related programs--at one time labeled
    ``dual use'' technologies. The intelligence-related aspects of DARPA,
    while at times collaborated and coordinated with non-DOD interests,
    particularly the CIA, are clearly linked to the national security
    mission and the fact that DOD operates its own vast intelligence
    operations.
        This raises another vexing question: How would results of an Energy
    ARPA be brought into fruition? DARPA has developed an established
    network of implementation paths that varied by technology and
    application. It has developed strategies for interacting with military
    users and developers for bringing military capabilities into
    application using the support of OSD when needed. It has developed
    various mechanisms for supporting incipient technological capabilities
    in universities and small enterprises and provided systematic support
    that builds an interlinked set of underpinning technologies that
    together, iteratively have moved closer to an ultimate transformational
    vision. Can an Energy ARPA obtain the freedom of movement to organize
    such implementation focused investment strategies? Who would be the
    organizations that would take the results of ARPA-E's proof-of-concept
    research and move it into the next level of development? In creating an
    ARPA-E how clearly defined should be the mechanisms it would draw upon
    to move its ideas forward? It would be an unfair reading of history to
    say that all of this was well understood when ARPA was founded. For the
    military side of the equation the role of the Secretary of Defense and
    the DDR&E cannot be overstated. Particularly in the 1960s through the
    1980s OSD interacted closely with the Director of DARPA in laying out
    priorities and directions--while the Director was clearly responsible
    for research.\13\
    ---------------------------------------------------------------------------
        \13\ The interaction between the DARPA director and OSD is
    important here. This was not a one-way street with OSD handing down
    specific focus for research, rather it was a dialogue in which the OSD,
    usually through the DDR&E, today the USD (AT&L), would lay out military
    and technical challenges it saw as priorities and DARPA would develop
    its perspective on what emerging technical capabilities might address
    these. DARPA, often in conjunction with other organizations, such as
    the Defense Nuclear Agency (DNA), would conduct studies and provide
    input to high-level DOD leadership on options for addressing daunting
    strategic concerns.
    ---------------------------------------------------------------------------
        The path undertaken by DARPA in bringing its technical results into
    application has been that of a somewhat distant or indirect supporter
    of the implementation process. In essence DARPA's role in technology
    transition has been to support technology demonstrations often in
    conjunction with potential users or through a series of ``boot
    strapped'' implementations of new technologies by employing the
    technology development as inputs to other DARPA research. This latter
    approach has been particularly effective in the area of information
    processing technologies, where for example, the DARPA-supported
    computer workstations were specifically acquired for use by DARPA-
    funded integrated circuit technology development programs.\14\ When the
    results of the technology development most likely would have to be
    adopted and adapted by the commercial sector the DARPA approach has
    generally been one of encouragement, but not direct involvement. The
    concern that commercialization is a function that is best left to
    others than those in government has led to proposals for creating
    alternative, non-governmental mechanisms, such as an Energy Technology
    Corporation, as suggested by John Deutch.\15\
    ---------------------------------------------------------------------------
        \14\ Van Atta, et al., DARPA Technical Accomplishments, Volume II,
    Chapter XVII, ``VLSI : Enabling Technologies for Advanced Computing,''
    Alexandria, VA: Institute for Defense Analyses, April 1991.
        \15\ John Deutch, ``What Should the Government Do To Encourage
    Technical Change in the Energy Sector?'' MIT Joint Program on the
    Science and Policy of Global Change, Report No. 120, May 2005.
    ---------------------------------------------------------------------------
        In employing a DARPA-model to another area of research, it is
    important to understand that DARPA began as relatively small, highly
    focused organization that was explicitly taking on problems that were
    of relatively little priority to existing military R&D organizations.
    Yet, the issues were of great importance and priority to senior
    leadership--including the Secretary of Defense and the President.
    Later, as the policy and technological circumstances changed, DARPA
    morphed and adapted. In particular, DARPA has been focused on pursuing
    advanced technology projects that could potentially ``make a
    difference''--and wedded not to the success of any particular project.
    It has been an ``innovation farm'' and idea incubator. It has only
    exceptionally taken on the actual implementation of a technology--and
    then only as a last resort, or as a very incipient step in application
    prototyping. If another department were to stand up an ``ARPA-like''
    organization, it should not try to invent a full-blown, full scale
    operation based on DARPA after 30 years. Rather, it should endeavor to
    build the organization organically, adaptively focusing on explicit
    high priority mission challenges. The idea should not be to make
    something look like DARPA; it should be to identify and organize
    advanced research around imperatives that are similar in nature to
    those that have driven DARPA.
        DARPA has been able to take on high-level issues that are
    disruptive of current operations and technical interests. The example
    of stealth, above, shows how it fostered a concept that was received
    hostilely by the main service that was to employ it--the Air Force--and
    initially rejected by the Navy. Even in its information technology
    research DARPA confronted a major, well-ensconced vested interest in
    IBM, who at the time totally dominated not only the computer industry,
    but also computer research.\16\ Can a civilian organization maintain
    independence of its technology program from such powerful ``vested
    interests''? DARPA had certain advantages that may be difficult to
    emulate in a non-DOD organization, particularly today. First, at its
    inception it had the cover of the initial set of Presidential Issues,
    vested on it directly from the Secretary of Defense. It was given a
    charter to take on issues that the existing Service R&D structure had
    failed to give adequate priority to and the results of which were
    manifestly wanting. As it successfully addressed its initial set of
    programs it further gained the support of OSD which gave it the top
    cover it needed. If an Energy ARPA is to have any chance of success it
    will need this level of support from both the Secretary of Energy and
    the White House.
    ---------------------------------------------------------------------------
        \16\ See Kenneth Flamm, Creating the Computer, Washington, DC:
    Brookings Institute, 1988, for a discussion of IBM's dominant role in
    computer research in the early 1960s.
    ---------------------------------------------------------------------------

    Issues in Establishing an ARPA-E

        Some key elements that would need to be addressed, and in some
    cases directly overcome, if an effective ARPA-E were to be created,
    are:

            1.  Leadership support--As discussed above, ARPA had President
            Eisenhower's direct and strong support, and this support has
            generally been sustained with both the White House and the
            Secretary of Defense.

            2.  Congressional oversight--One issue for ARPA-E, relative to
            DARPA is that DARPA enjoys Congressional oversight that is
            relatively simple, and has generally had the backing of key
            members and staffers.

            3.  Existing Lab structure--ARPA-E will need to contend with a
            research infrastructure in the National Laboratories, that had
            no such precedent in DOD. The Service R&D structure lacked the
            scale and scope of the current ``energy labs'' and also the
            support on Capitol Hill that these labs have.

            4.  Incumbent business interests--DARPA has succeeded by
            developing and fostering a community of interest ranging from
            academics to business. It developed these communities piece by
            piece from the ground up, based on technological capabilities
            and prospects. It has been able to find within that community
            interested and innovative participants who were willing to
            experiment with new ideas. In its information processing
            technology development, DARPA was able to build an alternative
            base despite the dominant presence of IBM. It is unclear
            whether the firms currently in energy production and usage will
            be open to such experimentation and whether alternative firms
            and even alternative sectors can grow within the energy
            industrial structure.

        An Energy ARPA has been proposed as a way to respond to critical
    energy needs by accelerating research in game-changing technologies.
    Advocates of this new approach need to make a strong case on what it is
    they see as needing to be done that the current R&D processes are not
    doing successfully. In essence, they need the moral equivalent of their
    Sputnik to galvanize support for such a novel agency. Is the lack of a
    robust hybrid automobile program in the U.S. an example that has
    similar sway? Is the hydrogen energy effort in this country similar to
    the ineffective Service response to Soviet ICBMs in the 1950s to
    provide a stimulus to creating an Energy ARPA? Is the recognition of
    the anthropogenic climate change impacts reaching a point where high-
    level policy-makers have come to realize that incremental approaches
    based on existing technologies is so insufficient that a radical
    enterprise is needed?

                         Biography for Richard Van Atta
        Dr. Richard Van Atta is a senior research analyst at the Science
    and Technology Policy Institute (STPI), where his work focuses on the
    technological needs and interests of the United States as they affect
    both national and economic security. He taught courses in national
    security and policy analysis at the American University's School of
    International Service followed by several years of private consulting
    before joining the research staff at the Institute for Defense Analyses
    (IDA) Studies and Analyses Center (1983-2006). From 1993 to 1998, Dr.
    Van Atta was an official in the Department of Defense (on temporary
    assignment from IDA), first as Special Assistant for Dual Use
    Technology Policy then as Assistant Deputy Under Secretary for Dual Use
    and Commercial Programs. He also is an adjunct professor in Georgetown
    University's Security Studies Program teaching a course on Emerging
    Technologies and Security.
        Dr. Van Atta has a Bachelor's Degree in political science from the
    University of California, Santa Barbara and a Ph.D. in political
    science from Indiana University.

                                   Discussion

        Chairwoman Giffords. Thank you, Dr. Van Atta. We are on a
    bit of a time crunch, in terms of Mr. Inglis' schedule, so I am
    going to allow him to start this first round of questions.

                                Nuclear Research

        Mr. Inglis. Thank you, Madam Chair. Very kind of you to let
    me go here, and appreciate the testimony.
        Mr. Denniston, you said something interesting, that nuclear
    shouldn't be included. Things that I have heard lately about
    nuclear. It has been a long time, of course, since we built a
    nuclear power plant, and I heard a major construction company
    tell me they're not sure that we have the capacity, that if you
    look around at who could design them, and that sort of thing,
    they were expressing some doubt.
        In talking to electrical generator kind of companies,
    people who make electricity, they tell me they are not willing
    to spend money on research in next generation reactors. If that
    is the case, we have lost some proficiencies in construction,
    and we don't have the appetite for research in the private
    sector, why not include nuclear in ARPA-E?
        Mr. Denniston. Great question. My answer would be that I am
    not saying that we shouldn't fund nuclear research. What I am
    saying is that the narrow purpose and mission, in my view, of
    ARPA-E, is translational research. Translational research is
    focused on identifying in the world, in the case of energy, in
    the commercial-industrial business world, the breakthrough
    energy solutions that will solve climate change, energy
    dependence, American competitiveness, and then reaching back to
    basic science, and identifying the possible solutions, and
    pushing them forward to the bring of commercialization, which
    is where industry can take over. And so, DOE can and will fund
    nuclear research. You can separately discuss what the
    appropriate funding levels would be.
        To the comments that have been made by the panel, the
    importance of having a focused mission, and of having a
    consistent culture, and a small, flat, risk-taking
    organization, are critical to the importance of ARPA-E, as
    those factors were to DARPA.
        And for those reasons, and what I also said in my
    testimony, Congressman, is that translational research is best
    suited to identifying breakthrough technologies in emerging
    fields, and not really design for incremental improvements in
    existing ones.

                          Technology Commercialization

        Mr. Inglis. Let me ask, you are here in the Science and
    Technology Committee, and of course, that means that we want to
    provide these breakthroughs, or be involved in the
    breakthroughs, and help, as we push through the barriers. And
    maybe at Energy and Commerce, they regulate things that already
    are in existence.
        But there is sort of a chicken and egg question here, I
    think, and that is whether there is technology already
    available, and what it takes is market forces to force them
    into a position of being viable in a commercial marketplace.
    And to some extent, you know, it is, we don't want to do
    science projects. We actually want to--they are fun and very
    valuable, but we want to actually get the technology into the
    marketplace, right? So, anybody want to take a shot at whether
    that is what we are successfully doing here, or whether really
    what we should be talking about is some kind of dealing in the
    marketplace, in terms of the price of gasoline, and things like
    that, that make it so that technologies would suddenly become
    very viable.
        Dr. Forrest. I would like to make a comment on that, if I
    may. I tend to agree with part of your question, which is do we
    know the scientific and technological routes to make clean
    energy? The answer to that is by and large, we do. Is it
    affordable? No, it is not. We are competing against fossil
    fuel. It is not an even playing field, but that is not the
    point. We are dealt the playing field that we have.
        So the real question is what are the science and technology
    breakthroughs that will make these solutions affordable? And
    that is what an independent ARPA-E will do, because it tailors,
    it brings the innovative engine together with the commercial
    engine, and you get it to be pulled into the marketplace very
    rapidly. So, no, we are not at all advocating, I don't believe
    anybody on this panel is advocating that we create another NSF.
    That is really, that creates the fundamental base of the
    technologies that we are talking about. What we are looking at
    is, and I think Mr. Denniston said it very well, it is this
    partnership, this translation that takes us from that basis to
    a market effective economy.
        Mr. Inglis. And Dr. Forrest, actually, you sharpened my
    question very well, because I don't want to sound like I am
    opposed to basic research. We here on this committee, we are
    very excited about basic research, because who knows where it
    will lead, but it gives us opportunities to pursue. But you are
    onto, really, the better, more precise question. That is, if
    you internalize the external cost of those fossil fuels, and
    made it so the market properly evaluated those, then the
    question is whether some of those technologies might suddenly
    become viable.
        Dr. Forrest. Well, I certainly would.
        Mr. Bonvillian. Mr. Inglis, you have asked a very important
    question. I think the underlying issue here is that there is a
    variety of things we are going to have to do in this very
    complex area of trying to stand up technologies within deeply
    established sectors. And part of that is going to have to be
    looking at the whole pricing situation, and someday, we will do
    that.
        Within that, though, we have to get the innovation system
    right, too. If we don't have the innovation system serving up
    new opportunities, if we only deal with the macro-pricing
    system, we are still going to be completely behind the eight-
    ball. If we don't have innovation opportunities that the energy
    sectors that are going to adopt, and see as ways out of their
    dilemma, we are just not going to get there.
        So, I think the function of this committee is a crucial one
    in this mix, which is to get the innovation system in the kind
    of shape we are going to need to allow these technology
    opportunities to happen. There is a series of problems, as I
    see it, in the technology standup area. The first set of
    problems, and to some extent we have emphasized this, is
    standing up sort of disruptive technologies that are going to
    be in new areas, and not necessarily compete with established
    sectors. And there are many of these. And DARPA has done that
    brilliantly. I mean, it has sold into the Defense Department,
    but it has also launched many technologies into the private
    sector, using its model.
        But then, in the energy sector, we have got other problems.
    A lot of what we stand up are going to have to be components in
    established sectors. So, you think of a battery in a hybrid
    engine. That is going to be a component in a larger automotive
    system. You think of carbon capture and sequestration. Those
    are components in a much larger utility sector. Some of those
    sectors are going to be game for adapting new technologies.
    Some aren't. Some are going to resist this change, and resist
    it in very tough-minded, competitive ways.
        So, we are going to have to figure out how to weave through
    those areas. I think a translational research entity can play a
    role, particularly in those sectors where adaptation is going
    to be accepted. But we need to have technologies for the full
    range.
        There are two other fundamental technology problems here.
    One is in the conservation and efficiency side. Some of that
    will involve breakthrough opportunities, and some of it is very
    incremental, probably not a role for an ARPA-E. And second,
    there is a deep manufacturing process side, that gets to your
    point about cost.
        One thing that DARPA has done an interesting job on,
    occasionally, over the years is looking at how to drive down
    manufacturing costs for defense products. It is a very
    sophisticated technology problem; it is a very sophisticated
    R&D problem. A lot of DARPA's work in bringing IT into the
    manufacturing process has had huge payoffs for other sectors as
    well. In order for a lot of the new technologies that we are
    going to need to compete, there is a manufacturing process task
    that we are going to have to go after, and this might be an
    interesting task, at least for breakthrough parts of that, for
    an ARPA-E as well.
        So, I think there is a series of roles--as we begin to
    break down the jobs that we need to get done in this complex
    sector--I think there is a series of roles an ARPA-E could
    play.
        Mr. Denniston. Congressman, could I try and answer? Your
    question was is it sensible public policy to put a price on
    carbon, and I am going to give you an answer in one simple
    declarative sentence. Emphatically, yes.
        I believe that is the single most important thing that
    Congress can do. Research is really important. We have got to
    do that, but we have a free externality now that needs to be
    changed. I think I gave you two sentences. If I could add one
    more comment, going back to your prior question on nuclear.
        If you look back over 50 years, and you add up the federal
    research funding of nuclear plus renewables, it is a large sum.
    Of that sum, nuclear has received 96 percent of the total. So,
    I believe it is time to level the playing field, and give some
    of these renewables a shot at the market.
        Dr. Van Atta. If I can, just one quick point. You can talk
    about the market forces, technologies available, these market
    forces. That was true in 1958, '59, '60, in computers. There
    was a market force, and it was called IBM. It controlled the
    technology. It controlled the marketplace, in much the same way
    as the large energy companies, the large power producers, et
    cetera, do in the energy field today, perhaps not quite to the
    same extent, but largely, in terms of controlling what is out
    there.
        DARPA created the alternative capabilities and technology
    that allowed others to enter into the marketplace, and also
    provided some mechanisms by which those technologies actually
    got out into the field. Through various internal procurement
    aspects, the government is a major consumer of energy. The
    government sets regulations on energy. The government procures
    energy systems. If those new ideas are coming forward, and have
    major impact, but perhaps need to be buffered over time, in
    terms of cost and risk, the government can play some very
    successful roles in spurring the adaptation of those
    technologies and implementation.
        And I think there are some lessons learned as to how DARPA
    did that in certain areas, and I think there are some other
    public policy examples we have that can be useful in that as
    well.

          Homeland Security Advanced Research Projects Agency (HSARPA)

        Chairwoman Giffords. Thank you. This question is mostly
    directed to Mr. Bonvillian and also Dr. Van Atta, but
    certainly, feel free to comment if you have some thoughts on
    this.
        Mr. Bonvillian, you were instrumental in developing the
    Homeland Security ARPA model, and looking at your written
    testimony, the program has not been, by and large, very
    successful. So, I am curious what we can learn in terms of not
    having successes there in Homeland Security. What sort of
    lessons can be learned, and how are we going to possibly avoid
    these problems with the ARPA-E model?
        Mr. Bonvillian. You know, this committee, the Science
    Committee, played a very central role in trying to tackle the
    whole science and technology mission of Homeland Security,
    including standing up an HSARPA model. So, when I was working
    on the Hill, I worked very, very closely with this committee's
    staff. They were equally involved.
        The Committee provided HSARPA, I thought and still believe,
    a strong and flexible authorization that was modeled on DARPA's
    strengths. But HSARPA was never adequately utilized or
    implemented, and it really exists now as a shell within a much
    larger organization, with a very minimal budget. And while a
    very talented initial staff, including a number of very
    talented people from DARPA itself, were hired to organize the
    entity, it was a significant period of time, over a year,
    before HSARPA obtained a leader. Unfortunately, because of
    illness, he was not able to stay in that entity for a lengthy
    period of time.
        So, there was an initial leadership gap problem. I think
    there is a series of lessons here that we can learn. First, an
    innovation culture is critical to success. I think the HSARPA
    entity had the team to be able to do that innovation initially,
    but the culture of the entity--the overall DHS Science and
    Technology Directorate--that it got stood up in was not
    prepared to accept this. It was, in effect, being rejected as a
    foreign body.
        So, having support from the agencies and/or overall entity
    in which this ARPA-E will be stood up becomes crucial.
    Relationships with the Department of Energy, if it is stood up
    at DOE, become absolutely vital. This has got to be something
    DOE wants to do. Otherwise, it is just not going to work. And
    that became a problem, even though the whole S&T Directorate
    was also new, that became a problem within Homeland Security.
        ARPA-E is going to need its own budget, and the ability to
    control it. HSARPA did not have that power; its budget was
    controlled from above. It never had the authority to even make
    R&D decisions. All of those had to go through a constant
    approval process. So, it was never allowed the autonomy that we
    have talked about as a necessity. It never had an island to be
    creative. So, that needs to be ensured, and control over its
    own budget is an absolute necessity, and it has got to be a
    sizable enough budget to make a difference.
        Technical talent of great skill is vital here, but you also
    need people with experience in the federal R&D system that are
    going to know how to relate to the other bureaucracies, who are
    going to know people there, know how they are organized, know
    what their cultures are, to be able to make those connections
    work. I think that is another lesson to draw from this HSARPA
    experience.
        And finally, you need to decide on the fundamental mission.
    One of the issues within the DHS Science and Technology
    Directorate was that there was a lot of short-term technology
    available that needed to be stood up quickly, given the threat
    to the country. And HSARPA can play a role in that, of course,
    but its fundamental mission is much more on the breakthrough
    side, the left-right model that we talked about earlier.
        If you try to mix the two missions together, short and long
    range R&D, you run into difficulties. And the shorter-term
    mission, which is frankly a more expensive mission often,
    because you are standing up technologies, tends to become a
    bill-payer for the longer-term mission, because the deadlines
    are not as real. So, HSARPA got raided, in a way, to stand up a
    lot of the shorter-term problems. So, decide early on what the
    mission is, and don't try to mix it, if you try to stand up an
    ARPA-E.
        Chairwoman Giffords. Thank you. Dr. Van Atta.
        Dr. Van Atta. Well, I agree that Bill has pretty much put
    his finger on it. First of all, the imperative of the near-term
    overwhelmed the ideas of HSARPA, the long-term, after 9/11, get
    things out there, do things quickly. Whatever we had, go find
    it, so it was very, very short-term, almost commercial, off the
    shelf, paint it a different color and get it out there.
        That swept away any of the longer-term notions, and put
    them on the back burner, constantly kept moving them back. The
    lack of budget, the lack of autonomy, the lack of independence,
    all the things we talked about that made DARPA DARPA weren't
    part of HSARPA. So, I think we can learn pretty much that if
    you don't do it right, you are going to get it wrong.
        Chairwoman Giffords. Thank you. Let me turn to Ms. Biggert.

                           ARPA-E Reporting Structure

        Ms. Biggert. Thank you very much, Madam Chairman.
        Thank you all for being here. I know that I have discussed
    this issue, and I don't know if any of you were at any of the
    hearings that we had last year, where we picked this up, but
    one of the things I would like to know is if you have all read
    the recommendations on ARPA-E included in the National
    Academies' Gathering Storm report. And I would like everybody
    to say yes or no, and everybody is waving yes.
        Okay. And if so, do you believe their recommendation is
    clear as to the exact function, role, and structure of
        ARPA-E, or do you believe it leaves a lot of questions
    unanswered? We will start. Just--Mr. Bonvillian.
        Mr. Bonvillian. Congresswoman, they did not provide a lot
    of detail in the Gathering Storm report. They did not lay out a
    framework. They laid out an idea. They laid out a concept. They
    identified what they felt was an institutional gap in the array
    of institutions that we have at DOE. And I don't want to be
    critical of DOE here. I mean, there are great things going on
    in the Office of Science. There are great things going on in
    our federal laboratories.
        The point I would make, though, is that this particular
    translational role has not been tasked to DOE, and the
    institutional array to tackle it just hasn't been set up at
    this time.
        Ms. Biggert. Okay.
        Mr. Bonvillian. And then, the question becomes whether or
    not you can use existing institutions at DOE to do this, and I
    would argue no, you probably want to create this thing, if that
    is a role that you want to make.
        Ms. Biggert. Okay, Mr. Denniston.
        Mr. Denniston. No. I don't think that the Gathering Storm
    report provided implementation details. I view it as an idea.
    So, they don't talk specifically about which technologies,
    fossil, nuclear, renewable. They don't talk about stage of
    research, should it be translational, is it basic, is it
    applied? They don't talk about the organizational details, much
    of which you have heard today.
        They do talk about funding levels, which are exactly what
    you have in the draft ARPA-E, but they don't explain where
    those numbers came from, and so, I think there is a lot--while
    the fundamental idea is sound, an awful lot of the
    implementation details are absent, and should be addressed in
    ARPA-E.
        Ms. Biggert. Dr. Forrest.
        Dr. Forrest. I agree with the previous two speakers, in
    that it is more of a schematic diagram of what this agency
    would look like. One of the things that it does comment on,
    though, is that the agency should report to the Under Secretary
    of Science, and I do not believe that that is the best location
    for this reporting structure. It should go directly to the
    Secretary of Energy.
        The other thing, I do believe that although it is schematic
    to be discussing specific funding levels, probably which are
    rapidly being swept aside by current events and so on, is
    probably something that the Committee and the Congress should
    discuss as a whole, but I would look at those recommendations
    as a starting point, but not an ending point for what we need
    to do here.
        Ms. Biggert. Dr. Van Atta.
        Dr. Van Atta. Yeah, I pretty much agree, that what they
    presented there was a generic approach, one looking for a
    fundamental alternative. Norm Augustine is very familiar with
    DARPA, being on the Defense Science Board, having worked, you
    know, as Chairman of Lockheed Martin, and in fact, being the
    head of the Army Science Technology, back when he worked with
    the Office of Secretary of Defense.
        So, he knew the effectiveness and the impact that had for
    security and defense, and so, I think they were looking at this
    as a model, but not to be explicitly, they didn't have the
    explicit implementation details.

                                  ARPA-E Study

        Ms. Biggert. Okay. Thank you. In a bill that we passed at
    the end of last year, H.R. 6203, we had a suggestion for a
    study, an ARPA-E study that would be conducted by--well, the
    Secretary of Department of Energy would enter into an
    arrangement with the National Academies of Sciences to conduct
    a detailed study, and make further recommendations, and
    obviously, it is too late for that now, as far as that bill,
    because it passed the House, but not the Senate.
        But do you think--I am concerned about setting up a
    completely different agency before we have answered a lot of
    these questions that were put forward. As you just mentioned,
    there were unanswered questions before we set up a completely
    new agency, and there are about five questions. You know, to
    determine what everybody does now, so to know what would be the
    focus of the new agency, and how, to the extent that DARPA
    would be used as the, whether it should be used as, whether it
    is the appropriate model, how research and development
    sponsored by ARPA would differ from that that is done by the
    National Labs, or sponsored by the Office of Science, or Office
    of Energy Efficiency, and should industry or National
    Laboratories be recipients of the ARPA-E grants, which I think
    are all questions that really need to be answered before this
    happens.
        Dr. Forrest. I would like to answer a couple of those
    questions. In my formal remarks, where I did mention that the
    flexibility of DARPA came from the fact that it really does not
    provide substantial funding to the DOD labs, which is the
    equivalent.
        The National Labs simply are not organized to be a
    functional change agent within our country. I think a lot of
    the questions that you asked are very important, but I do think
    we know many of the answers. I think we do know what the goal
    of the Labs are. We do know, for example, what the basic
    mission of the basic energy sciences, for example, is funding.
    And I do believe that given the scale of the problem, there is
    a huge, unmet need in the center, and that is this translation
    between idea and moving to market. And this is what has not
    been served traditionally, we know this quite well, by the
    Department of Energy, and we really have to move on from that
    point, because of the national strategic need for this, and
    also, for the environmental challenge that we are facing.
        Ms. Biggert. I don't think that is all, you know, all of
    the question, because it is, you know, it can be private,
    whatever. Let me just say that, a couple of things I hear. I
    think that most of you seem, I think, it makes it sound like
    the National Labs don't do anything, and to me, it was always
    their focus, was to be the innovation, to do the basic research
    that is going to lead them to the transitional, to lead to the
    marketplace. And I think the difference between DARPA and ARPA-
    E is that when DARPA develops something, it is developed, but
    it has the demand. I mean, they--it has the demand for it,
    because we have the military, which is then going to receive
    the product that is developed.
        What happens in the sciences is we don't know what the
    demand will be, and you are talking about fossil fuels. If they
    are not, you know, while we are using those, we haven't been
    able to convince the--or find the demand that is going to do
    away with those. For example, let us take a hybrid car. Right
    now, we are seeing the higher prices of gasoline, so people are
    going out and buying more hybrid cars, which is really good,
    but if we have offered an incentive to, because the price is
    higher, so what we have to do is to create the--everybody is
    going to want to buy a hybrid car, and they are not going to
    want to use just one that has gasoline in it.
        With the military, they are going to determine that this is
    the product that is going to be used in lieu of something else
    that isn't as good, and that is what worries me. You set this
    up, and say okay, we are going to find the innovation, and we
    have to, to complete----
        Mr. Denniston. Can I----
        Ms. Biggert. Yes, sir.
        Mr. Denniston. Can I try a shot at that, Congresswoman?
    First is on the question of a study. I wouldn't do a study. I
    think this subcommittee has the facts and the expertise to be
    able to decide those details. A study delays implementation,
    which I would be very much opposed to.
        On your question, on the distinction that you draw between
    DARPA and ARPA-E, my belief is that is a distinction without a
    difference, and I think my view is that we are currently today
    seeing a Moore's Law effect in the renewable energy field,
    where wind power, the price of wind power has declined by an
    order of magnitude in the past 20 years. Solar power, by 60
    percent in the same period of time. Biofuels are twice as
    efficient now as they were in the '80s, and that is before we
    put a lot of resources, private industry and federal, on it. I
    can assure you that this Moore's Law, the slope of the curve
    will accelerate.
        And the objective of this is to end up with renewable
    sources of energy that are price-advantaged over the incumbent
    sources, and the sooner we do that, the sooner that we will
    relieve ourselves of the three crises: energy dependence,
    American competitiveness, and climate change.
        I was in China over the summer, and I had lunch with the
    General Director of their Ministry of Science and Technology,
    on the subject of energy research. They are doing an enormous
    amount. He didn't tell me the amount that they are funding, but
    pointed me in different directions around the country. They are
    putting a lot of resource on this. I was in Europe last month,
    visiting with governmental officials. There is a race to lead
    the next industrial revolution. In my opinion, it will be
    around energy, and if America doesn't lead that race, then we
    will pay the consequences, in terms of standard of living,
    jobs, and prosperity in this country. This is urgent, it is a
    crisis, we need to get going, in my view.
        Ms. Biggert. I think we would all agree with you, but I
    would add to that that we have to really focus in on nuclear
    energy and the recycling of the waste, and I think that we need
    to get going on that, and I worry that some of these other
    things might take, you know, because it is going to be the
    cost, but in the long-term, it is going to lower, you know,
    because it will come down once we have developed enough of the
    reactors and enough of the recycling.
        Dr. Forrest. If I could just, if I may, just wheel out one
    statistic. Germany has been working very hard on solar. In
    about five years, they anticipate that more energy in Germany
    will be produced by solar power than by nuclear power. The cost
    curves that are driving solar today are extraordinarily
    aggressive, and if we stay on this track--by the way, there are
    some very large American suppliers of that German solar energy,
    which is good news. But I think that there are numerous
    things--there is no silver bullet here in finding a single
    energy solution, but we really do have to work on renewables,
    because that is where the future of this technology is going.
        Ms. Biggert. Yeah. And I think what you are saying is
    absolutely true, but I don't know if there is just one silver
    bullet, like ARPA-E, that is going to create that. And I know I
    am way over my time, Madam Chairman. If I might just go back. I
    hope Mr. Denniston does not think it would be worthwhile for
    NAS to answer some of these unanswered questions, or come to
    some kind of consensus to, you know, to find out what their
    recommendations are.
        Mr. Bonvillian--how do you--do you think that NAS should do
    a study, or there should be any answers?
        Mr. Bonvillian. Congresswoman, I think we know a tremendous
    amount about the DARPA model, and we understand what that is.
    And I think that there is a fair amount of understanding,
    including, in some circles at DOE, that this translational role
    is not there. It is not within the current DOE institutional
    array. It is not anyone's fault, there just happens to be a
    gap.
        I think the critical decisions is are we going to fill that
    institutional gap, and are we going to allocate the resources
    necessary to fill that gap? If you decide to fill the gap,
    there is a variety of solutions, inside DOE, or outside DOE, as
    a component within or as an entity outside some existing
    entity. There is a variety of solutions there, but the real
    decision is are we going to fill that institutional gap in some
    way, and then, are we going to put the resources into this, in
    order to enable it to operate at scale, to begin to stand up
    the array, or the portfolio, of technology options we are going
    to have to have at. I think those are probably the crucial
    questions.
        Ms. Biggert. Thank you. Dr. Forrest.
        Dr. Forrest. I think I have commented enough on that.
        Ms. Biggert. All right. And Dr. Van Atta.
        Dr. Van Atta. I am an analyst by trade, and so, doing
    studies is always a wonderful idea, except there is a time we
    have to stop doing studies. The fact of the matter is, is there
    is a well-defined issue and need here, and a potential
    mechanism. I have raised the questions in terms of the issue of
    commercialization, the issue of the role of the Labs, et
    cetera. All of these things are things that management
    direction from leadership can lay out in terms of these are
    things that we need to be concerned about.
        How do you link to the National Labs, whether it is the
    major defense labs, or whether it is Argonne or Oak Ridge? They
    have great new technological capabilities there. How do those
    move from there into demonstration practices, in terms of
    proof-of-concept for application? An ARPA-E might be a
    mechanism where those ideas can be moved out of the lab.
    Because one of the problems is the Labs do work in the Labs.
    The question of how to get things out of the Labs, and from the
    Labs into other people's hands is something that we are all
    interested in finding better solutions for, and ARPA-E could
    provide a mechanism for that.
        In terms of mechanisms, in terms of whether it should be
    nuclear, et cetera, that is part of a strategy. That strategy
    has to be set at the national level, and that is part of the
    strategy which is set by leadership. The roles of the different
    technological capabilities towards reaching those strategic
    goals have to be evaluated. I don't think a National Academy
    can make those determinations up front any more than anyone
    else can. That has to be part of an overall strategic develop.
        Professor Sokoloff, for example, has presented this notion
    of the wedges. It is very clear that not any single one of
    these technological capabilities is going to solve the problem.
    My father spent his entire career at Lawrence in Berkeley and
    Livermore developing fusion energy technological capabilities.
    I can say that, you know, that is a crucial potential for the
    very, very long-term future, but we don't know what the
    breakthroughs are that will make that happen. Should some of
    those breakthroughs be identified as potentials, and ARPA-E
    might be a mechanism to test a couple of those out, or develop
    the underlying capabilities.
        Ms. Biggert. Thank you very much.
        Dr. Van Atta. When you have to be based upon ideas, rather
    than just substantive areas.
        Ms. Biggert. Thank you. I yield back. Thank you.

                      Renewable Energy Technology Industry

        Chairwoman Giffords. Heading back to an area that Mr.
    Denniston talked about, one of the goals of the ARPA-E project
    is to faster innovation of a new U.S. energy technology
    industry, and to create a new workforce built around this new
    sector, or greentech. But to the extent that this market has
    developed already, in terms of now we see that the Japanese,
    the Europeans, and also, the Chinese are starting to gain the
    lead.
        Some questions I would hope the panel could answer. One,
    can ARPA-E ensure that the United States stays on the front end
    of technological innovation, and supports the domestic energy
    industry? Two, should ARPA-E have an explicit Buy America
    clause, or otherwise ensure that these technologies are
    manufactured and deployed in the United States first? Three,
    what kind of workforce do you all see developing around this
    new clean energy technology? And fourth, what levels of
    education and training are going to be required for this new
    workforce?
        A lot of questions, but again, just the staying innovative,
    on top, the Buy America, the development around the clean
    energy technologies, and then, the training.
        Mr. Denniston. I will be happy to take a shot and those,
    and I am sure my colleagues will have their own thoughts.
        So, will ARPA-E ensure that the U.S. is on the leading edge
    and is the leader? There is no guarantee. I would look at the
    converse of that, which is if we don't have an ARPA-E or
    something like that, I think we have a very low probability of
    doing so, because as my fellow panelists have pointed out a
    number of times, there is no translational function being
    performed today, and we know that without that, we will
    struggle to come up with the breakthroughs. Others are doing
    that across the world. We are in a global race, so I think we
    need it to have a chance to stay at the front end.
        In terms of Buy America, I don't even know what that means.
    Does that require that companies, U.S. companies, not--because
    the buyers of these technologies won't be energy companies, and
    so, if the U.S. Federal Government funds research that startup
    or mature companies roll out, do we make other consumers,
    businesses and consumers buy them? I don't think that is a good
    idea. I think you can create incentives, so I will tell you
    right now, in both Asia and in Europe, there are strong
    incentives to set up manufacturing there, tax incentives, you
    can do to Singapore and get a ten year tax holiday for setting
    up manufacturing operations there. That is what the U.S. is
    competing with to put manufacturing facilities in place. I
    don't think--you probably could mandate by statute that all
    Americans buy all American products, but that would be un-
    American, I think.
        Your third question is what about the workforce. The
    workforce is, this will be a boon for technology and
    innovation, and what we saw happen over the past three decades,
    as the NIH budget quintupled, is enormous, topflight technical
    talent sprinting into the health care field, the research
    field, because that is where the money was. And that is what we
    will see happen also in the renewable energy field if there is
    significant funding, because the best and the brightest can
    look at that and say wow, this is a really interesting area,
    and I can get my projects funded. So, I think on the technical,
    scientific level, it is an excellent idea. If there are--there
    will be manufacturing as well, no doubt about it. How much is a
    function of public policy.
        And your last question was on education and training, and I
    can tell you from visits that I have made, which I do
    frequently, to our top research institutions, academic research
    institutions, that there is enormous interest to pursue energy,
    because our best academic institutions see that as an area
    where they can make a difference, a growth area going forward,
    so I think those are your four questions.
        Dr. Forrest. I would like to jump in, too, and talk as an
    educator, what is like, what is happening out there on the
    ground.
        And I am a person who grew up in the Space Race, the
    generation of the Space Race, and Kennedy, President Kennedy at
    the time created a national challenge that struck and
    galvanized not just a generation of young people to go into
    science and technology, but a generation of young people's
    parents to encourage their children to go and to solve a
    national need.
        I haven't seen in the interim a challenge that has arisen
    that has affected the psyche of young people beyond that which
    I now see now, with sustainability of the environment and
    energy independence. Energy institutes are starting to arise,
    some very formidable ones, at many universities, our
    university, the University of Michigan, has just established
    Michigan Memorial Phoenix Energy Institute, which is an
    antecedent, it is following on in the footsteps of our Atoms
    for Peace program, that was established at the end of the
    Second World War.
        So, by putting more money into the research end of things,
    which ultimately creates jobs, you will find that there will be
    a large, emerging, and effective workforce that will assure
    U.S. competitiveness. Just establishment of an agency does not
    do that, but DARPA has had that effect, very much so, in
    establishing a generation or multiple generations of young
    people who have gone into the technologies that have been
    generated out of DARPA. And I believe that we are, today,
    reaping the benefits of those changes.
        One last point is that if you look at American funding of
    alternative energies, and alternative energy research, over the
    last twenty years, Japan has been ahead of us. Over the last
    ten, Europe has been ahead of us. They have very rapidly
    increasing budgets in these areas. Ours is flat or declining in
    some areas.
        So, I think that if you really talk about the long-term
    competitiveness of this Nation, which is coupled directly into
    our standard of living, this is the place we really have to
    draw the line, and make some commitments to, for the long-term.
        Mr. Bonvillian. I wonder if I could add--I am sorry.
        Chairwoman Giffords. Well, we will start with Dr. Van Atta,
    and could you----
        Mr. Bonvillian. Sure.
        Dr. Van Atta. It is interesting, on the ARPA-E ensuring our
    leadership. A few months ago, I was over in Japan, at a Japan-
    U.S. climate change forum informal working group, and I
    explained, similar to what I did today here, the DARPA model,
    and how it worked, and how it might work in the energy area,
    and the Japanese all were very bright young technical people
    from METI, their economic and technology institute, were both
    jealous and astonished.
        What a wonderful thing. We could never do that here. And
    basically, with the notion that that is something that gives us
    a fundamental advantage relative to them. They have other
    advantages, one of which is they are very, very aware of energy
    prices, and they are very, very aware of their environment.
        As far as explicit Buy America, the world doesn't work that
    way. If you are going to make these technologies, and make them
    work, it has got to be global. It has got to have global
    impact, and we have to be the leaders in global technology.
    Finding ways of creating the best, so that the world comes to
    it for affordability and quality is what we have to do.
    Legislating it won't make it happen. It doesn't work in DOD,
    and it won't work here either.
        As far as the workforce, we are talking about
    bioengineering, nanoengineering, materials, even old
    technologies like physics and chemistry, all are going to come
    to play here. They are going to regenerate and recreate whole
    new areas, and then, you are talking about product
    manufacturing. GE and windmills, who is going to make those
    solar cells of Dr. Forrest's? There are going to whole sets of
    technology leaders, technology producers, the same people who
    did the Intel thin film microcircuit technologies are going to
    be making his solar cells.
        That is how we are going to generate a workforce, and you
    are right, education and training in science and technology,
    keeping that pipeline of young, fresh minds going is crucial.
    Having the objectives toward changing our society, in terms of
    our energy, our climate, will draw these students in.
        Chairwoman Giffords. Mr. Bonvillian.
        Mr. Bonvillian. I just wanted to add a word on the
    workforce and your questions.
        I was with an MIT professor this morning who teaches
    chemical engineering, who has done a tremendous amount of work
    on carbon capture and sequestration. He decided to turn his
    engineering design class over to these energy technological
    problems. He got an enrollment he couldn't believe, that he had
    never seen before, 80 students. He divided them into 20
    different teams. He said they worked harder than he had ever
    seen students work before. When he came to the end of the
    semester, he said half the teams approached him, asking if they
    could continue working all summer on the energy problems. This
    doesn't happen a lot, and the level of interest and enthusiasm
    that is in this energy issue is so powerful. I am sure Steve
    has stories very much like this.
        MIT has a campus-wide energy initiative. In some key ways,
    it was and is student-driven. There is a new energy club
    started a couple of years ago at MIT. They meet every two
    weeks. They often have 400 students at their bi-weekly
    meetings, which is unheard-of. It is by far the most active
    student activity. So, there is an incredible amount of talent
    that wants to go into this energy field and find ways into it.
        We stimulated a generation of talent into the life sciences
    by the increases that we gave to NIH. That research funding put
    that talent in that field. Life science is a field where we
    have world dominance. This is a competitive sector that no one
    is close to, in biotechnology and pharmaceuticals. We can do
    the same thing here. Part of the story is in strengthening our
    research investments, because I think the talent is going to be
    there.
        And let me just mention one other thing that DARPA has done
    over the years. As Dick pointed out, there have been many
    DARPAs, and there are issues now in some areas. But over the
    years, DARPA created a tradition of what it called ``DARPA
    hard'' problems. Really hard problems. And the nature of those
    tough problems just drew talent, sucked talent into them, and
    produced incredible technology over the years. And one of the
    interesting things about an ARPA-E model is that you can
    create, if you are working on a breakthrough, revolutionary
    technology model, you can create those DARPA hard problems, and
    draw a whole generation of talent in to attack them. And these
    are the challenges of our time.
        Chairwoman Giffords. Thank you. Just to clarify, in terms
    of the Buy America label, like I say, one of the goals of ARPA-
    E is to focus on the U.S. technology industry, so the idea
    would be that these technologies are first manufactured and
    deployed here in the United States, over giving preference to
    another nation. So, and again, I would have to look at the
    language of the bill, but I just want to make sure that you
    know, we are clear, in terms of meeting the goals, or not
    meeting those goals.
        Mr. Denniston. I am still struggling with the concept. I
    think if ARPA-E succeeds in finding breakthroughs, and the
    biggest problem is they can't produce enough to fill market
    demand, that would be a really good outcome. Okay. That would
    be a fabulous outcome, and maybe at that point, Congress can
    look at allocating that, but that would be the best success
    that we could hope for, is that we find a breakthrough that the
    entire world is rushing to grab onto and deploy, because it
    offers huge advantages over fossil and nuclear and everything
    else that is out there. I think that would be a very happy
    circumstance for us to see.
        Dr. Van Atta. I will go so far as to say that if you look
    at how DARPA succeeded in Silicon Valley, the times have
    changed. If you fund the generation of ideas, and the
    development of the prototypes within the U.S., through U.S.
    universities with U.S. companies being involved, the beginnings
    of that manufacturing and production will happen in the U.S.
    Can you legislate that, and say that is the way it has to be
    for every one? I think that would be too narrow. Can you say
    that is the expectations, when you are funding people? I think
    you can say that you expect to see that that research will lead
    to development of production facilities initially in the U.S.
    If you insist that they stay in the U.S., you will get what
    happens with the Motorolas, et cetera, of this world, when they
    say if you are trying to squeeze me down here, I will go
    somewhere else.
        And you have to remember, also, that there are lots of
    incentives being paid out in China and elsewhere, to bring
    people there. The Microsoft Research Center in Beijing has lots
    of incentives to be there, and to develop Chinese-based
    researchers, because of our export control laws, so I would be
    careful that we don't create the incentives for people to be
    elsewhere, by creating things like Buy America, and they say
    well, in that case, we will produce our research somewhere
    else.
        Chairwoman Giffords. And you know, this question stemmed
    from suggestions about what should be in the bill. It is not
    currently written in, but I am glad to have your feedback on
    that.
        Ms. Biggert, please.

                            ARPA-E Program Structure

        Ms. Biggert. Thank you. I am certainly open to this
    concept, and I agree with everything that you are saying, how
    we need to compete, and we need the research, and we need it
    done. I just worry about actually putting it into a single box,
    and saying this is the way it is going to be done. And the
    reason I say that is I have to tell you my DARPA story, and I
    had a group come in to see me, and they were scientists who
    were, had spun off from Argonne, so they were looking how they
    were going to get this, get their product to market. And it was
    a product that would, the military would be the focus.
        So, they applied to DARPA, and they, and they developed,
    produced inexpensive, high quality titanium, which could be
    rolled out, and it was something that the Department of Defense
    was searching for. They were turned down, so they came to my
    office, and we started to work on it, yet I got some funding
    for them to further develop. You know, you are talking about
    where a company is in the development, but they haven't been
    able to produce enough, to get it to work on a high scale. So,
    it was obvious that this worked, and finally got the Department
    of Energy, or Department of Defense, to take a look at it
    again, and it was exactly what they were looking for, that they
    had to have, to produce a product by 2008. So, they are now
    producing it for them, and what worries me is here was a
    product that was right there in front of their faces, and they
    didn't see it. It didn't, you know, at that time. So, they, the
    scientists got private capital, built a plant, and demonstrated
    that it worked, and then DARPA decided to, and this was high
    risk, so the story ends that both DOE and Boeing, the largest
    consumer of titanium in the world, joined the Army to discuss
    this in my office, and suddenly, it just took off.
        And that is why I worry, and here is the homeland security
    that hasn't worked. I mean, we--a couple weeks ago, I had the
    Secretary of Energy out at my district, again, to look at some
    of the companies that are in the district, and how they are
    transitioning from the, you know, the early development, they
    are all spin-offs from Argonne, and they are working to put
    their products out, and they are going to be in high demand. We
    have got nanotechnology, we have got, you know, all kinds of
    companies that are able to produce these now.
        I don't want to stifle any, you know, of that type of--if
    this would be a place where everybody is going to come to, and
    it is going to----
        Dr. Forrest. I can't comment directly on the case that you
    are alluding to, but I would like to make two distinctions
    first of all, or two statements. One is we don't have a system
    in any agency or part of government which is perfect. Mistakes
    do get made. But I don't think that anyone here is also
    advocating that all energy funding get filtered through an
    ARPA-E. There is still tremendous amounts of funding that we
    would anticipate would continue to flow through the same
    sources as always, through the Office of Science, to the
    National Labs, that would fund basic energy research and so on.
        ARPA-E is filling a gap, and that is all it is doing, and
    that gap is the translational gap. The good news about this
    country is we have a diversity of solutions to any problem, and
    so the one that you allude to, it seems like the problem was
    solved in any event. We don't expect perfection from ARPA-E,
    but we do all recognize, I believe, that there is this very
    critical function that it can fill, which is currently unmet as
    a need.
        Dr. Van Atta. I can comment on this, in terms of I used to
    run some of the programs at the Pentagon dealing with some of
    the Title III, Defense Production Act, which dealt with a fair
    amount of the materials areas. I think both the DOD and the
    government in general needs to have a little more focus on the
    fundamental, underlying, crucial needs for advanced materials
    and alternative materials, including metals. Metals tend to get
    kind of short-shrifted. They seem old, but there is lots of new
    and interesting things, as we are getting more and more
    sophisticated in some of our technologies.
        On the other hand, there is an important point here, which
    is this diversity of alternatives that this country has, that
    you know, blows the other guys away. They can't understand that
    we have so many mechanisms, the Advanced Technology Program in
    Commerce, which is now, I guess, has been modified and changed.
    We have mechanisms that allow people to find, that are ways of
    getting that technology in.
        It is important that one not presume that a single agency
    is going to solve all the problems. DARPA doesn't solve all of
    DOD's problems. That is why we have a whole range of other
    systems within the services, et cetera. And you can't expect or
    think that this agency is going to provide the complete one
    stop shop across all, nor should it think itself as that.
    Otherwise--and we are going to have a competition for ideas and
    competition for resources here, and I know there is a concern
    that this will mean that the prospects are that some other
    existing organization, whether it is a defense lab, or some
    other organization, a DOE lab, or the S&T program, is going to
    say well, gee, if this thing comes alive, it is going to, some
    prospects will take money from us. And the answer is the
    competition amongst organizations to fill our national needs is
    a good thing. And just because something new and different is
    going to hit the street doesn't mean that we should suddenly
    say well, okay, wait a minute, we have got this program, that
    program, they are going to be at risk. They have to compete on
    the basis of merit, what they are doing for the country, and
    meeting their needs.
        And if we have a fundamental unmet need here, which I think
    we have tried to demonstrate here, that has to get on the table
    and compete with those other ideas.

                            Energy Research Funding

        Mr. Denniston. There has been a suggestion a couple times
    in this hearing of a concern that increased federal research
    funding for energy would crowd out private alternatives, and I
    disagree with that suggestion, and I will tell you why, for two
    reasons.
        The first is the current level of private investment in
    energy research is very, very, very small, compared to the
    industries that we are talking about. So, the annual revenue of
    the energy and transportation industries in the aggregate is
    $1.8 trillion. The venture capital industry last year invested,
    depending on who you ask, $1 or $2 billion. Some larger
    companies invest some, but it doesn't add up to nearly one
    tenth of one percent of industry revenues, and if you show me
    an industry that is investing one tenth of one percent in
    research and development, I can tell you that is an industry
    that is not investing for the future.
        We need more research funding. Historically, the government
    has been an integral part of that, and so, my suggestion is we
    should let the best idea win. If that best idea comes out of
    ARPA-E or some other federal research funding, as it did in the
    health care field for the past 30 years, that will get
    transferred over to private industry, and we will have a very
    successful American company, and it is much better that that
    idea come from the U.S. than from a foreign country, and by
    increasing federal energy research funding, we increase the
    probability that America leads the next industrial revolution.
        Ms. Biggert. Maybe it should be the technology revolution,
    but----
        Mr. Denniston. Sure.
        Dr. Van Atta. I wanted to make a point on the private
    investment. I did a study a bit ago, as I do do studies, on the
    role of venture capital in DOD, and it was interesting. I
    interviewed several people, including Kleiner Perkins and some
    others, and one of the things that was interesting is I asked
    where do you go as venture capitalists think of the next ideas
    where things would come from. They say we look at DARPA. Where
    are they going?
        So, the amount of money that goes into areas of interest
    has a lot to do with the kind of money that government is
    putting in that shows interest and shows direction. SEMATECH
    helped create government, industry investments in semiconductor
    manufacturing in this country, that the Intels, the IBMs, the
    Motorolas and all, built on. So, the interrelationship, that
    partnership between the government and industry, is crucial.
    And we have to realize that that is now happening around the
    world, so we are in a competitive race when you see what other
    governments are doing to encourage that R&D and that technology
    development. And that is based upon their interest in achieving
    their competitive status versus us. And we have to realize this
    is now a hypercompetitive world in these areas, and if we want
    to rest on our laurels, we are going to have to be worried
    where we are going to be in 15, 20 years.
        Ms. Biggert. Well, 50 percent of GDP in the last 50 years
    is the result of research and development, so we have got to
    continue with this. Thank you very much. I yield back.

                                   Recoupment

        Chairwoman Giffords. Thank you. In Chairman Gordon's
    absence, I would like the panel to address this question that
    he talked about on terms of recouping, recoupment of dollars.
    There is a provision in the bill, it calls for the Secretary to
    develop procedures to recoup the federal share of commercially
    successful projects under ARPA-E, and gives the Secretary
    authority to waive the provision.
        So, I am curious if members of our panel think that is a
    good idea or not a good idea, and why.
        Mr. Bonvillian. Maybe I can start off. I am concerned about
    this provision. Essentially, you want to encourage new
    technologies to be stood up, but you are putting on a clause on
    them that essentially allows recapture up to a 20 year period,
    and I think that is a burden that we should not impose on new
    ideas and new technologies.
        Somebody is going to have to pay that bill, and the R&D
    investment is going to be discounted on day one, as that
    technology is stood up. Everybody is going to know that it is
    going to have to get repaid at some future date, and it is
    going to be a burden on the standup process. We have not
    imposed recoupment on any other federal R&D. I think, frankly,
    it has been a very smart strategy on our part. We capture the
    cost of the great new technologies we stand up through the R&D
    process through the tax system. We stand up small companies,
    they become successful, we tax them at a pretty tough corporate
    rate. That is the way the government operates. We don't tax the
    new technologies. We don't want to discourage new technologies.
    Let us just recoup it through the tax system at a later stage.
        So, I am concerned about this. Now, in my view, the
    immediate problem that we have is adequate revenue to stand
    this new entity up at the beginning. A recoupment clause is not
    going to help solve that problem. It is a much later stage
    recovery problem.
        Now, there will, at some point, I trust, in the next few
    years, be some kind of cap and trade macro pricing system that
    will be imposed on various energy-dependent economic sectors in
    the United States. That cap and trade proposal is going to
    raise very significant income through the initial auctions, and
    auctions continue on an annualized basis in the bills that are
    currently in front of the Congress.
        Typically, the government's recovery at the initial auction
    stage is comparatively low. You want to give people time to
    transition, but that recovery goes up over a period of time.
    These allocations are going to generate tens of billions of
    dollars, and we will be making a foolish mistake if we don't
    spend a lot of that cap and trade allocation money on the new
    technologies and the innovation system that we are going to
    need.
        So, I think that what we have here is an interim problem,
    between now and then, to stand ARPA-E up with adequate
    revenues. There also may be some other revenues in the oil and
    gas royalties area, that you could look at, which I know some
    of the Committee has taken a look at already. That seems to be
    a possibility. You may also want to consider an initial one
    year sizable grant here.
        The country is going to have to spend a lot more money on
    our energy R&D. Otherwise, we are going to cede the energy
    innovation territory. And therefore, I know these investments
    are coming. I worry that a recoupment clause, by taxing
    technology, as opposed to successful companies, is a
    problematic way to go.
        Dr. Forrest. I would also like to chime in on that one. I
    have been fortunate enough to have been a partner in several
    companies that started up. One of the companies was financed
    almost entirely through the Small Business Innovation Research
    Program. It is called Sensors Unlimited. Over the years, it
    brought in probably a few million dollars worth of SBIR money
    at the height of the Internet bubble, it sold for $700 million.
    The return to the Federal Government from that sale was--the
    CEO of that company calculated something like 20 to one,
    compared to the investment.
        To have unfettered investment is very important. I would
    also like to say that I have seen these type of clauses in
    state law. Very often, they get tangled up in the agreements
    that companies already have with their primary investors,
    because there is payback clauses there, too. And so, what
    happens is the government now becomes a competitor against the
    private sector when it does this sort of thing, and it is very,
    I think, detrimental. Many grants like that from the state that
    I am in today have come under question, and have been turned
    back, and have not been accepted. I think this is a damper on
    real innovation. The Federal Government has been an excellent
    partner in driving innovation, understanding that by creating
    prosperity, it gets all the returns it needs, and to try to do
    this in a micro-way with a specific program, I think, has a
    detrimental effect, a dampening effect.
        Mr. Denniston. I would echo Dr. Forrest's comments. I urge
    the Committee to pass a bill with significant increased funding
    levels. I know this is hard, a high degree of difficulty, but
    significant increase in funding levels and no recoupment. You
    will see my comments in my written remarks.
        I pity the ARPA-E Director with a recoupment clause,
    because now, there are two missions that stand in conflict. The
    first is to race technologies and solutions to the market, but
    the second is to do it with ankle weights on, and the
    recoupment clause is an ankle weight, because it requires
    negotiation with universities, with private industry. We have
    seen this movie before. It will slow the process down, so
    fundamentally, I think the Subcommittee has to decide whether
    to rank order priorities. Is the top priority to solve the
    problems, climate change, energy dependence, American
    competitiveness? Or is it to make this ARPA-E revenue-neutral?
    And for me, I have to express some frustration as an American,
    a voter, a taxpayer, that we find ourselves in a budget
    predicament where we are faced with a crisis, and we can't find
    budget for it. It is tremendously frustrating. That is a
    different topic for a different day. I agree with Mr.
    Bonvillian's comment that if ARPA-E succeeds, and we create
    breakthrough technologies, the Federal Treasury will be repaid
    many times over, in the form of income tax and payroll tax
    revenue. And if you want to recoup, then earmark those tax
    dollars, send them back to ARPA-E. That is the way to repay
    ARPA-E without putting ankle weights on from the get-go.
        Dr. Van Atta. There is quite a bit more complication to
    this, as well. I agree with the comments that were made up to
    this point.
        Who is going to pay that recoupment? Is it going to be
    Google? Is it going to be Cisco? Is it going to be Sun
    Microsystems? For many of the things that people are using,
    that were funded by DARPA, the first guys who got the money
    weren't the guys who succeeded. It was the guys after that, or
    the guys who built on that, or the guys who spun off of that.
    You can't track that. You can't evaluate that. There are a few.
    There are a few. If you go to QUALCOMM and Irwin Jacobs, he
    will tell you, I got my money from building up this TMA, it
    came from DARPA, working on a Defense problem, working with the
    Defense Department, and you know that QUALCOMM is paying the
    government back handsomely, in terms of its revenues and all
    that it is making today.
        The crucial problem here is the recoupment assumes that
    there is a linear relationship between the dollars in and the
    results out. It is not linear, in terms of the dollars, and you
    have, you know, the one percent of the guys who succeeded makes
    you a billion dollars, but those guys may not have been the
    guys who got the original money. In fact, finding that and
    tracking that, there will be a lot of deniability here. Well,
    yeah, DARPA was over there somewhere, but I forgot all about
    them.
        So, you have to be, I don't see how that works.

                        Fostering an Innovative Culture

        Chairwoman Giffords. A couple final questions. In terms of,
    and something that all of you talked about, the independence of
    ARPA-E, how do we actually ensure that, and what have we
    learned from even the Congressional pressures that DARPA has
    experienced over time? How has DARPA insulated itself, and how,
    possibly, can we write into the bill that ARPA-E is kept
    really, truly independent?
        Dr. Van Atta. Let me speak to that first, because I have
    actually addressed that issue a couple of times. You can't
    legislate independence. You have to raise the expectations that
    it will be independent, but you have an oversight role in
    Congress. So, you have, you know, there is a fundamental
    oversight role in terms of the budget, and in terms of
    expectations. You can state that the organization should be
    independent of specific and identified entities within the
    Departments through the management structure.
        You can't guarantee that the bureaucracy will leave it
    alone. HSARPA is a great example of that. But I do think that
    you can manage it, and you can evaluate it, based upon the
    degree to which it has demonstrated results. The basic way that
    DARPA has managed to keep itself at least less prone to
    earmarks than other organizations is it can demonstrate that
    what it is already doing is so impactful and so necessary that
    they have been able to convince the Congress and the staffs
    that you shouldn't start throwing more stuff at it and
    diverting it, though there have been some very big earmarks put
    on by Congress that went into DARPA, including SEMATECH. So, it
    is not that it has been completely independent, but it hasn't
    been completely dependent, either.
        The other issue is it doesn't come back and ask Congress to
    help it with money. It puts its program out there, and says
    this is what we want to do, and it is not hurting for money, so
    it keeps saying put more things in there. I think having a
    definitive, well laid out charter and mission, and permission
    to implement that, is the best way of doing that. It is very
    hard to legislate that, except to set the expectations of the
    independence.
        Chairwoman Giffords. Mr. Bonvillian.
        Mr. Bonvillian. One model, which the Committee, I know, has
    been thinking about, is the wholly owned government corporation
    model, and you know, as we have all discussed for innovation
    entities in the business of standing up new technologies, a
    very successful model has been to put them on a protective
    island that is comparatively free from contending
    bureaucracies.
        One way to do that is through a wholly owned government
    corporation. There are some----
        Chairwoman Giffords. I am sorry, Mr. Bonvillian. The mike
    cut out. What was that again?
        Mr. Bonvillian. One way to do that is to create the entity
    within a wholly owned government corporation. Locating an ARPA-
    E in a corporation would assure it significant hiring
    flexibility, competitive salary structures, a certain freedom
    from Congressional earmarking interference, which, let us face
    it, will be an issue. And a corporation model can move it out
    of slower moving government bureaucratic procedures. So, there
    is significant advantage here. Some of these issues, you can
    fix in a statutory structure, including the contracting
    flexibility, and some of the employment hiring speed issues,
    but the corporation is an easier model for the standup process.
        Now, there is a big issue here with a government
    corporation, which is that you have to have the bridge back to
    leadership. If a wholly owned government corporation is facing
    tough contending interests with political power, and let us
    face it, we have that in the energy field in spades, it is
    difficult for the corporation to maintain its independence, and
    to assure its ongoing viability, and particularly, to obtain
    ongoing funding. There may be battles about this an ongoing
    basis.
        So, there are advantages to the corporation model. The way
    in which you make the model work, and it is not simple, is to
    make sure there is a very strong bridge back to political
    leadership that is prepared to have a stake in the corporate
    entity, understand it, back its research efforts, and provide
    it a certain kind of political screen and protection in the
    process.
        Getting that balance right will be crucial. Otherwise, you
    are just going to have an island out there. But I do toss that
    out, throw that out to you, as a possible model that you may
    want to consider. You can do many of the same things within
    DOE. In other words, this is not an either/or option. You can
    create an island-bridge within DOE as well, but I think you
    should at least explore the wholly owned government
    corporation.
        Dr. Van Atta. I would like to add a little bit more, Bill,
    to what you just said, because----
        Chairwoman Giffords. And Dr. Van Atta, can you also take
    into consideration whether or not there should be a written
    mission, because that is part of it as well, that we need to be
    looking at?
        Dr. Van Atta. Yeah, I would say first of all, the fact that
    DARPA does report to the highest level, the Secretary of
    Defense, though administratively, that has linked it more to
    the Office of Acquisition, Technology, and Logistics. It is--
    the DARPA Director still reports to the Secretary of Defense,
    and his mission, if you will, if you go to the mission, is to
    achieve the goals of the Secretary, as related to the goals of
    the President.
        It is not to meet service goals. It is not to meet
    individual goals of a particular sub-organization. And I think
    the mission, relative to sustaining U.S. leadership in energy
    technologies for both security and for climate change is a
    fundamental issue that should be the issue, the mission of this
    organization, and it should report to that mission, at the
    highest level. And it is at that highest level, not through all
    these other mechanisms and bureaucracies, sub-tiers, et cetera,
    that you maintain that independence. Keep it out of the
    bureaucratic strains, bureaucratic structures, as we said.
    HSARPA failed because it was part of, embedded in, and it had
    to report budgetarily through all those other mechanisms. While
    DARPA informs the DDR&E about its budget, it sets its own
    budget, in terms of how it allocates its dollars. It doesn't
    have to get approval from anybody as to how it allocates those
    dollars. That is crucial, and that is something which is set,
    not by legislation. It is set by administrative expectations
    within the organization, in terms of ensuring its independence,
    and the Secretary protects that.

                                    Funding

        Chairwoman Giffords. My final question, I know we have kept
    you here for a couple of hours, but this is, I think, really
    the meat of it, the Gathering Storm report calls for the ARPA-E
    to authorize $300 million for the first year, and then quickly
    escalate up to $1 billion within five years.
        H.R. 364 currently has a similar funding profile, but some
    suggest that the only way a high cost, risk-tolerant program
    like ARPA-E will be successful is if it is dedicated funding of
    some kind, therefore would not be subject to annual
    appropriations or other political or perhaps financial
    pressures or resource fluctuations that might stifle this sort
    of innovation.
        So, I am curious whether or not this level of investment
    prescribed in H.R. 364 matches the magnitude of the challenges
    that we have talked about, and whoever wants to start.
        Mr. Denniston. I will repeat what I said before, which is I
    think it is dangerously deficient. I think if you look at,
    again, the scope of the crises that we face, the scale of these
    industries, energy and transportation, $300 million pursuing
    change, well, ARPA-E, the current draft of ARPA-E says first
    year, $300 million, going up to $915 million in 2012. It is to
    go to fossil, nuclear, renewable. It is at all stages of energy
    research, basic, demonstration, and by the way, it is
    recoupable.
        It doesn't--when you put all those factors across what the
    statute is proposing, my fear is it is not going to do very
    much at all. It is $300 million on a $1.8 trillion industry, is
    a rounding error. And we just have to do better if we want to
    place solving our crises, our energy crises as a top national
    priority. I hope we can do that.
        Dr. Forrest. Let me just give you a little perspective.
    That builds on that $2 trillion number. If this were a business
    now, John will know more about this than I do, but most high
    tech businesses, technology businesses, or businesses that are
    really involved in the next generation of whatever product they
    are making, typically about five to 10 percent gets ploughed
    back into R&D. So, you can assume that that $1 trillion is
    bringing in about $100 billion of money to make change.
        But unfortunately, it is really to embed, most of that
    money is coming in through the oil industry, so it is being
    invested to make sure that we have oil into the future from
    whatever source. So, if we are going to counter that with
    renewables for all the reasons that we have talked about today,
    we have to at least get on the map, and while there is always a
    start-up problem, how do you spend money wisely, you can't just
    put a lot of money on the table instantaneously, but that has
    to be a phase-in to something that really is equal to the
    problem, and I believe, like John does, that $1 billion is just
    woefully underfunded.
        Mr. Bonvillian. So, I get a shot at it? I know the budget
    problems that the Congress faces, and they are painful, and how
    do you find $300 million, and persuade the appropriators to
    allocate it, much less $1 billion. These are DARPA-sized
    problems. DARPA is a $3 billion agency, right? If anything,
    these energy problems are more dramatic, in some ways, than
    what DARPA faces. How are you going to pull that off?
        As I said before, I do think that there is a reasonable
    prospect over time, that there are going to be significant
    revenues if we impose a cap and trade system, and Europe, and
    the rest of the developing world, is moving in that direction.
    I think we are going to have to fall into sync with that
    process over a period of time. So, I think there will be a
    significant revenue stream out there, and it would be a tragedy
    if we didn't invest that revenue stream significantly in R&D.
        But you have got a standup period in the interim, and I
    don't want to say that $1 billion on energy R&D is not worth
    spending. It is. $1 billion in the earlier research stages can
    do a lot, but getting even to $1 billion is going to be tough
    to ask for. Obviously, you have to even this in over a period
    of time. I would also just urge you to think about other
    potential revenue sources that might be out there, and there
    may be some royalty sources that you want to look at.
        Dr. Van Atta. I guess I am an optimist, in the sense of
    saying that you know, first of all, you have to start things
    up, and if you are going to start things up, you need to do it
    in a focused way, that gets things going on a success path. So
    I think if one could start with $300 million in a focused way,
    not try and take on everything, you would be doing something
    very good, and that probably would be, in my mind, probably
    starting $300 million on renewables, as the area where, I
    think, the most dollars can do the most advantage.
        Scaling then becomes an issue, and I think you do have a
    question as to how do you scale, and I think, and what is the
    right amount of money. Too much money is also not a good thing.
    I think you want to have an organization that is somewhat lean.
    I think if they could scale up to $1 billion, and then prove
    that they could do good with that, and then deserve more, that
    is fine. There is a point at which even DARPA agrees that more
    money is probably not a good thing, in order to do what its
    unique role is. Otherwise, it is probably going way beyond its
    original charters into, in fact, development type programs and
    projects, as opposed to the kind of front-end advanced
    development proof-of-concept work.
        So, maybe I am a little different in mind, in terms of
    where I think this fits in the scale of things. I think if we
    can get the $300 million, get something started in a focused
    way, sort of like the Presidential initiatives when DARPA was
    first created, in terms of three key things, get that up and
    running, then say all right, based upon that, let us move
    forward, based upon our success path with the objective of at
    least $1 billion, and if we can go further than that, if it is
    justified, fine.
        DARPA didn't start off with a dollar bogie. DARPA started
    off with a problem bogie. And I think the problem here is that
    we have to focus on getting the momentum going. If there is a
    way of getting more money in at the start, fine, but you know,
    starting with too much money can be a problem, too. I will use
    SDI as an example, too much money, there is a problem of too
    much money chasing too few ideas.
        Right now, we have lots of ideas up there. I think getting
    some money out there to start sifting and sorting amongst those
    ideas is crucial. Starting with $300 million, if that is what
    we have got, let us start with it. If we can get some more,
    $500, that would be good, too.
        Dr. Forrest. Just to circle back on that, just very
    briefly, is we have to understand that the energy problem is
    probably, by all accountings, the biggest crisis that humanity
    is facing in this century. There are six billion people on this
    planet. Two billion people today do not have access to
    electricity. Now, that is not going to last for long. Those two
    billion people are going to be burning very dirty, the dirtiest
    form of coal and fossil fuels.
        If you think we have a problem now, it is only beginning,
    so we have to first understand the challenge, the level of the
    crisis. We will, this country will find a way. I couldn't, as I
    said before, I can't tell you the right level of funding, but
    we really have to make it match the situation. We have to
    understand that the situation we are finding ourselves in
    today, both from a competitive, security, and environmental
    aspect. And if we do that, and start marching forward, we will
    find that right number.
        Chairwoman Giffords. Well, I want to thank all of our
    panelists today for coming to testify. It was incredibly
    interesting discussion, and inspiring as well.
        We have a lot of work to do in Congress, and knowing that
    we have the four of you for resources, and knowing the
    direction that Chairman Gordon is taking this issue in, I think
    that we have a lot to look forward to.
        Under the rules of the Committee, the record will be held
    open for two weeks for Members to submit additional statements
    and any additional questions they might have for the witnesses.
        If there is no objection, the witnesses are dismissed, and
    the meeting is adjourned. Thank you.
        Mr. Bonvillian. Thank you.
        Mr. Denniston. Thank you very much.
        [Whereupon, at 4:16 p.m., the Subcommittee was adjourned.]
                                   Appendix:

                                  ----------

                       Additional Material for the Record

                    Section-by-Section Analysis of H.R. 364

    Summary

        H.R. 364 establishes an Advanced Research Projects Agency for
    Energy within the U.S. Department of Energy. Modeled after the
    Department of Defense's Defense Advanced Research Projects Agency,
    ARPA-E is a new program charged with the mission of reducing U.S.
    dependence on oil through the rapid development and commercialization
    of transformational clean energy technologies. This bill follows on the
    recommendations of the National Academy of Sciences' report ``Rising
    Above the Gathering Storm: Energizing and Employing America for a
    Brighter Economic Future.''

    Section-by-Section

    Section 1. Findings

        The U.S. can meet long-term energy challenges through sustained
    investment in energy research programs at DOE augmented by an
    innovative and aggressive new energy technology development effort
    based on the same operating principles that make DARPA successful.

    Section 2. Advanced Research Projects Agency-Energy

        Establishes the Advanced Research Projects Agency-Energy (ARPA-E)
    within the Department of Energy. Similar to the Department of Defense's
    successful Advanced Research Projects Agency (DARPA), this new
    organizational structure will be better positioned to support
    revolutionary and transformational energy research where risk and pay-
    offs are high.
        The stated goal of ARPA-E is to reduce the dependence of the U.S.
    on foreign energy sources by 20 percent over the next 10 years. To
    achieve this ARPA-E should support targeted high-risk, high pay-off
    research to accelerate the innovation cycle for both traditional and
    alternative energy sources and energy efficiency. ARPA-E shall be
    headed by a Director, appointed by the Secretary, who will administer
    competitive grants, cooperative agreements, contracts or similar
    transactions with universities, industry and consortia which may
    include federal labs.
        Organization of ARPA-E will be very flat and nimble to avoid
    bureaucratic impediments that stifle innovation today. The Director
    shall designate program managers who will have flexibility in
    establishing R&D goals for the program, publicizing goals, issuing
    solicitations and selecting projects for support as well as monitoring
    their progress. Projects will be chosen based on factors such as
    novelty, scientific and technical merit, applicant's capabilities and
    other criteria as the Director determines. ARPA-E will have authority
    to hire specialized science and engineering personnel to be program
    managers. (This is similar to DARPA and HS-ARPA.)
        In addition, the Director shall ensure that ARPA-E's activities are
    coordinated with other federal research agencies and that ARPA-E may
    carry out projects jointly with other agencies.

    Section. 3. Energy Independence Acceleration Fund

        Establishes the Energy Independence Acceleration Fund administered
    by the Director of ARPA-E. Funding is authorized from FY 2008 thru 2013
    ramping up 25 percent per year from an initial authorization of $300
    million to $915 million.

    Section 4. Recoupment

        If a project is successful the Federal Government can recoup some
    of its original investment. The provision allows the Secretary complete
    flexibility in developing recoupment agreements, and the ability to
    waive it entirely if necessary for the commercial viability of a
    project. All recouped funds will be returned to the Energy Independence
    Acceleration Fund.

    Section 5. Advisory Committee

        The ARPA-E Advisory Committee may seek advice either from an
    existing DOE advisory committee or may establish a new advisory
    committee. If the Director of ARPA-E requires industry advice, a panel
    to advise on a specific technology area, or to hire an outside
    consultant, this provision provides the appropriate authorities.

    Section 6. ARPA-E Evaluation

        At the end of five and one-half years, the President's Committee on
    Science and Technology (PCAST) shall evaluate how well ARPA-E has
    performed in achieving its goals and mission. The Committee is required
    to recommend whether ARPA-E should be continued or terminated as well
    as lessons learned from its operation.