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

                   PROJECTS AGENCY-ENERGY (ARPA-E) --
                                H.R. 364



                               BEFORE THE

                       SUBCOMMITTEE ON ENERGY AND

                        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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                 HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
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
JERRY MCNERNEY, California           W. TODD AKIN, Missouri
PAUL KANJORSKI, Pennsylvania         JO BONNER, Alabama
DARLENE HOOLEY, Oregon               TOM FEENEY, Florida
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

                 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

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


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

  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

                                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



                     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


    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 

          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 

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


    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 
    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.


          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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 

    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 
    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.

                        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 
    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


    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 
    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 
    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 
    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 

    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 

          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.
    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.
    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.
    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.
    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.
    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 
    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 

          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 

          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 

                      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.


    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 
    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 
    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 
    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.


    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.


    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 


    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 

          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.


    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 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 
    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.


        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 


    Dr. Forrest. Oh, there we are. Thank you, Madam Chairman 
Giffords and Ranking Member Inglis for this invitation to 
    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 
    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 
    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 
    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 
    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


    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 
    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 

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 
    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 
    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 
    \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. 
    \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.


    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 

                    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.


    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 
    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 
    \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 

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 

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

        --  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 
    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


        --  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 

    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 

         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'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 

          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 
    \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 

    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 

    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 
    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, 

        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.


    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 
    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 
    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 
    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 
    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 

      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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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, 
    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.


    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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.


    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 
    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.]


                   Additional Material for the Record

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


    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 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.