[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




                     THE ADVANCED RESEARCH PROJECTS
                        AGENCY-ENERGY (ARPA-E):
                    ASSESSING THE AGENCY'S PROGRESS
                    AND PROMISE IN TRANSFORMING THE
                     U.S. ENERGY INNOVATION SYSTEM

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


                                HEARING

                               BEFORE THE

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 27, 2010

                               __________

                           Serial No. 111-72

                               __________

     Printed for the use of the Committee on Science and Technology


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

                                 ______




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                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                 HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
DAVID WU, Oregon                     LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington              DANA ROHRABACHER, California
BRAD MILLER, North Carolina          ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois            VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona          FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland           JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio                W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico             RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York              BOB INGLIS, South Carolina
STEVEN R. ROTHMAN, New Jersey        MICHAEL T. McCAUL, Texas
JIM MATHESON, Utah                   MARIO DIAZ-BALART, Florida
LINCOLN DAVIS, Tennessee             BRIAN P. BILBRAY, California
BEN CHANDLER, Kentucky               ADRIAN SMITH, Nebraska
RUSS CARNAHAN, Missouri              PAUL C. BROUN, Georgia
BARON P. HILL, Indiana               PETE OLSON, Texas
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
JOHN GARAMENDI, California
VACANCY





                            C O N T E N T S

                            January 20, 2010

                                                                   Page
Witness List.....................................................     2
Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Bart Gordon, Chairman, Committee on 
  Science and Technology, U.S. House of Representatives..........     6
    Written Statement............................................     7

Statement by Representative Ralph M. Hall, Minority Ranking 
  Member, Committee on Science and Technology, U.S. House of 
  Representatives................................................     8
    Written Statement............................................     9

Prepared Statement by Representative Jerry F. Costello, Member, 
  Committee on Science and Technology, U.S. House of 
  Representatives................................................     9

Prepared Statement by Representative Eddie Bernice Johnson, 
  Member, Committee on Science and Technology, U.S. House of 
  Representatives................................................    10

                               Witnesses:

Dr. Arun Majumdar, Director, Advanced Research Projects Agency-
  Energy (ARPA-E)
    Oral Statement...............................................    10
    Written Statement............................................    12
    Biography....................................................    23

Dr. Chuck Vest, President, National Academy of Engineering
    Oral Statement...............................................    24
    Written Statement............................................    25
    Biography....................................................    28

Dr. Anthony Atti, President and CEO, Phononic Devices
    Oral Statement...............................................    28
    Written Statement............................................    30
    Biography....................................................    34

Mr. John Denniston, Partner, Kleiner Perkins Caufield & Byers
    Oral Statement...............................................    34
    Written Statement............................................    36
    Biography....................................................    40

Dr. John Pierce, Vice President, Dupont Applied Sciences in 
  Biotechnology
    Oral Statement...............................................    41
    Written Statement............................................    42
    Biography....................................................    45

Discussion
  Keeping Jobs and Innovation in the U.S.........................    45
  Scaling Up Fledgling Technologies..............................    47
  Prioritizing ARPA-E's Goals....................................    48
  Retaining Intellectual Property and Manufacturing in the U.S...    49
  Intellectual Property and Commercialization....................    51
  Justifying Support for R&D at Large Corporations...............    53
  U.S. STEM Education and Federal Renewable Electricity Standards    54
  Leveraging Public Money for Private Investment.................    55
  Helping Small Businesses Achieve Market Breakthroughs..........    57
  A Historical Context and Protecting DOE's Overall Effectiveness    59
  The Structure of ARPA-E's Grant System.........................    61
  Criteria for Funding Opportunity Announcements.................    61
  Economic Recession and Innovation..............................    62
  ARPA-E and the Global Solar Power Market.......................    62
  Funding Constraints and National Security......................    63
  Potential Changes to FOAs and the Need for Investment..........    64

             Appendix 1: Answers to Post-Hearing Questions

Dr. Arun Majumdar, Director, Advanced Research Projects Agency-
  Energy (ARPA-E)................................................    68

Dr. Chuck Vest, President, National Academy of Engineering.......    73

Dr. Anthony Atti, President and CEO, Phononic Devices............    75

Mr. John Denniston, Partner, Kleiner Perkins Caufield & Byers....    77

Dr. Michael A. Blaustein, Technology Director, Science and 
  Technology Strategic Planning, Dupont, on behalf of Dr. John 
  Pierce, Vice President, Dupont Applied Sciences in 
  Biotechnology..................................................    78

             Appendix 2: Additional Material for the Record

Statement of William J. Perry, 19th United States Secretary of 
  Defense........................................................    80
 
 THE ADVANCED RESEARCH PROJECTS AGENCY-ENERGY (ARPA-E): ASSESSING THE 
     AGENCY'S PROGRESS AND PROMISE IN TRANSFORMING THE U.S. ENERGY 
                           INNOVATION SYSTEM

                              ----------                              


                      WEDNESDAY, JANUARY 27, 2010

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

    The Committee met, pursuant to call, at 10:04 a.m., in Room 
2318 of the Rayburn House Office Building, Hon. Bart Gordon 
[Chairman of the Committee] presiding.



                            hearing charter

                     U.S. HOUSE OF REPRESENTATIVES

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

              The Advanced Research Projects Agency-Energy

               (ARPA-E): Assessing the Agency's Progress

              and Promise in Transforming the U.S. Energy

                           Innovation System

                      wednesday, january 27, 2010
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

Purpose

    The purpose of this hearing is to review progress made on 
establishing ARPA-E and discuss what differentiates ARPA-E from other 
DOE programs, hear accounts of experiences with the agency's first 
funding opportunities, examine the agency's plans and goals for the 
coming year, and discuss ways in which ARPA-E may be improved through 
reauthorization of the America COMPETES Act, as appropriate.

Witnesses

          Dr. Arun Majumdar is the Director of the Advanced 
        Research Projects Agency-Energy (ARPA-E) at the U.S. Department 
        of Energy. He was nominated by President Obama in September 
        2009 and confirmed by the Senate in October. Dr. Majumdar was 
        formerly Associate Laboratory Director for Energy and 
        Environment at Lawrence Berkeley National Laboratory and a 
        Professor of Mechanical Engineering and Materials Science and 
        Engineering at the University of California at Berkeley.

          Dr. Charles Vest is the President of the National 
        Academy of Engineering and former President of the 
        Massachusetts Institute of Technology (MIT). Dr. Vest served on 
        the National Academies ``Rising Above the Gathering Storm'' 
        panel, which proposed the creation of ARPA-E.

          Mr. John Denniston is a Partner at the venture 
        capital firm Kleiner, Perkins, Caufield and Byers (KPCB). He is 
        a leading expert on clean energy technology investment.

          Dr. Anthony Atti is the President and CEO of Phononic 
        Devices, Inc, a small firm that originated at the University of 
        Oklahoma. Phononic Devices received funding for development of 
        thermoelectric energy conversion devices.

          Dr. John Pierce is the Vice President of Technology 
        at DuPont Applied BioSciences. DuPont, a Fortune 100 company, 
        was chosen to receive funding for development of processes to 
        produce biobutanol from macroalgae.

Background

    The Advanced Research Projects Agency-Energy (ARPA-E) was 
originally authorized in the America COMPETES Act of 2007 [P.L. 110-
69]. That Act followed on the direct recommendations of the widely-
acknowledged 2005 National Academies report, ``Rising Above the 
Gathering Storm.'' The ``Gathering Storm'' panel was chaired by retired 
Lockheed Martin Chairman and CEO Norman Augustine, and included, among 
a number of experts on innovation, the current President of the 
National Academy of Engineering, Dr. Charles Vest, the current 
Secretary of Defense, Dr. Robert Gates, and the current Secretary of 
Energy, Dr. Steven Chu. The panel made a series of recommendations to 
enhance the nation's technological competitiveness, including a 
recommendation calling on the Federal Government to create a new energy 
research agency (ARPA-E) within Department of Energy patterned after 
the successful Defense Advanced Research Projects Agency (DARPA) within 
the Department of Defense.
    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 . . . . 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.''
    Several other components of the panel's recommendations were 
included in the COMPETES Act, including extending special personnel and 
contracting authorities, hiring of staff for limited terms of 
approximately three years, and authorizing $300 million in initial year 
funding. COMPETES differs from the ``Gathering Storm'' recommendations 
primarily by having the Director of ARPA-E report directly to the 
Secretary of Energy, further reducing bureaucratic inefficiencies and 
enhancing decisionmaking powers of the Director. The America COMPETES 
Act was signed into law in August 2007.
    Despite being authorized in 2007 it was not until 2009 that ARPA-E 
received funding. The American Recovery and Reinvestment Act of 2009 
[P.L. 111-5] included allocations of $400 million for ARPA-E to become 
fully operational. At the same time, Fiscal Year 2009 Omnibus 
Appropriations Act appropriated $15 million for the start-up of ARPA-E.
    Passage of the Recovery Act served as the launch point for ARPA-E. 
However, the stipulations for funding under the Recovery Act provided a 
unique and challenging situation for the Department in standing up 
ARPA-E by requiring that agencies obligate all funds by the end of 
fiscal year 2010. Therefore, within this timeframe of less than two 
years, the Department would have to establish ARPA-E, overcome 
logistical challenges such as acquiring office space and hiring core 
staff and contractors, announce opportunities for project funding, 
conduct intensive project selection processes, make a large number of 
awards and complete the contracting process with award recipients, 
oversee the execution of these projects with high degree of interaction 
with performers, and terminate funding for projects that did not appear 
promising. Furthermore, the Director of ARPA-E required Presidential 
nomination and Senate confirmation. To date, despite very limited 
staffing and an unexpectedly high number of applications, ARPA-E has 
met all specified deadlines and obligations.
    Shortly after receiving Recovery Act funding, ARPA-E released its 
first Funding Opportunity Announcement (FOA) in April 2009, and it 
received an unprecedented response. The scope of the announcement was 
broad, limiting applications simply to ``transformational'' 
technologies. Furthermore, to reduce the administrative burden on both 
ARPA-E staff and applicants and to mitigate costs associated with a 
full application, the FOA called for submission of concept papers of 
only eight pages or less. Consequently, ARPA-E received almost 3,700 
concept papers. After an intensive selection process utilizing expert 
volunteers from industry and academia, 334 of those were chosen to 
submit full applications. Ultimately, 37 projects were chosen to 
participate, totaling over $150 million in awards to a diverse range of 
technologies and performers. A detailed list of awards can be found 
here: http://www.energy.gov/news2009/documents2009/ARPA-
E-Project-Selections.pdf
    ARPA-E also follows an aggressive schedule for negotiating and 
signing contracts with performers. For the first round of funding, 
ARPA-E completed all of the award contracts within three months after 
the award announcement, and most within two months. By all accounts 
this is a rapid pace for Federal contracting and represents a 60% 
reduction over the average Department of Energy procurement cycle time.
    A second round of solicitations totaling $100 million was announced 
in early December. Informed by a series of open workshops the second 
round focuses on three distinct areas: innovative materials and process 
for carbon capture, transportation batteries, and liquid fuels from 
carbon dioxide. The deadline for submission was January 15, 2010. 
Despite the comparatively narrow scope of this solicitation, ARPA-E 
received over 600 concept papers. It is expected that awards will be 
announced in the spring of 2010, totaling 30-40 projects, and a third 
round of solicitations will be announced in a similar timeframe.
    Given the high demand for both the first and second rounds of 
funding, it became clear that ARPA-E had the financial and human 
capacity to accommodate only a small percentage of applications. 
Assuming that many more projects were worthy of funding, and that those 
that did receive ARPA-E awards would ultimately have to secure private 
sector funding, the Department announced that it would work with 
outside organizations to hold an ARPA-E Energy Innovation Summit on 
March 1-3rd. The summit is expected to highlight projects that both 
received awards and those that did not receive awards but might be of 
interest to the investor community. Securing private sector funding for 
projects, either as cost-share on projects or follow-on investment 
after project completion, is critical to commercializing successful 
innovations from ARPA-E. Detailed information on the ARPA-E Energy 
Innovation Summit can be found here: http://www.ct-si.org/events/
EnergyInnovation/.
    For more information on the hearing please contact Chris King at 
225-8844 or [email protected]
    Chairman Gordon. Good morning. I want to welcome everyone 
to the hearing on the Advanced Research Projects Agency for 
Energy, or ARPA-E. It was almost a year ago that ARPA-E 
received startup funding. We can consider this hearing their 
first annual check-up.
    Today we will discuss the rather brief but dynamic history 
of ARPA-E, including some of the early achievements and future 
plans for the Agency. We will also hear from witnesses on the 
role of ARPA-E in the larger energy technology landscape and 
how it can best be positioned to serve as a driver of job 
creation and technological competitiveness in the United 
States.
    This Committee has a lot invested in ARPA-E. Though the 
America COMPETES Act was a product of bipartisan negotiation 
between the House and Senate, it is really this Committee that 
has led the charge in ensuring that ARPA-E became a reality.
    In 1958 DARPA [Defense Advanced Research Projects Agency] 
was created in response to Sputnik, and today we must respond 
to the serious threat of China and others that see leadership 
in clean energy technology development as key to their economic 
growth.
    Just as the originators of DARPA can look back on its 
successes, the internet, stealth technology, and GPS among many 
others, I firmly believe that in the not-so-distant future, 
Members of this Committee will look back on our role in the 
formation of ARPA-E and take great pride in the technological 
breakthroughs and new industries that will inevitably result 
from its work. ARPA-E will in turn serve as a model for 
innovation in other programs within the Department of Energy 
and other Federal agencies.
    We were very fortunate that the President chose Dr. Steven 
Chu to lead the Department. Along with Dr. Vest, who is with us 
today, Secretary Chu was instrumental in seeing that the 
National Academy of Sciences' Rising Above the Gathering Storm 
report included a recommendation to establish ARPA-E. They 
clearly understood the threats to competitiveness and the call 
for new models of research and development.
    As Tom Donohue, the CEO of the U.S. Chamber of Commerce, 
said in a hearing last week, ``The creation of ARPA-E 
represents a bold step towards bypassing some of the 
traditional stove-piping that frequently hinders the efficiency 
and expediency of research and development at DOE and its 
National Laboratories.''
    Over the last four years I have become a believer that the 
DARPA model will work for energy, and that it was just what the 
Department needed to overcome long-standing institutional 
barriers to innovation.
    I think we can all appreciate a small, non-bureaucratic 
group of very talented individuals armed with the resources to 
quickly respond to high-risk technological challenges and, just 
as quickly, to terminate unsuccessful projects. This team has 
the singular mission to do whatever it takes to develop the 
most cutting-edge, clean energy technologies and get them into 
the marketplace as quickly as possible.
    Dr. Arun Majumdar and his team understand their mission 
better than anyone. They understand that their challenge is to 
be innovative not only in the projects they undertake, but also 
in how they undertake them. They appear unafraid, confronting 
the traditional bureaucratic hurdles and trying new models to 
spur innovation. And let me give you one quick example of that. 
On two different occasions, Dr. Majumdar and Dr. Chu came to 
see me, and on each occasion I said that there are more good 
ideas for energy innovation than there are dollars, public 
dollars, available. And we need to have some type or find some 
way to put those private dollars with the good ideas.
    I also told each of them that when they go back to the 
office, their lawyers are going to give them 100 reasons why 
they can't do this, and they just need to say ``I want one 
reason why I can.'' Miraculously, I guess because they haven't 
been in town very long, they came up with that one reason, and 
now next month there is going to be a seminar affair to help 
them develop that community within ARPA-E as well as hopefully 
to bring more public-sector dollars to the table. And as I have 
been around them, I can tell you firsthand, this really is a 
band of brothers and sisters that have come together with a 
singular bond, and that is to really help this country, both in 
terms of energy independence and job creation with new 
industries.
    Many of them, well, I won't say many of them, I think all 
of them left jobs and took pay cuts to come to Washington. They 
virtually all had to interrupt a successful career, and because 
you are only going to be here for two or three years, many of 
them left their families at home so the kids could stay in 
school. So they are here on a mission, and even though you can 
tell I am very supportive of that mission, this Committee still 
has a job of oversight. And so we need to make sure that they 
take this good idea and maximize it to its fullest extent.
    [The prepared statement of Chairman Gordon follows:]
               Prepared Statement of Chairman Bart Gordon
    Good morning. I want to welcome everyone to this hearing on the 
Advanced Research Projects Agency-Energy, or ARPA-E. It was almost a 
year ago that ARPA-E received startup funding from the Recovery Act. We 
can consider this hearing their first annual check-up.
    Today we will discuss the rather brief but dynamic history of ARPA-
E, including some of the early achievements and future plans for the 
agency. We will also hear from witnesses on the role of ARPA-E in the 
larger energy technology landscape, and how it can best be positioned 
to serve as a driver of job creation and technological competitiveness 
in the U.S.
    This Committee has a lot invested in ARPA-E. Though the America 
COMPETES Act was very much a product of bipartisan negotiations between 
the House and Senate, it is really this Committee that has led the 
charge in ensuring that ARPA-E became a reality.
    In 1958 DARPA was created in response to Sputnik, and today we must 
respond to the serious threat of China and others that see leadership 
in clean energy technology development as key to economic growth.
    Just as the originators of DARPA can look back on its successes_the 
internet, stealth technology, GPS_I firmly believe that, in the not-so-
distant future, members of this Committee will look back on our role in 
the formation of ARPA-E and take great pride in the technological 
breakthroughs and new industries that will inevitably result from its 
work. ARPA-E will in turn serve as a model for innovation in other 
programs within DOE and other Federal agencies.
    We were very fortunate that the President chose Dr. Steven Chu to 
lead the Department. Along with Dr. Vest, Secretary Chu was 
instrumental in seeing that the National Academy of Science's ``Rising 
Above the Gathering Storm'' report included a recommendation to 
establish ARPA-E. They clearly understood the threats to 
competitiveness called for new models for research and development.
    As Tom Donohue, the CEO of the U.S. Chamber of Commerce, said in a 
hearing last week, ``the creation of ARPA-E represents a bold step 
towards bypassing some of the traditional `stove piping' that 
frequently hinders the efficiency and expediency of research and 
development at DOE and its National Laboratories.''
    Over the last four years I have become a believer that the DARPA 
model will work for energy, and that it was just what the Department 
needed to overcome long-standing institutional barriers to innovation.
    I think we can all appreciate a small, non-bureaucratic group of 
very talented individuals armed with the resources to quickly respond 
to high-risk technical challenges and, just as quickly, terminate 
unneeded projects. This team has the singular mission to do whatever it 
takes to develop the most cutting edge clean energy technologies and 
get them into the marketplace as quickly as possible.
    I have followed very closely the progress of ARPA-E, and I can 
safely say that I am very encouraged by what I have seen. Dr. Majumdar 
and his team understand their mission better than anyone. They 
understand that their charge is to be innovative not only in the 
projects they undertake, but also in how they undertake them. They 
appear unafraid of confronting the traditional bureaucratic hurdles and 
trying new models for spurring innovation.

    Chairman Gordon. And so with that, I now recognize our 
Ranking Member, my good friend and distinguished member from 
Texas, Ralph Hall.
    Mr. Hall. Mr. Chairman, thank you for your usual good 
opening statement. I think I just ought to start with there is 
little if any disagreement on this Committee on the importance 
of fundamental advances in energy technologies to America's 
future economic national security. It is a priority that all of 
us and all of our members share and a principle for which we 
are able to work together and have worked together.
    The challenge lies in how best to structure the Federal 
Government's involvement in energy R&D to maximize the use of 
all the resources. For a number of reasons, I don't know how 
many, I opposed the creation of ARPA-E in 2007. I was concerned 
that the DARPA model could not be applied successfully to the 
energy sector. I was concerned about the lack of clarity and 
the mission and scope of ARPA-E and whether it could result in 
government interference in private markets. I was also 
concerned that the creation of a new agency would compete with 
and reduce funding for DOE's Office of Science which was a top 
priority of The Gathering Storm report as well as our America 
COMPETES legislation.
    Now, over two years since the legislation that established 
ARPA-E was signed into law, my original concerns largely 
remain. This is primarily because the agency's operations are 
still in the formative stages with the first round of grants 
being announced just last fall. The absence of a record upon 
which to make and form judgments regarding ARPA-E may be the 
most difficult aspect of this reauthorization. Without such a 
record, I am afraid we are left in a mostly conceptual debate 
similar to the one we had in 2007. Accordingly, I expect that 
we will ask many of the same questions, but this time maybe the 
answers will be different or at least more meaningful, since we 
have the benefit of a new ARPA-E director to provide responses 
and help us understand his vision for the agency.
    I thank Chairman Gordon for working closely with me and 
with us on these issues and for assembling this distinguished 
panel of experts today. In as much as ARPA-E is now the law, 
which we supported as part of the America COMPETES Act, I want 
to work with this good Chairman as the program gets off its 
feet to make sure that it is the success that he believes and 
he is entitled to see.
    And I yield back my time.
    [The statement of Mr. Hall follows:]
           Prepared Statement of Representative Ralph M. Hall
    Thank you, Mr. Chairman, for calling this hearing today on the 
Department of Energy's Advanced Research Projects Agency, or ARPA-E.
    There is little if any disagreement in this Committee on the 
importance of fundamental advances in energy technologies to America's 
future economic and national security. It is a priority that all of our 
Members share, and a principle from which we are able to work together.
    The challenge lies in how best to structure the Federal 
Government's involvement in energy R&D to maximize use of limited 
resources.
    For a number of reasons, I opposed the creation of ARPA-E in 2007. 
I was concerned that the DARPA model could not be applied successfully 
to the energy sector. I was concerned about the lack of clarity in the 
mission and scope of ARPA-E, and whether it could result in government 
interference in private markets.
    And I was concerned that creation of a new agency would compete 
with and reduce funding for DOE's Office of Science, which was a top 
priority of the ``Gathering Storm'' report as well as our America 
COMPETES legislation. Now, over two years since the legislation 
establishing ARPA-E was signed into law, my original concerns largely 
remain. This is primarily because the agency's operations are still in 
the formative stages, with the first round of grants being announced 
just last Fall.
    The absence of a record upon which to make informed judgments 
regarding ARPA-E may be the most difficult aspect of its 
reauthorization. Without such a record, I'm afraid we are left with a 
mostly conceptual debate similar to the one we had in 2007. 
Accordingly, I expect that well ask many of the same questions. But 
this time maybe the answers will be different . . . or at least more 
meaningful, since we have the benefit of a new ARPA-E Director to 
provide responses and help us understand his vision for the agency.
    I thank Chairman Gordon for working closely with me on these issues 
and for assembling this distinguished panel of experts today. Inasmuch 
that ARPA-E is now law_which we supported as part of the America 
COMPETES Act_I want to work with the Chairman as the program gets off 
its feet to make sure it is the success that he believes it can be.

    [The prepared statement of Mr. Costello follows:]
         Prepared Statement of Representative Jerry F. Costello
    Good Morning. Thank you, Mr. Chairman, for holding today's hearing 
to review the progress made on establishing the Advanced Research 
Projects Agency-Energy (ARPA-E) in the Department of Energy (DOE) and 
to discuss opportunities to improve the agency as we reauthorize the 
America COMPETES Act.
    I was pleased to support the America COMPETES Act when it passed 
Congress with bipartisan support in 2007 and was signed into law by 
President Bush. Based on the recommendations of the 2005 report, Rising 
Above the Gathering Storm, the America COMPETES Act created ARPA-E, a 
government agency designed to invest in high-risk, high-reward energy 
research. In 2009 ARPA-E received $400 million in funding through the 
American Recovery and Reinvestment Act, and the Fiscal Year 2009 
Omnibus Appropriations Act provided $15 million. I commend DOE, Dr. 
Majumdar, and the staff of ARPA-E for their hard work and efficiency in 
establishing the agency and awarding $150 million in less than one year 
to 37 award recipients.
    While ARPA-E is instrumental in providing the initial investment in 
these research projects, additional funding will be necessary to move 
these innovative projects towards development, demonstration, and 
commercialization. I am interested to hear from our witnesses what 
programs, if any, are in place to assist the continued development of 
these projects.
    Finally, as a supporter of clean coal technology, I was pleased 
ARPA-E provided funds to five carbon capture and storage (CCS) projects 
in its first round and will focus their next round of awards on 
investing in CCS. This next phase will have an immediate impact on our 
energy independence by enabling our coal plants to demonstrate that 
coal be used to cleanly and efficiently reduce our dependence on 
foreign oil.
    I welcome our panel of witnesses, and I look forward to their 
testimony. Thank you again, Mr. Chairman.

    [The prepared statement of Ms. Johnson follows:]
       Prepared Statement of Representative Eddie Bernice Johnson
    Thank you, Mr. Chairman and Ranking Member.
    It is clear the Advanced Research Projects Agency-Energy (ARPA-E) 
is taking our Country a step in the right direction. ARPA-E, modeled 
after the highly successful Defense Advanced Research Agency (DARPA) 
within the Department of Defense provides funding for projects that 
have the potential to revolutionize American society. I am proud to 
have been a co-sponsor of the legislation that created this program and 
I strongly support its continuation.
    It is vital for our Country to move forward by funding research 
that creates alternative forms of energy and technology that will lead 
us to a more prosperous future both environmentally and economically. 
If we continue to invest heavily in finite resources there is nothing 
to prevent those costs from skyrocketing when the supply runs low. The 
national security implications of the rapid escalation of energy costs 
must not be ignored. The time is now to invest in renewable energy. The 
time is now for ARPA-E.
    Despite being funded for just one year, ARPA-E has shown its 
promise. Investing in projects that may one day revolutionize battery 
technology, motors, electronic and vehicle technologies may one day 
spur the renewable energy revolution.
    I am disappointed that not one project from the state of Texas was 
selected in the first round of ARPA-E awards. Texas is home to many of 
the nation's leading businesses and research institutions dedicated 
towards funding renewable energy research. Out of all states, Texas 
ranks second in the Nation for its total number of alternative fuel 
vehicles; fifth for wind energy production; and eighth in total 
renewable energy R&D expenditures. The state of Texas has been a leader 
in alternative energy projects and research.
    I would like to thank our witnesses for their time, insight and 
evaluation of this vital program. The Committee will undoubtedly have 
many questions and benefit from your expertise and leadership in 
cutting-edge research.
    It is my hope that this hearing will help us as we provide the 
leadership necessary to get our energy economy back on track.
    Thank you, Mr. Chairman. I yield back.

    Chairman Gordon. Thank you, Mr. Hall. And panel, you can 
see your charge today is to make this bright, able person 
better understand what we see in ARPA-E. And it is my pleasure 
to introduce a very distinguished panel following upon an 
excellent panel last week.
    First we have Dr. Arun Majumdar, who is the Director of 
ARPA-E and formerly the Associate Laboratory Director for 
Energy and Environment at the Lawrence Berkeley National 
Laboratory. Dr. Chuck Vest is the President of the National 
Academy of Engineering and a valued member of the Rising Above 
the Gathering Storm panel. Dr. Tony Atti is the President and 
CEO of Phononic Devices, and Mr. John Denniston is a partner in 
the firm of Kleiner Perkins Caufield & Byers, and finally Dr. 
John Pierce is the Vice President of DuPont Applied Sciences in 
Biotechnology. And I also would like to recognize John Gage who 
is here observing, who is a longtime technology leader in 
Silicon Valley, and I am sure that John Denniston will call 
upon you if he gets stuck to answer any kind of questions.
    So Dr. Majumdar, you are recognized for five minutes.

 STATEMENTS OF DR. ARUN MAJUMDAR, DIRECTOR, ADVANCED RESEARCH 
                PROJECTS AGENCY-ENERGY (ARPA-E)

    Dr. Majumdar. Thank you very much. Chairman Gordon, Ranking 
Member Hall, and distinguished Members of this Committee, I am 
delighted to appear before you today and testify as the first 
Director of the Advanced Research Projects Agency for Energy, 
or ARPA-E. I am grateful for the trust that President Obama and 
Secretary Chu have placed in me. I also want to thank Congress 
for authorizing ARPA-E in the America COMPETES Act and for 
appropriating $400 million in the American Recovery and 
Reinvestment Act of 2009. I am very excited about this 
opportunity to identify and invest in high-risk, high-payoff 
research and development that can transform our domestic and 
global energy landscape.
    As you know, ARPA-E was modeled after DARPA, which was 
created in 1958 in response to the launch of Sputnik when it 
was felt that the United States had lost its technological 
lead. The United States now faces three Sputnik-like 
challenges: energy security, U.S. technological lead, and 
greenhouse gas emissions and climate change. In many cases, we 
as a Nation are lagging behind, and we need to change course 
with fierce urgency. ARPA-E's goal is to help catalyze this 
change.
    Let me give you a quick report of where we are now and some 
thoughts on how to move forward.
    The first funding opportunity announcement received an 
overwhelming response from the technical community: 3,700 
concept papers, 340 full proposals, and, after a thorough 
review process, 37 proposals selected for award at an average 
of $4 million each. These projects were selected based on the 
impact on our mission, innovative technical approaches, superb 
teams, opportunities for the United States to gain leadership 
and to pursue technologies that are underserved by other parts 
of DOE and the private sector. If successful, these 
technologies could be game-changing and launch new 
opportunities for American businesses and jobs.
    The $150 million of ARPA-E investment in this round 
catalyzed an additional $33 million in investment in two 
months, mostly from the private sector. Equally important, 
today ARPA-E has already negotiated 36 out of the 37 awards in 
less than three months.
    While the first round was a clear success, the large 
oversubscription meant that there were many innovative ideas 
that we could not support with funding. We are bringing many of 
those teams back to ARPA-E through workshops and new programs. 
The ARPA-E Energy and Innovation Summit which will be held in 
Washington, D.C. on March 2 and 3 will not only showcase ARPA-E 
technologies, but will also introduce teams that we could not 
fund to other funding sources. I invite you and your staff to 
attend this event.
    The second round funding opportunity announcement drew on 
the lessons from these workshops and will focus on advanced 
batteries for transportation, new materials and processes for 
carbon capture, and new ways of generating transportation fuel 
from hydrogen, carbon dioxide and electricity. The third round 
will be announced in early March. The goal of these rounds is 
to either identify technologies that will leapfrog over today's 
approaches or to create technologies where none currently 
exist.
    If I have any concern for the future, it is the following: 
While ARPA-E's focus is to invest upstream in the energy 
innovation pipeline, we must keep the scaling of these 
innovations within the United States and thereby create new 
jobs in the energy sector. The purpose of the ARPA-E and the 
Innovation Summit is to explore how to achieve this. In this 
regard, I may note that the government is the Nation's largest 
energy consumer. I urge Congress to consider using the 
government's purchasing power to create a demand pull for 
American innovations so that our businesses can get a foothold 
once they meet or exceed market-based performance and cost 
metrics. This will be critical in scaling up innovations and 
creating new jobs within the United States, especially in 
manufacturing, and it will enable American taxpayers to reap 
the benefits of their upstream investments through ARPA-E.
    I recognize that these early days are a very critical 
period for ARPA-E. We are putting together our DNA, and we must 
get this right by innovating in our internal processes. We have 
a new organizational structure that is not only nimble and 
agile but one that breaks down potential silos between various 
disciplines and encourages internal debate and discussion, as 
well as coordination with the rest of DOE. I am delighted to 
report that we have been able to recruit some of the best and 
brightest from the technical community as program directors to 
serve in ARPA-E for a limited time. These are a rare breed of 
people who are some of the most active scientists and engineers 
with one foot in science and technology development and the 
other in business. We have also created an ARPA-E fellows 
program to recruit some of the best young minds to join ARPA-E 
for a maximum of two years and help us craft new programs by 
identifying technological opportunities in the global energy 
landscape.
    From my past experience in the R&D community and through 
what I have now seen through ARPA-E, I can assure you that the 
innovation process in the United States is in full swing. 
Energy is now receiving the attention of the best minds in our 
country and is attracting new talent. I am confident in saying 
that we are not limited by lack of good ideas. We still have 
the best R&D infrastructure in the world and a thriving 
innovation ecosystem in business and entrepreneurship. I am 
very optimistic about our Nation's future.
    I pledge to use all my knowledge, expertise and experience 
to continue growing ARPA-E into a robust engine for American 
innovation and energy environment. I once again thank you for 
your support.
    [The prepared statement of Dr. Majumdar follows:]
                  Prepared Statement of Arun Majumdar
    Chairman Gordon, Ranking Member Hall, and Members of this 
Committee, thank you for the opportunity to testify today on the 
Advanced Research Projects Agency-Energy (ARPA-E).
    As the first Director of ARPA-E, I am also grateful for the 
opportunity to create an organization within the DOE with a mandate to 
identify and support the innovative and pioneering ideas and people 
that will be game-changing for our domestic and global energy 
landscape. It has been incredibly exciting for me and my team. Prior to 
my current job, I was a Professor of Mechanical Engineering and 
Materials Science and Engineering for 13 years at the University of 
California, Berkeley, as well as a scientist and the Associate 
Laboratory Director for Energy and Environment at the Lawrence Berkeley 
National Laboratory. I have been involved in R&D for the last 25 years 
and am an elected member of the National Academy of Engineering.
    I want to thank President Obama and Secretary Chu for their trust 
in me to serve as the first Director of ARPA-E, the Senate for 
confirming me in this position, and to Congress for authorizing and 
appropriating ARPA-E. I especially want to recognize Chairman Gordon 
and the Members of this Committee for all of their hard work in 
authorizing ARPA-E in the America COMPETES Act.
    Many people within the DOE have my deepest gratitude for their work 
to help launch ARPA-E before I joined as its Director on October 26, 
2009. These include Secretary Chu himself, Undersecretaries Kristina 
Johnson and Steve Koonin, CFO Steve Isakowitz, DOE's American Recovery 
and Reinvestment Act Recovery Act Implementation team led by Matt 
Rogers, Shane Kosinski, as well as many staff members from the Offices 
of the General Counsel, and Procurement, along with the technical staff 
from the Office of Science and the Applied Energy Offices. I was very 
blessed to have their support before I joined, and I continue to rely 
on their expertise and effort.

1. Introduction

    As this committee well knows, our dependence on fossil fuels 
threatens our energy and environmental security and creates significant 
challenges in addressing climate change. Business as usual is not a 
viable option. Conversely, taking swift action on energy is a 
tremendous economic opportunity to lead in what Secretary Chu has 
called another industrial revolution. The nation that successfully 
grows its economy with more efficient energy use, a clean domestic 
energy supply, and a smart energy infrastructure will lead the global 
economy of the 21st century. In many cases, we are lagging behind. We 
as a nation need to change course with fierce urgency.
    ARPA-E was created to address this important issue, and it was 
created with DARPA as a model. It is important to understand the 
origins of DARPA, and also point out some of the key differences 
between the defense and energy sectors of our economy. DARPA, 
originally called ARPA, was created in 1958 in response to the launch 
of Sputnik by the Soviet Union. It was felt at the time that the U.S. 
had lost its technological lead, and that the Nation needed an 
organization that would invest in high-risk/high-payoff R&D and connect 
technological innovation to business, which would then support the 
defense infrastructure.



    The U.S. now faces three Sputnik-like challenges in the energy and 
climate area (see Figure 1): (a) energy security; (b) U.S. 
technological lead; and (c) greenhouse gas emissions and climate 
change. To illustrate where we are, I have included two snapshots of 
production key to future energy use. Figure 2 shows the trends in U.S. 
market share and shipments of photovoltaic solar cells_in a span of 15 
years, the U.S. market share has decreased from 45 percent to less than 
10 percent. Figure 3 shows the manufacturing volumes of Lithium-ion 
batteries in 2009. These batteries are being used in both mobile 
electronics (laptop computers, cell phones, etc.) as well as for plug-
in hybrid and electric vehicles. It is noteworthy that the materials 
and chemistry that are used in these batteries were largely discovered 
here, yet the United States has about one percent of the global 
manufacturing volume.



2. Scale and Pace of Innovation Needed in the Energy Sector

    During the 20th century, certain key innovations changed the course 
of human history, including the Haber-Bosch process of creating 
artificial fertilizers by fixing atmospheric nitrogen to form ammonia. 
It touched humanity like none other because it led to massive increase 
in food production and an almost four-fold increase in global 
population in 100 years. Other game-changers included creating semi-
dwarf, high-yield strains of wheat that introduced the green 
revolution; antibiotics; polio vaccination; the transistor and 
integrated circuits; electrification; the airplane; nuclear energy; 
optical and wireless communication; the internet; and more. Now imagine 
all of these innovations happening in a span of just 10-20 years: That 
is the scale and pace of game-changing innovations that we need to 
address the energy and climate change challenge we face. In short, the 
next 20 years need to be the most innovative period in our Nation's 
history.



    Our history is replete with examples of pioneers and entrepreneurs 
who took risks. These innovators often failed initially, but quickly 
learned from those failures, competed against each other, and innovated 
in both technology and business to create the largest industrial base 
the world has ever seen.
    ARPA-E's goal is to tap into this truly American ethos, and to 
identify and support the pioneers of the future. With the best R&D 
infrastructure in the world, a thriving innovation ecosystem in 
business and entrepreneurship, and a generation of bright young minds 
that is willing to engage with fearless intensity, we have all the 
ingredients necessary for future success. The goal of ARPA-E is to 
harness them to address our technological gaps and leapfrog over 
current approaches.

3. Creation of ARPA-E

    Recognizing the need to reevaluate the way the United States spurs 
innovation, the National Academies released a 2005 report, ``Rising 
Above the Gathering Storm'', that included the recommendation to 
establish an Advanced Research Projects Agency-Energy (ARPA-E) within 
the Department of Energy (DOE). In August of 2007, Congress passed the 
America COMPETES Act which, among many of the recommendations in the 
National Academies report it codified, established ARPA-E with the 
following objectives:

        1.  To bring a freshness, excitement, and sense of mission to 
        energy research that will attract the U.S.'s best and brightest 
        minds_those of experienced scientists and engineers, and, 
        especially, those of students and young researchers, including 
        from the entrepreneurial world;
        2.  To focus on transformational energy research that industry 
        by itself cannot or will not support due to its high risk but 
        where success would provide dramatic benefits for the nation;
        3.  To utilize an ARPA-like organization that is flat, nimble, 
        and sparse, capable of sustaining for long periods of time 
        those projects whose promise remains real, while phasing out 
        programs that do not prove to be as promising as anticipated; 
        and
        4.  To create a new tool to bridge the gap between basic energy 
        research and development/industrial innovation.

    President Barack Obama announced the launch of ARPA-E on April 27, 
2009, as part of a sweeping announcement about Federal investment in 
research and development and science education. The American Recovery 
and Reinvestment Act of 2009 provided $400 million in funding for ARPA-
E.
    With the first tranche of those funds having been awarded, I would 
like to provide a report on where we are now and our plans for the 
future.

4. First Funding Opportunity Announcement

    4.1 Process: The first ARPA-E Funding Opportunity Announcement 
(FOA) was made in May 2009, and the FOA requested concept papers of 
transformational ideas spanning all aspects of energy science and 
technology. ARPA-E received approximately 3700 concept papers, 
significantly higher than expected. After these concept papers were 
reviewed, roughly 340 were invited to submit full proposals. These 
proposals were then reviewed by two sets of panels of external 
reviewers. Based on these reviews and a rigorous selection process, on 
October 26, 2009 the DOE selected awardees for $151 million of Recovery 
Act funds for 37 energy research projects under ARPA-E. The average 
funding level was $4M for a maximum of three years. The minimum and 
maximum funding levels were about $500K to $9M, respectively. 
Approximately 45% of the funding was received by small businesses, 35% 
by educational institutions, and the remaining 20% by large industry. 
National Laboratories team members participated in 19% of the funded 
projects.
    Selections for ARPA-E's first FOA were announced Oct 26, 2009. By 
January 15, 2010, 35 out of 37 selections were awarded. This speed has 
now set records within the DOE, showing both the potential for ARPA-E 
to move quickly as consistent with its mission, and its ability to move 
Recovery dollars out the door in order to quickly create jobs.

    4.2 Funded Projects: These 37 projects constituted the best ideas 
that, if successful, could be potential game-changers in the energy 
sector. These topics were chosen based on the following criteria:

          High impact on ARPA-E mission areas
          Innovative technical approaches
          Best-in-class people and teams
          Opportunities for U.S. to maintain/gain technology 
        leadership
          ``White Space'' opportunities relative to existing 
        DOE portfolio
          Topic areas underserved by private sector investment 
        (e.g., both technical and market risk)
          Strong additionality/leveraged impact relative to 
        private sector investment and other public funding programs

    Let me provide a couple of examples from among the projects funded 
by the first FOA.



    Figure 4 shows a large-scale liquid metal battery under development 
at the Massachusetts Institute of Technology. It is based on the 
innovative use of electroplating on two different metals from a mixture 
of two liquid metals. Based on low-cost, domestically available liquid 
metals, such a battery could lead to the mass adoption of grid-scale 
electrical energy storage as part of the nation's energy grid. The 
estimated cost of such a battery would be roughly $50-100/kWhr, which 
would make it economical world wide. Grid-level electricity storage is 
one of the most challenging issues to make a ``smart grid'', and yet 
there are currently very few viable technologies that meet all the 
requirements for such an application.



    Figure 5 shows the design of a new wind turbine developed by 
FloDesign Corp, a startup company based in Massachusetts. Today's 
windmills look like propellers with large blades mounted on a rotating 
horizontal axle, and they have an inherent limit (the Betz limit), 
capturing a maximum of about 60% of the wind energy. Today's windmills 
operate at about 50-55% efficiency, which is seen as almost the 
practical efficiency limit. FloDesign has used concepts from jet engine 
fluid dynamics and innovated in windmill design, which has now been 
able to beat the Betz limit. This breakthrough enables FloDesign to 
reduce the cost and size of windmills by roughly 40% while maintaining 
the same power level. Furthermore, the major loads are no longer on the 
rotating shaft and bearing, but rather on the stationary envelop, which 
reduces reliability problems and increase lifetime.

    4.3 Building a Constituency: The nature of projects selected in 
FOA-1 has energized and engaged the technical and investment community. 
In addition to unveiling a pent-up fountain of ideas as evidenced by 
the overwhelming response to the solicitation, private capital has 
begun to come off the sidelines, which was one of the main goals of the 
Recovery Act. After ARPA-E announced its selections, the teams 
collectively received about $30M of private investments in less than 
two months, suggesting that if ARPA-E can reduce the technology risk, 
the private sector is willing to adopt the technology and potentially 
scale it in the market.
    In fact, one ARPA-E awardee went as far as to say, ``Winning the 
ARPA-E award served as the catalyst for an over-subscribed financing 
round and recruitment of business executives.''

    4.4 Speed of Transactions: Selections for ARPA-E's first FOA were 
announced October 26, 2009. By January 15, 2010, 35 out of 37 
selections were awarded. This speed has now set records within DOE, 
which is especially important considering that we are being funded 
through ARRA funds, all of which need to be obligated by September 30, 
2010.

    4.5 Supporting Projects Not Funded: One of my main goals in the 
near future is to nurture this interest in ARPA-E technologies. As 
noted above, of the 3,700 initial applications received, DOE only 
selected 37 for funding. Clearly, the first ARPA-E solicitation was 
oversubscribed and many excellent proposals could not be funded. We 
have encouraged and continue to encourage many of the teams who did not 
get funded to return to ARPA-E with their ideas for future workshops 
and to help us create new programs. We are also launching the ARPA-E 
Energy Innovation Summit March 1-3, 2009, in Washington, DC, where we 
not only want to highlight the technologies that we support, but also 
invite teams that did not get funded, so that we can connect them to 
other offices within DOE as well as other funding agencies and 
organizations. In short, I realize that we cannot financially support 
everyone, but we also realize that we need to build a large community 
beyond ARPA-E for our nation to change course with fierce urgency.

5. Next Funding Opportunity Announcements

    On the heels of the first funding opportunity's success, Secretary 
Chu announced on December 7, 2009 the availability of a second round of 
funding opportunities for transformational energy research projects 
through ARPA-E. Funding Opportunity Announcement 2 (FOA-2) will provide 
an additional $100 million in Recovery Act funding. In contrast to FOA-
1, which was open to all topics related to energy, FOA-2 is focused on 
a set of three topics chosen from several workshops that ARPA-E hosted 
over a three-month period, where it received input from the technical 
community. Areas of focus included under FOA-2 are:

        1.  Electrofuels. ARPA-E seeks new ways to make liquid 
        transportation fuels_without using petroleum or biomass_by 
        using microorganisms to harness chemical or electrical energy 
        to convert carbon dioxide into liquid fuels.
        2.  Innovative Materials & Processes for Advanced Carbon 
        Capture Technologies (IMPACCT). To address the enormous 
        challenge of reducing the cost of carbon capture, ARPA-E is 
        looking for low-cost catalysts to enable systems with superior 
        thermodynamics that are not currently practical due to slow 
        kinetics, robust materials that resist degradation from caustic 
        contaminants in flue gas, and advanced capture processes.
        3.  Batteries for Electrical Energy Storage in Transportation 
        (BEEST). ARPA-E seeks to develop a new generation of ultra-high 
        energy density, low-cost battery technologies for long electric 
        range plug in hybrid electric vehicles and electric vehicles 
        (EVs).

    We are now in the process of organizing another set of workshops, 
the results of which we will use to plan the next set of FOAs (FOA-3) 
sometime in early Spring. FOA-3 will be the last funding under ARRA 
funds, and we will obligate these awards before September 2010.

6. The DNA of ARPA-E

    I firmly believe that if we are to stimulate innovations in 
technology in the technobusiness community, ARPA-E itself must be 
innovative. My vision includes:

          Organization: Flat, nimble, agile, collaborative, 
        internal debates and discussions;
          Excellence in People & Ideas: An all-star team at 
        ARPA-E focusing on highly
    selective and potentially game-changing ideas;
          Integrity: New program creation and proposal review 
        process;
          Openness: Open to best ideas regardless of origin, 
        transparency, public understanding of value of technology for 
        society, respond to community input;
          Speed: Streamline transactions and accelerate science 
        to market;
          Metrics of Success: Quantitative value creation.

    While we have adopted some best practices from DARPA based on 
statutory requirements as well as non-statutory ones, it is worth 
noting that the defense and energy sectors are by nature very 
different. The defense sector is almost a closed economy, and DARPA 
will always have a known customer, the DOD. On the other hand, the DOE 
budget is a fraction of whole energy sector, and ARPA-E is a fraction 
of that. Hence, ARPA-E needs to identify the customers (both private 
and government) and must act as a catalyst for private investment for 
scaling the technologies downstream.



    6.1 ARPA-E Program Organization: Figure 6 shows the program 
organization of the ARPA-E. The goal here is to break down silos. It is 
a matrix organization with two offices_Applied Science and Technology 
Office (or the Technology Push Office) and the Integrated Energy 
Systems Office (or Technology Pull Office). The Program Directors will 
be responsible for either a Technology Push Program or a Technology 
Pull Program, i.e., they will sit on the periphery of this matrix. The 
matrix structure is created in order to foster debate and discussion 
when a FOA for a program is created. For example, if a Program Director 
from the Technology Push Office wants to create a program FOA, he/she 
needs to convince the Program Directors in the Technology Pull Office 
that the device or process will be useful for a system. On the other 
hand, if a Program Director in the Technology Pull Office wants to 
create a program, he/she needs to integrate across disciplines in the 
Technology Push Office. As an example, Figure 6 shows the three FOA-2s 
at the intersection of Technology Pull and Push Offices. I believe the 
tension and constructive debate that such an organization creates is 
healthy, and will lead to much more collaboration and interactions 
between various disciplines.



    Figure 7 shows the coordination of this organization structure 
within the DOE. The Technology Push Office interacts with the Office of 
Science, such that if a discovery is made that could have significant 
impact on energy systems, ARPA-E would be ready to accelerate 
technology development based on the scientific discovery. On the other 
hand if science is missing in a certain energy-related area, ARPA-E 
could inform Office of Science to pursue the underlying science. The 
Technology Pull Office will interact with the Applied Energy Offices to 
identify technology and market gaps. The Technology Pull Office will 
also interact directly with small and large industry, the venture and 
investment communities, as well as government agencies. Based on all 
these input, programs will be created and teams will be funded. These 
teams will then create technologies, which could be adopted via 
leveraging the deployment programs within the Applied Offices, or 
directly by the industry, investment community, or government.



    6.2 ARPA-E Organization Structure: Figure 8 shows the 
organizational structure of ARPA-E. It has three teams that work 
collaboratively_the operations team, the program team, and the 
commercialization/stakeholder engagement team. All personnel report to 
the Director and Deputy Director of Operations.
    Currently, ARPA-E is relatively small in size, and this 
organizational structure will suffice. As the size grows, the structure 
will evolve as well, and I look forward to returning to this committee 
with updates and requests for suggestions as this evolution continues.

    6.3 Program Directors: The selection of program directors is 
critical to the success of ARPA-E. The people I am currently recruiting 
are those that have one foot in science (active researchers) and the 
other foot in technology development and business. These include people 
from academia or national labs who are very active in research, and may 
have started businesses or worked closely with industry, or people from 
the industry who are still involved in science research.

    6.4 ARPA-E Fellows Program_Leveraging Our Strength: There is a 
grassroots movement in the U.S. where the youth have broken barriers 
between science, engineering, business, law, and public policy and have 
come together to work in energy. To tap into this body, we have created 
the ARPA-E Fellows program. This program will bring the best and 
brightest to ARPA-E, and have them serve the Nation for a maximum of 
two years. During this time, they will be an internal think tank to 
step back from our current programs and identify new ways of creating 
technologies that can have gamechanging impact on our and the world's 
energy economy.

7. Role of ARPA-E in the Energy Innovation Pipeline

    ARPA-E will invest in high-risk/high-payoff technologies which 
could be potential game-changers. However, ARPA-E investments will be 
upstream in the whole development process. For these technologies to 
scale in volume/size and also in cost, it is important to understand 
the downstream process as well, and identify mechanisms to create a 
market pull or reduce the risk for further large-scale investments. 
Figure 9 shows a conceptual plot of the DOE portfolio and private 
investment instruments. For ARPA-E to be successful, it is important 
ARPA-E understands, utilizes, and facilitates technology transition in 
this landscape.



    It is also important to note that Figure 9 does not apply to all 
technologies. For centralized technologies, such as carbon capture or 
power plants, one needs to have demonstration projects that show both 
technical and economic performance before the risk is sufficiently 
reduced for large investments. On the other hand, decentralized energy 
technologies (e.g., batteries for vehicles) may follow a different 
route and therefore need not be limited by large demonstration 
projects.



8. Metrics of Success

    Since the authorization of ARPA-E, there have been high 
expectations for its success. It is important for us to manage these 
expectations. In the energy sector, home runs are rarely hit in a 
couple of years. Therefore, it is important for us to define the 
metrics of success as a function of time. Figure 10 shows three stages 
in time. It is relatively easy to show some element of success now, 
which is listed in the figure. It is unlikely that the true impact of a 
technology can be felt in less than 10 years. But it is relatively easy 
to define success 10+ years from now_if an energy technology is truly 
game-changing, then it will have a major impact on the market, on 
people, on jobs, and various other metrics listed in Figure 10. Perhaps 
the most difficult metrics of success are in the next 3-5 years. The 
metrics listed in Figure 10 in this time period are what we can 
demonstrate in the near future. We will keep track of these metrics in 
a quantitative fashion and I will be happy to share them with Congress 
from time to time.

9. Beyond the Recovery Act

    As I noted earlier, we have a plan in place to spend the Recovery 
Act funds allocated to ARPA-E. Once those funds are exhausted, we must 
continue to invest in high-risk, high-reward technologies in order to 
achieve major breakthroughs in energy like those I highlighted at the 
beginning of my testimony. I look forward to working with the Members 
of this Committee and many others going forward in order in order to 
allow Congress' vision for ARPA-E to reach its full potential.
    Again, I thank you for the opportunity to testify before this 
Committee, and I am happy to answer any questions you may have at this 
time.

                      Biography for Arun Majumdar
    Dr. Arun Majumdar became the first Director of the Advanced 
Research Projects Agency-Energy (ARPA-E), the country's only agency 
devoted to high-risk/high-payoff transformational energy research and 
development, in October 2009.
    Previously, Dr. Majumdar was the Associate Laboratory Director for 
Energy and Environment at Lawrence Berkeley National Laboratory and a 
Professor of Mechanical Engineering and Materials Science and 
Engineering at the University of California, Berkeley. Dr. Majumdar is 
a member of the National Academy of Engineering, and has served as an 
advisor to the National Science Foundation, Department of Energy's 
Basic Energy Sciences, and on nanotechnology to the President's Council 
of Advisors on Science and Technology.

    Chairman Gordon. Thank you, and Dr. Vest, you are 
recognized.

 STATEMENTS OF DR. CHUCK VEST, PRESIDENT, NATIONAL ACADEMY OF 
                          ENGINEERING

    Dr. Vest. Mr. Chairman, Members of the Committee, thank you 
very much for the__
    Chairman Gordon. Use your microphone. It will work better. 
There we go.
    Dr. Vest. Technology weakness here. I am very honored and 
pleased to be able to be here to comment briefly on ARPA-E this 
morning. As President of the U.S. National Academy of 
Engineering and particularly as a Member of the Committee so 
ably chaired by Norm Augustine, that wrote the report, Rising 
Above the Gathering Storm.
    As all of you know, this Nation faces an energy crisis of 
immense magnitude. We have to not only meet our challenges of 
energy security but we also have to recognize the enormous 
worldwide markets that are out there if we are to become, here 
in the United States, the technology leaders in new green 
technologies.
    Rising Above the Gathering Storm, as you know, broadly 
addressed what the Nation needs to do to remain technologically 
competitive and to build a strong economy for the future. Our 
committee proposed only one new government entity in that 
report, and that is ARPA-E. And I would like to explain why and 
take a quick read of how ARPA-E is getting started within that 
framework.
    As you know, in the 1950s and '60s, this Nation also faced 
enormous challenges of unprecedented magnitude, mostly having 
to do with our national security. Today we have strong 
security, we have stealth technologies, and we won the Cold 
War; but we also have an IT industry, an information technology 
industry that dominates the way the world works today, 
economically and in business terms. Much of the reason we have 
such things was the creation of DARPA, the Advanced Research 
Projects Agency in the Department of Defense. It had a goal of 
bringing new players to the table with new ideas and a lean, 
flat, aggressive organization to conduct the kind of research 
and development that was not being done within the government, 
that was not being done within the traditional defense 
industries, and look what it brought us.
    The Gathering Storm committee believed that we needed to 
take a similar step relative to the energy challenges that the 
United States faces. We believe that we allowed--certainly I 
can speak from the academic community--after the early '80s, we 
really allowed energy for two decades to become sort of an 
academic backwater. We were not attracting the best and 
brightest young men and women into thinking about energy 
research. Fortunately over the last two or three years, this 
situation is beginning to reverse dramatically, and we hope 
that ARPA-E will enable it to do so even more.
    So the concept that the Rising Above the Gathering Storm 
committee had for ARPA-E is very simple, very straightforward. 
We believe that we need a new organization to conduct research 
and development outside the traditional set of players in both 
government and industry, that its mission would be to conduct 
high-risk but potentially very high-payoff research and 
development associated with energy, that these projects should 
be clearly goal-oriented, and that they would attract new 
players, new players particularly from the academic community 
and from the entrepreneurial community that is so critical to 
the U.S. economy, players who would not be involved with energy 
otherwise. We believe that the organization should be nimble, 
flat, and like the original ARPA would succeed only to the 
extent that it could attract to Washington very bright young 
men and women for relatively brief periods of time in their 
career, not to become consumed by the traditional bureaucracy, 
but to run nimbly and to have the ability to make tough 
decisions of two kinds: one, to provide sustained support to 
high-risk, high-payoff, goal-oriented projects that are going 
well, and secondly, to be able to cut them off if they are not. 
Not to pander to my good colleague here, but the fact is that 
were it not for this energy crisis and this opportunity, Arun 
Majumdar would probably be happily back in Berkeley doing very 
fundamental academic research of the small project nature. But 
first within the UC system and now within the Federal 
Government, he has answered the call, and we need to give him 
the tools to bring other such people to this, to fight this 
great crisis that we face.
    As discussion goes on, I will try to make some other 
comments about where we are, but let me just say simply that 
while the National Academies has not formally assessed what is 
happening to this point in ARPA-E, simply looking over the 
nature of the projects funded in the first round, the nature of 
the call for those projects, and the kind of people who are 
coming to the table to bring their talent and toolkits to the 
Nation's energy challenge, I think they are off to a great 
start. The key is enabling ARPA-E to stick to its mission, to 
distinguish itself from the other elements, more traditional 
elements of energy R&D, and to build the great ties into our 
industries, particularly our entrepreneurial sector that are 
needed.
    Thank you very much for this opportunity.
    [The prepared statement of Dr. Vest follows:]
                    Prepared Statement of Chuck Vest
    I am Charles Vest, President of the National Academy of Engineering 
and former president of MIT. The National Academy of Engineering is an 
elected body of 2,000 of the nation's most accomplished engineers from 
industry, academia, and government. We are charged by the Congress to 
serve as the key external advisors to the Federal Government on matters 
of engineering and technology. Together with our sister organizations, 
the National Academy of Sciences and the Institute of Medicine, we 
comprise the National Academies.
    Thank you for the invitation to reflect on the early stages of the 
establishment of the Advanced Research Projects Agency-Energy (ARPA-E), 
the agency's progress to date, and its promise for filling an important 
gap in the nation's array of tools for energy research, development and 
innovation. This morning I would like to recap some of the key ideas 
motivating the creation of ARPA-E and note how those ideas were 
reflected in the 2007 America COMPETES Act and now, in the Department 
of Energy's implementation of ARPA-E. Finally, I would like to offer 
some thoughts on how the intended features of ARPA-E might be preserved 
and nurtured as this new agency continues to mature.

Conceptual Foundations of ARPA-E

    In 2006 I was privileged to serve on a National Academies committee 
chaired by Norm Augustine that produced the report, Rising Above the 
Gathering Storm: Energizing and Employing America for a Brighter 
Economic Future. That report included many recommendations for 
rebuilding the nation's ability to utilize technology innovation as an 
engine for economic growth and international competitiveness, but it 
included only one recommendation to create a new government 
organization, ARPA-E, similar in design and intent to the very 
longstanding Defense Advanced Research Projects Agency (DARPA).
    The Gathering Storm committee found a serious lack of either 
government or industry mechanisms for exploring long-term, high-risk, 
but potentially very high payoff energy research, development, and 
innovation directed specifically toward deploying new energy 
technologies. The committee concluded that creation of an ARPA-E was 
important to develop a base of ``transformational research that could 
lead to new ways of fueling the Nation and its economy.'' ARPA-E's 
mission would, in the committee's view, complement but not replace 
other mechanisms in the nation's energy R&D portfolio.
    In particular, the Gathering Storm committee believed that a key 
reason to establish ARPA-E in the Department of Energy (DOE) was to 
attract and enable new elements of the scientific and engineering 
research and development communities from industry and academia to 
conduct high-risk, high-payoff, goal-oriented research that would not 
be carried out otherwise. The committee reasoned that ARPA-E should be 
a new entity that would support work outside the traditional venues 
such as the DOE laboratories. It would attract new players in 
universities and private industry, especially entrepreneurial 
enterprises. Key to its success would be how well the agency manages to 
gather bright project managers to conceive, stimulate, and fund non-
traditional, potentially high-payoff, goal-oriented R&D. The general 
framework provided by DARPA could help provide a time-proven point of 
departure for rapidly designing and deploying a lean, assertive 
organization with a high probability of being very important to the 
nation's energy future.
    As an educator and a long time observer of the science and 
engineering communities, I note that, on the whole, in recent decades 
few of our most creative minds were attracted to energy research. We in 
universities, after the early 1980s, allowed energy to slip into 
academic backwaters. Neither our energy companies, nor our national 
laboratories, nor the entrepreneurial community applied the 
intellectual and financial attention the area deserved. With notable 
exceptions, we grew complacent while a monumental national and 
international challenge developed.
    In the last three or four years, of course, the larger scientific 
and engineering communities have awakened to challenge of our looming 
energy crisis. I note that the study, America's Energy Future: 
Technology and Transformation, initiated in 2007 by the National 
Academy of Engineering and the National Academy of Sciences, and 
released last year, identified many of the key energy technology 
pathways essential to transforming the nation's patterns of energy 
supply and demand, including improving energy efficiency in buildings, 
transportation and industry, coal-fired electric power generation, 
nuclear power, renewable energy (principally in electric power 
generation), oil and natural gas, alternative liquid transportation 
fuels derived from coal and biomass, and modernization of the nation's 
electric power transmission and distribution grid.
    The America's Energy Future study also characterized the challenges 
that must be addressed in developing those technology pathways and 
concluded that with a sustained national commitment, the United States 
could obtain substantial energy-efficiency improvements, new sources of 
energy, and reductions in greenhouse gas emissions through the 
accelerated deployment of existing and emerging technologies. However, 
mobilization of the public and private sectors, supported by sustained 
long-term policies and investments, will be required for the decades-
long effort to develop, demonstrate, and deploy these technologies. 
Actions taken between now and 2020 to develop and demonstrate several 
key technologies will also largely determine our options for many 
decades to come. Further, the study committee found that it is 
imperative that key technology development and demonstration activities 
be started very soon, even though some will be expensive and not all 
will be successful or will be overtaken by better technologies. In 
order to in develop these pathways, however, we must take concerted 
action and make the considerable investments necessary to enlist our 
most talented researchers and innovators. I believe that ARPA-E could 
play a considerable role in accelerating some of these transformations.
    The Gathering Storm committee conceived of ARPA-E as a critically 
important organization reporting to the DOE Under Secretary for Science 
with four principal objectives:

        1.  Bring a freshness, excitement, and sense of mission to 
        energy research that will attract many of our best and 
        brightest minds_those of experienced scientists and engineers, 
        and, especially, those of students, young researchers, and 
        entrepreneurs.
        2.  Focus on creative, out-of-the-box, potentially 
        transformational research that industry cannot or will not 
        support.
        3.  Utilize an ARPA-like organization that is flat, nimble, and 
        sparse, yet capable of setting goals and making decisions that 
        will allow it to sustain for long periods of time those 
        projects whose promise is real, and to cull out programs that 
        do not prove to be productive or as promising as anticipated.
        4.  Create a new tool to bridge the troubling gaps between 
        basic energy research, development, and industrial innovation. 
        It can serve as a model for improving technology transfer in 
        other areas that are essential to our future prosperity.

    The Gathering Storm committee did not believe it should specify the 
organization and mission of ARPA-E in great detail. We believed that 
should be worked out by the Secretary of Energy and the Under Secretary 
for Science in rapid, but intense, consultation with experts from the 
scientific, engineering, and entrepreneurial communities.
    In the 1950s, defense visionaries realized that the military had to 
reach out to new communities for the innovative technologies to counter 
the rapidly changing threats of the post Sputnik era. They established 
the original ARPA in the Department of Defense. It was enormously 
successful and paid great dividends to both our military and civil 
societies. We believed that ARPA provides the right framework on which 
to design ARPA-E. It is a proven model.

Capitalizing on the Vision

    The 2007 America COMPETES Act incorporated the Academies 
recommendation for creation of ARPA-E and authorized its establishment. 
In 2009 the American Recovery and Reinvestment Act (ARRA) provided $400 
million for ARPA-E, the formation of which President Obama announced in 
a speech at the Annual Meeting of the National Academy of Sciences on 
April 27, 2009.
    Last week, Secretary Chu reflected on these efforts before the 
Senate Energy and Natural Resources Committee. In particular, he 
indicated that

        ``changing the way we do business at the DOE to improve 
        customer responsiveness and the quality of our selection of 
        competitive grants. As an example, in order to identify the 
        best possible reviewers for the first round of ARPA-E 
        proposals, I wrote a letter to many of the Presidents of our 
        research universities to ask for the names of their best 
        scientists and engineers. We then called upon those people to 
        help review the proposals, arguing that they should help us as 
        part of their patriotic duty. The technical community responded 
        heroically and we were able to review 3,700 applications, 
        conducting over 4.2 person years of work, in a few short weeks. 
        That fact that we could only fund 1 percent of the applications 
        speaks volumes that additional research support would be money 
        well spent.''

    Secretary Chu's characterization of the early stages of ARPA-E is 
certainly consistent with the Academies conceptual ideas reflected in 
the Gathering Storm report.

Meeting the Challenges and Preserving the Vision

    The design of the initial program solicitation by ARPA-E is quite 
consistent with the kind of program envisioned in the Gathering Storm 
report. Although the Academies has not formally evaluated them, the 
first round of awards seems consistent with fundamental objective of 
exploring innovative and potentially transformative technologies that 
are unlikely to find traditional support. For example, a liquid metal 
battery that show promise for providing grid-scale electrical energy 
storage, a new wind turbine that can achieve higher efficiencies with a 
smaller size, and a new approach to carbon capture inspired by a human 
body enzyme are all examples from this first round of awards.
    Looking forward, it is essential that ARPA-E remain faithful to the 
original goals of pursuing high-risk, high-payoff opportunities, 
staying connected and current with the vibrant community capable of 
carrying out ARPA-E activities, and re-tuning the portfolio of 
activities continuously to quickly initiate and sustain new activities 
and to rapidly phase out those that show less promise just as quickly. 
Otherwise the ARPA-E mission will merge into the balance of the energy 
R&D mission, re-introducing the gap ARPA-E was designed to fill.
    Critics of the original conceptual ARPA-E design raised a variety 
of issues, including that an ARPA-E might not address the actual 
barriers to new energy technology; that it is based on a research 
agency model that does not apply well to energy; that different 
proponents of ARPA-E describe different missions for it; that it would 
compete with, or get swallowed up by existing energy research programs; 
and that it is unclear how it would be distinct from other energy 
research programs. At this point in the agency's evolution, I would 
characterize these criticisms as potential risks, but ones that will be 
avoided if the new agency keeps on its current path, true to its 
mission, and attracts talented managers.
    Perhaps a more recent challenge, not unrelated to the challenge of 
preservation of the ARPA-E's distinct mission, is coordination of the 
agency's efforts with other DOE approaches for building strong channels 
of innovation, such as the Energy Frontier Research Centers, which are 
multi-year, multi-investigator scientific collaborations focused on 
overcoming known hurdles in basic science and, Energy Innovation Hubs, 
which will establish larger, highly integrated teams working to solve 
identified high-priority technology challenges. I believe that with 
careful management and clear goals, these elements can form a 
productive and efficient ecosystem for energy innovation and technology 
deployment.
    Energy is absolutely fundamental to a modern economy, but the 
historical patterns of energy supply and utilization in America are on 
the verge of changing substantially. Exactly how our energy use should 
or will change, and at what rate, is a very difficult and complex 
challenges for this generation. For over three decades America's 
capacity for technology innovation has been a cornerstone of our 
national strategies for dealing with both current and long-term energy 
policy issues, but the new sense of urgency has raised the stakes and 
the scale of the challenge. The early stages of development of ARPA-E 
show promise as a key component in nation's energy R&D portfolio that 
has been missing for many decades.
    Thank you again for the opportunity to share my thoughts with you 
today and I look forward to addressing any questions the Committee 
might have.

                        Biography for Chuck Vest
    Charles M. Vest is president of the U.S. National Academy of 
Engineering and president emeritus of the Massachusetts Institute of 
Technology. A professor of mechanical engineering at MIT and formerly 
at the University of Michigan, he served on the U.S. President's 
Council of Advisors on Science and Technology from 1994-2008, and 
chaired the President's Committee on the Redesign of the Space Station 
and the Secretary of Energy's Task Force on the Future of Science at 
DOE. He was a member of the Commission on the Intelligence Capabilities 
of the United States Regarding Weapons of Mass Destruction and the 
Secretary of Education's Commission on the Future of Higher Education. 
He was vice chair of the U.S. Council on Competitiveness for seven 
years, has served on the boards of DuPont and IBM, and was awarded the 
2006 National Medal of Technology.

    Chairman Gordon. Thank you, Dr. Vest. Dr. Atti, you are 
recognized.

  STATEMENTS OF DR. ANTHONY ATTI, PRESIDENT AND CEO, PHONONIC 
                            DEVICES

    Dr. Atti. Good morning Chairman Gordon, Ranking Member 
Hall, and Members of the Committee, thank you for inviting me 
to testify on an urgent matter of national importance, 
commercializing clean energy technologies. My name is Anthony 
Atti, and I am the co-founder and CEO of Phononic Devices and 
am deeply passionate about this issue. Originally from Buffalo, 
New York, I have had the uniquely American opportunity to work 
in clean energy across the country as a scientist and 
entrepreneur and am continually inspired by our entrepreneurial 
spirit, now very much embodied, I believe, in ARPA-E. I have an 
undergraduate degree in biochemistry from Ithaca College and 
earned my Ph.D. in Organic Chemistry from the University of 
Southern California where I researched hydrogen and methanol 
fuel cells in partnership with NASA's Jet Propulsion 
Laboratory. During that time our research was supported by 
DARPA with an audacious goal: extend battery run time while 
significantly reducing their weight by more than 30 percent, 
thus benefiting the war fighter. Here I saw the positive impact 
of a transformational funding approach coupled with commercial 
emphasis, an important template for ARPA-E. I have now spent 
almost a decade building early-stage clean energy companies. 
The rewards are great but so too are the risks.
    First and foremost is technology readiness. Few investors 
can quantify this variable and often misjudge time to market. 
Second is market risk; if you build it, the customer does not 
always come. And last is operating risk. Start-up companies 
require staffing of key management and technical positions. 
Collectively, a chicken-and-egg scenario confronts 
entrepreneurs as they are told by investors, ``come see me when 
you have something,'' only to think, ``but isn't that what your 
money is for?''
    In today's energy landscape we generate most electricity by 
making heat, whether it is through burning coal or splitting 
atoms. That heat makes steam which turns a turbine and makes 
electricity. A somewhat antiquated process, most of the heat is 
wasted, a staggering 50-60 percent according to Department of 
Energy estimates. Consequently, and not without some irony, 
there is a more than $7 billion industry for refrigeration 
technologies that deal with the damaging effects of this heat.
    Phononic Devices was founded to recapture this waste heat 
and convert it into usable electric power, or depending on the 
source of the heat, provide refrigeration and cooling. This 
concept, called thermoelectric, uses advanced semiconductor 
materials, similar to those found in microprocessors and solar 
cells, to manage heat by manipulating the direction of 
electrons at the nanoscale. Resembling computer chips, 
thermoelectric devices are quiet, have no moving parts or 
harmful emissions, and our design concepts are projected to 
dramatically improve thermoelectric efficiency from less than 
10 percent today to more than 30 percent. This is expected to 
result in a dollar-per-watt energy savings of 75 percent for 
power generation and 60 percent for cooling, respectively.
    Innumerable market opportunities for power and cooling 
exist. Steel and aluminum manufacturers accustomed to venting 
heat through smoke stacks now view this as a source of power 
while a new generation of refrigerators and air conditioners 
can operate quietly and without harmful chemicals.
    While our plan is sound and the rewards truly 
transformational, the challenge ahead is formidable. Phononic 
Devices' technology is still early in development, market 
penetration features entrenched multi-billion dollar 
competitors, and we are literally building the company from the 
ground up out of laboratories at the University of Oklahoma and 
North Carolina State University. Very few venture capital 
investors are willing to take on this level of risk, and this 
economy only makes that worse. However, in the process of 
responding to ARPA-E's program we have made great progress with 
investors. We signed an exclusive agreement with the University 
of Oklahoma accessing valuable intellectual property, partnered 
with best-in-class researchers at the University of California 
Santa Cruz and California Institute of Technology, and built a 
technical and business database for investors to review.
    Having now successfully concluded the reward process, 
Phononic Devices has raised more than $2 million in venture 
capital financing from clean energy leaders Venrock and Oak 
Investment Partners. We have aggressive growth plans. Having 
now added four full-time engineers in just six months, our 
business plan projects the need for more than 250 employees 
over the next three years. Already, we have received inquiries 
from Fortune 500 defense, industrial and electronics customers 
with a pressing need for innovative cooling solutions or power 
generation options to mitigate their electricity costs.
    Our company has a very simple but important motto, ``do 
good science, quickly,'' and with ARPA-E it is exciting to be a 
part of this important initiative benefiting our country at 
such a critical time in her history.
    Thank you again for your time and I look forward to 
answering your questions.
    [The prepared statement of Dr. Atti follows:]
                   Prepared Statement of Anthony Atti

Introduction and Background

    Good morning Chairman Gordon, Ranking Member Hall, and Members of 
the Committee, thank you for inviting me to testify on an urgent matter 
of national importance; commercialization of clean energy technologies. 
My name is Anthony Atti and I'm the Co-Founder and CEO of Phononic 
Devices and am deeply passionate about this issue. Originally from 
Buffalo, NY, I've had the uniquely American opportunity to work in 
clean energy across the country as a scientist and entrepreneur and am 
continually inspired by our entrepreneurial spirit, now very much 
embodied I believe in ARPA-E. I have an undergraduate degree in 
Biochemistry from Ithaca College and earned my Ph.D. in Organic 
Chemistry from the University of Southern California where I researched 
hydrogen and methanol fuel cells in partnership with NASA's Jet 
Propulsion Laboratory. During that time our research was supported by 
DARPA with an audacious goal . . . extend battery run time while 
significantly reducing their weight by more than 30% thus benefiting 
the war fighter. Here I saw the positive impact of a transformational 
funding approach coupled with commercial emphasis; an important 
template for ARPA-E. I've now spent almost a decade building early 
stage clean energy companies; the rewards are great but so too are the 
risks. First and foremost is technology readiness; few investors can 
quantify this variable and often misjudge time to market. Second is 
market risk; if you build it . . . the customer does not always come. 
And last is operating risk; start-up companies require staffing of key 
management and technical positions. Collectively, a chicken and egg 
scenario confronts entrepreneurs as they're told by investors; ``come 
see me when you have something'' . . . only to think ``but isn't that 
what your money is for?''

Phononic Devices

    In today's energy landscape we generate most electricity by making 
heat, whether it's through burning coal or splitting atoms. That heat 
makes steam which turns a turbine and makes electricity. A somewhat 
antiquated process, most of the heat is wasted . . . a staggering 50-
60% according to Department of Energy estimates. Consequently, and not 
without some irony, there's a more than $7B industry for technologies 
that deal with the damaging effects of this heat. Phononic Devices was 
founded to recapture this waste heat and convert it into usable 
electric power, or depending on the source of the heat, provide 
refrigeration and cooling. This `thermoelectric' concept uses advanced 
semiconductor materials, similar to those found in microprocessors and 
solar cells, to manage heat by manipulating the direction of electrons 
at the nanoscale. Resembling computer chips, thermoelectric devices are 
quiet, have no moving parts or harmful emissions, and our design 
concepts are projected to dramatically improve thermoelectric 
efficiency from less than 10% today to more than 30%. This is expected 
to result in a $/W energy savings of 75% for power generation and 60% 
for cooling, respectively. Innumerable market opportunities for power 
and cooling exist . . . steel and aluminum manufacturers accustomed to 
venting heat through smoke stacks now view this as a source of power 
while a new generation of refrigerators and air conditioners can 
operate quietly and without harmful chemicals.

ARPA Impact

    While our plan is sound and the rewards truly transformational, the 
challenge ahead is formidable; Phononic Devices' technology is still 
early in development, market penetration features entrenched multi-
billion dollar competitors, and we are literally building the company 
from the ground up out of laboratories at the University of Oklahoma 
and North Carolina State University. Very few venture capital investors 
are willing to take on this level of risk . . . and this economy only 
makes it worse. However, in the process of responding to ARPA-E's 
program we have made great progress with investors: we signed an 
exclusive agreement with the University of Oklahoma accessing valuable 
intellectual property; partnered with best-in-class researchers at the 
University of California Santa Cruz and California Institute of 
Technology; and built a technical and business database for investors 
to review. Having now successfully concluded the reward process, 
Phononic Devices has raised more than $2M in venture capital financing 
from clean energy leaders Venrock and Oak Investment Partners. We have 
aggressive growth plans, having now added four full time engineers in 
just six months our business plan projects the need for more than 250 
employees over the next three years. Already, we have received 
inquiries from Fortune 500 defense, industrial and electronics 
customers with a pressing need for innovative cooling solutions, or 
power generation options to mitigate their electricity costs. Our 
company has a very simple but important motto . . . ``Do Good Science . 
. . Quickly'' and with ARPA-E is excited to be a part of this important 
initiative benefiting our country at such a critical time in her 
history. Thank you again for your time and I look forward to answering 
your questions.

WRITTEN TESTIMONY

    Company Background: Phononic Devices is commercializing advanced 
thermoelectric semiconductor materials and devices designed to convert 
waste heat from industrial and commercial processes into usable 
electric power, and conversely, highly efficient cooling and 
refrigeration. Despite the national security risks and pollution 
concerns associated with fossil fuel consumption, the Department of 
Energy estimates that 50-60% of all the energy consumed in the US per 
year is wasted as heat; recovery of which is an intense area of 
interest. Phononic Devices' unique approach and design concepts, 
developed in an exclusive licensing partnership with the University of 
Oklahoma, are projected to dramatically improve thermal to electric 
energy conversion efficiency by combining key thermoelectric 
properties: superior thermopower with thermally insulating thin film 
materials. With diverse energy harvesting applications that include 
powering wireless devices, hybridization with solar thermal 
concentrators and combustion engines, as well as the ability to 
displace compressors for residential and HVAC cooling, Phononic 
Devices' approach makes possible a more than $125B market opportunity.



    Nanostructured Semiconductor Materials: despite a clean and 
reliable solid state platform and high value-add uses that include 
opto-electronic cooling and custom refrigeration, widespread 
thermoelectric commercial adoption has been hindered by low ZT 1; an 
important gauge of Carnot Power Conversion Efficiency of only 10%. Too 
low to compete with or displace incumbent power generation and 
refrigeration technologies, traditional thermoelectric design concepts 
have focused mainly on reducing lattice thermal conductivity with 
limited success. Emphases on material nanostructures that specifically 
optimize thermopower_core to Phononic Devices' approach_present a 
tremendous opportunity.



    Transformational Impact: High Efficiency Thermoelectric Devices: 
Phononic Devices is uniquely positioned to accelerate market 
penetration through direct sales, OEM licensing, and joint venture 
partnerships with industry and manufacturing leaders. Phononic Devices 
recognizes that to capture an existing share of the $300M 
thermoelectric market, but more importantly access a more than $125B 
cooling and energy harvesting opportunity, its product platform must 
radically change the fundamentals of thermal to electric energy 
conversion. Performance features far superior to existing competitors 
and exceeding demanding customer requirements are enabled by Phononic 
Devices' thin film and high efficiency thermoelectric approach. Device 
features will follow a modular and scalable design approach; flexible 
range of operating conditions; highly efficient `Z'T Carnot Power 
Conversion and COP cooling; and a thin-film manufacturing platform 
readily scaled and transitioned using industry-standard high volume 
throughput manufacturing techniques. Phononic Devices is led by an 
experienced entrepreneurial team, best-in-class technical 
collaborators, and backing from top tier Silicon Valley Cleantech 
investors; the company was recently recognized by the newly created 
ARPA-E as a leader in the emerging clean energy marketplace.

MARKET OPPORTUNITY

    Cooling & Refrigeration: thermoelectric cooling is popular for 
luxury and recreational refrigerators and also widely used to cool and 
control temperature in opto-electronics and telecommunications 
equipment. Concerning the former, as customers increasingly incorporate 
aesthetics into their utility purchases, a quiet and more importantly 
compact option provides greater flexibility and functionality beyond 
the kitchen. In the latter case of opto-electronics and telecom, 
cooling and temperature stabilization of laser diodes, superluminescent 
laser diodes, and diode pumped solid state lasers is of paramount 
importance. In many cases thermoelectric modules are considered a 
standard component of laser devices as temperature control is a 
critical element needed to maintain laser lifetime, prevent premature 
failure, and enable advantageous laser emission parameters.



    Energy Harvesting: energy harvesting is the process whereby ambient 
heat is captured, converted into electricity and used to drive 
electrical and combined devices. The use of thermoelectrics, in which a 
temperature difference creates an electric potential, can convert a 
portion of this waste heat from thermal sources into electricity 
thereby improving the overall efficiency of an operating system. Widely 
used in space propulsion for decades, recently thermoelectric 
generators have been targeted by military and wireless customers for 
sensors and remote power where battery life and access to back-up power 
is problematic. Hybridization with Concentrating Solar and 
Concentrating PV are also of great interest as waste heat from the 
sun's direct rays can be captured to augment the collective power and 
efficiency of the installation.



                       Biography for Anthony Atti
    An experienced clean energy investor and entrepreneur, Dr. Atti has 
demonstrated expertise and leadership in venture financing, business 
development, start-up growth and operations, and negotiating joint 
venture relationships. As a former Director at MHI Energy Partners, a 
seed and early stage energy private equity fund, Dr. Atti managed deal 
flow networks, conducted due diligence, structured venture financing 
transactions, and provided direct portfolio company leadership as an 
Entrepreneur-in-Residence. Dr. Atti earned his Ph.D. in Organic 
Chemistry from the Loker Hydrocarbon Research Institute at the 
University of Southern California under the direction of Dr. G.K. Surya 
Prakash and Dr. George A. Olah; the former a world-renowned fluorine 
chemist and the latter a winner of the 1994 Nobel Prize in Chemistry. 
As a PostDoctoral member of the Electrochemical Technologies team, he 
conducted research on hydrogen and methanol fuel cells at the NASA-Jet 
Propulsion Laboratory in Pasadena, CA. Dr. Atti also holds an MBA from 
New York University and a Bachelor of Arts in Biochemistry from Ithaca 
College.

    Chairman Gordon. Thank you, Dr. Atti. Mr. Denniston, you 
are recognized.

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

    Mr. Denniston. Good morning Chairman Gordon, Ranking Member 
Hall, Members of the Committee. I am grateful for the chance to 
support your vital work in helping America compete and the race 
for new, clean energy technologies.
    The venture capital community is keenly interested in the 
green tech sector. In recent years, venture capitalists have 
backed many breakthrough projects in this field, some of which 
are already helping to transform the global energy industries. 
In fact, it would be hard for me to overstate the opportunity 
we see unfolding in the energy and transportation sectors, 
collectively, the world's largest at $6 trillion annually.
    Major recent technical advances and the early benefits of 
economies of scale have significantly narrowed the price gap 
with fossil fuels, and this process is only bound to speed up 
with further innovation.
    What all this means is that we are now in the midst of a 
new industrial revolution holding the promise of vast numbers 
of new jobs from blue collar, builders, factory and maintenance 
workers, to white collar engineers, salespeople and managers. 
The question is, where will these jobs be based? Unfortunately, 
the United States has already fallen behind in the global green 
tech competition. Here is an alarming example. Today the United 
States is home to only two of the world's top 10 solar 
companies, two of the world's top 10 wind turbine 
manufacturers, and only one of the world's top 10 advanced 
battery makers.
    Summing up, we have a paltry 17 percent market share of the 
leading companies in these critically important growth 
industries, and we face a particularly strong economic threat 
from China where the central government has decided that 
renewable energy is mission critical to their future. Chinese 
officials are making huge investments in research and 
development while their state-owned banks are now bankrolling 
green exports, a brilliant means of deploying their foreign 
exchange reserves as a competitive weapon at a time when the 
rest of the world is short of cash.
    The results have been staggering. For example, within just 
a few years, China has built its solar industry basically from 
scratch to become the largest in the world. Within three years, 
it increased its market share of the global solar panel market 
from two percent to nearly 50 percent. During that same period, 
U.S. market share went in exactly the opposite direction, from 
43 percent to 16 percent.
    The global competition is daunting, but it is unfortunately 
far from our only concern. Time is running out for America, 
along with the rest of the world, to combat the risks of 
climate change. We are morally obligated to invent a safer 
world for our children and their children.
    Now, ARPA-E's great promise is to deliver the clean energy 
breakthroughs that are so vital to our economy, our standard of 
living and the environment. It can do this mainly by addressing 
the dangerous deficiency of renewable energy projects at U.S. 
scientific institutions. U.S. renewables researchers lack 
neither the technical talent nor the passion, but they 
unfortunately do lack the funding. And what this means, to use 
a baseball metaphor, is that America simply isn't getting 
enough at-bats, even as our global competitors are making the 
necessary investments to continue hitting home runs.
    ARPA-E promises to do for U.S. green tech what its 
successful predecessor, DARPA, has done not only for our 
military but also for the private sector, including the 
creation of the internet, global positioning satellite, 
robotics, lasers and so many others.
    I have been pleased to watch ARPA-E's fast, effective work 
in selecting its first 37 grantees. As I review the list of 
these high-risk, high-reward projects, I am heartened to see 
how many aspire to tackle today's most urgent energy 
challenges. Indeed, ARPA-E appears to be on the road to 
duplicating DARPA's success except that, unlike DARPA, ARPA-E's 
funding and status are uncertain. That is really why I am here 
today, to urge you to extend the Agency's charter and expand 
its resources. ARPA-E should not be treated as a short-term 
experiment but rather as a pillar of U.S. energy policy. Only 
then can America show the rest of the world once again how to 
lead an industrial revolution.
    [The prepared statement of Mr. Denniston follows:]
                  Prepared Statement of John Denniston

Introduction

    Good morning, Chairman Gordon and Members of the Committee. My name 
is John Denniston, and I'm a partner at Kleiner Perkins Caufield & 
Byers, based in California's Silicon Valley. Founded in 1972, Kleiner 
Perkins is one of America's oldest and most successful venture capital 
firms.
    Our mission at Kleiner Perkins is to recognize emerging technology 
and market trends. We've funded more than 575 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, Millennium Pharmaceuticals, Netscape, Sun 
Microsystems, Symantec and VeriSign. Our portfolio companies 
collectively employ more than 325,000 workers, and generate $125 
billion in annual revenue. My testimony today reflects my own views.
    I'm honored to be here today and grateful for the chance to support 
your vital work in helping America compete in the global race for new 
energy technologies. The creation of ARPA-E_the Advanced Research 
Projects Agency-Energy_marks major progress in this increasingly fierce 
competition. As you know, ARPA-E was modeled after DARPA in the 
Department of Defense, which has brought us not only cutting-edge 
military technology, but also life-changing commercial advances through 
the Internet, global positioning satellites, robotics, and lasers. 
ARPA-E's great promise is to deliver critically important breakthroughs 
in clean energy, which will benefit our economy, our standard of 
living, and our environment.

The Second Industrial Revolution

    The world today is in the midst of a major economic transition that 
in many ways resembles an earlier historic turning point. In the 
Industrial Revolution, humans traded the power of horses and wood for 
mass-produced coal and oil, thereby unleashing a cascade of new 
technologies, from mass-manufacturing methods to railroads, 
automobiles, electricity, and telephones. These new means of extracting 
and harnessing fossil fuels enabled virtually all of the other 
innovations of that era, and thus catalyzed what was arguably 
civilization's most profound transformation up to that time, from an 
agrarian society to an industrial one. In that sense, the Industrial 
Revolution might more accurately be thought of as the world's first 
Energy Revolution.
    Today, history is repeating itself, as the triple threat of climate 
change, global competition and energy insecurity chases America into a 
new industrial transformation_in this case, with clean, green 
technologies replacing the dirty brown ones. It's a time, once again, 
of creative destruction: an idea popularized by the economist Joseph 
Schumpeter, which holds that longterm economic growth is achieved 
through continual innovation by entrepreneurs, who constantly replace 
incumbent companies and industries with new and better ones.

The Innovation Imperative

    Today, as in the Industrial Revolution, our ability to discover new 
answers for old questions will determine our continued prosperity. In 
other words, technology innovation continues to be the secret sauce of 
America's robust economy.
    Consider: in recent decades, our high-tech industries have 
accounted for a relatively modest portion of our overall economy_less 
than 10 percent of gross domestic product. Yet these same industries 
have continuously generated fully half of all economic growth and 
three-fourths of productivity gains. And of course, it is GDP and 
productivity growth that create dynamic job opportunities and rising 
standards of living.
    Today, throughout the world, we're seeing a burst of inventive and 
entrepreneurial activity in ``greentech''_technologies aimed at helping 
the environment as well as the economy. Innovators have recently made 
enormous technical advances across a range of disciplines_electronics, 
physics, chemistry, biology, and new materials_which have narrowed the 
price gap with fossil fuels. And this process is only bound to speed 
up, as the costs of renewable energy continue to decline with further 
innovation and economies of scale.
    A key distinction between renewable and fossil energy is that the 
renewable fuels themselves_sunlight, wind, ocean waves, and the earth's 
heat_are free. Unlike coal or oil, these free, clean, sources of power 
are both abundant and invulnerable to both the disruptive price 
volatility of the commodity markets and the prospect of increasing 
environmental compliance costs. All they require of us is that we 
figure out cost-effective ways to harness them. And we're making swift 
progress in this regard.
    Solar power offers an excellent example of the ability of 
innovators and the power of economies of scale to drive down cost: As 
entrepreneurs have sprinted into this sector, solar module prices 
declined nearly 50 percent last year alone. Experts predict further 
significant price declines going forward. In contrast, crude oil prices 
increased 100 percent last year, and are up by roughly 300 percent over 
the past decade.

The Risk of Inaction

    One of our great blessings as Americans is that we're a nation of 
innovators. This explains why we still lead the world in the 
information technology and life science industries. What worries me, 
however, is evidence that we are rapidly falling behind when it comes 
to clean energy.
    In the last Industrial Revolution, America faced very little 
competition outside of England, and the word ``globalization'' wasn't 
even in our vocabulary. Today, from Ireland to India, dozens of nations 
have discovered the recipe for our secret sauce, and are racing to 
innovate their way to new jobs and prosperity. Some are already 
enjoying extraordinary success_gains, I'm sorry to say, that have come 
at our expense.
    We face a particularly strong economic threat from China, where the 
central government has determined that renewable energy is mission-
critical to its future, and has aggressively rolled out ambitious 
policies and huge investments to support it. Chinese officials have 
granted subsidies, free land, and cash for research and development. 
The nation's state-owned banks are also bankrolling green exports, a 
brilliant means of deploying its foreign exchange reserves as a 
competitive weapon at a time when the rest of the world is short of 
cash.
    The results of these policies have been staggering. Within just a 
few years, China has become a global leader in the solar, wind, and 
advanced batteries industries. In the solar industry, it has built an 
industry basically from scratch to become the world's largest 
manufacturer. Three years ago, China held merely two percent of the 
solar panel market; by the fourth quarter of 2009, that share had grown 
to nearly 50 percent. During the same period, U.S. market share in this 
sector declined from 43 percent to 16 percent.
    We can't sit back and watch these numbers continue to decline. The 
large and growing global solar photovoltaic market now exceeds $40 
billion annually, already surpassing the size of the global internet 
search market.
    And let me remind you that solar power is only one sector in what 
is by far the world's largest and arguably most essential set of 
industries: the $6 trillion energy and transportation markets. These 
markets are on the cusp of a dramatic transformation, which translates 
to the kind of economic opportunity seen only every several generations 
or so. We simply cannot afford to ignore them.

The Climate Crisis

    As if globalization weren't a daunting enough threat, it's not by 
any means all we have to worry about. We simply can't forget, as much 
as it may be human nature to try, the mounting risks of climate change. 
Some of the world's leading scientists have determined that 350 parts 
per million is the safe upper limit for carbon dioxide in our 
atmosphere. We passed that benchmark back in 1988, and are rapidly 
approaching 400, a level that threatens dangerous weather, serious 
floods, disruptions in food supply, and increased epidemics. Put 
simply, climate change has become our most urgent innovation 
imperative: we're morally obliged to invent a safer world for our 
children and their children.

The Promise of ARPA-E

    ARPA-E is a bold and brilliant effort to support innovation in the 
greentech industries that hold such promise both for our standard of 
living and the future of our planet. Once again, I commend this 
Committee for its pioneering achievement in creating this new agency. 
I'll now address the four questions that accompanied my invitation to 
speak here today.

Venture Capitalists, Greentech, and ARPA-E

    You've asked me to describe the role of venture capital in energy 
technology development and give my thoughts about how ARPA-E might 
complement that role.
    Venture capital's role in the energy markets compares with the one 
it has played for decades in the information technology and life 
sciences industries. Typically, venture capital firms seek to invest in 
companies that have moved beyond their earliest, highest-risk technical 
phase. The private sector as a whole largely avoids basic research, and 
venture capitalists are no different in this regard.
    In contrast, the Federal Government has historically and 
successfully funded very early-stage research, and thus played an 
instrumental role in the innovation chain in a host of industries, 
including information technology, the life sciences, and national 
defense. In fact, through some remarkably successful partnerships with 
research universities and the private sector, which licenses 
commercialization rights for products that have demonstrated value, the 
government has provided the vast majority of basic research funding in 
this country. These public-private partnerships have saved millions of 
lives and generated hundreds of billions of dollars in revenue in the 
life sciences, while creating massive new information technology 
industries.
    The great opportunity with ARPA-E is that this new agency can now 
play a similar role in U.S. energy technology development by providing 
that desperately needed, early-stage funding for breakthrough 
renewable-energy technologies. ARPA-E funding can also help address our 
competitive and environmental challenges by enabling companies to speed 
up production of breakthrough technologies and pursue new ones.
    ARPA-E can perform this role most effectively, complementing the 
role of investors and scientists, if it is structured as a long-term 
initiative, with an expanded budget and clearly defined focus on 
renewable energy. In these ways it would truly mirror its tremendously 
successful predecessor, DARPA.
    DARPA pioneered what's known as translational research, in which 
the research sponsors first identify the most crucial market 
requirements, and only after doing so, provide funding for the most 
worthy and promising technologies. DARPA achieved its phenomenal 
success not by seeking to avoid surprises, but by aspiring to create 
them. It served as a catalyzing force by defining the challenges, 
working with researchers to develop solution concepts, and building a 
community of change-agent advocates. DARPA's translational research 
approach embraces risk, seeking to ignite revolutionary breakthroughs 
rather than merely incremental improvements in existing products. The 
risks may be big, but as history has demonstrated, so are the potential 
rewards.
    In the energy industry today, we face many enormous challenges. How 
can we limit the amount of greenhouse gases escaping from conventional 
power plants? How can we make intermittent sources of power, from wind 
or the sun, more cost-effective and reliable? What are the best 
technical approaches to achieve high-performance, low-cost batteries 
for both transportation and grid storage? What policies should the 
Federal Government adopt to assure America leads the next industrial 
revolution? ARPA-E represents an essential first step in addressing 
these and other urgent questions.

The U.S. Greentech Investment Climate

    I last addressed the issue of the climate for greentech investment 
in my testimony before the House Subcommittee on Energy and the 
Environment in April 2007, on the eve of the global financial meltdown. 
The industry faced impediments then, and today, as may come as no 
surprise, the situation is even more challenging.
    The good news is that the venture capital community is keenly 
interested in this sector, and eager to invest in promising green 
technologies. In recent years, venture capitalists have invested in 
many breakthrough green technologies, some of which have already 
entered the marketplace, and others which will come to market in the 
near future. I'm confident these companies, taken as a whole, have 
begun a dramatic transformation of our energy system, green for brown.
    Unfortunately, however, U.S. green entrepreneurs and their venture 
sponsors are encountering obstacles in the form of the financial 
crisis, a scarcity of renewable energy projects in U.S. research 
laboratories, and fierce competition from abroad.
    The venture industry, like virtually every other industry, has been 
hit hard by our economic crisis. In 2009, new investor commitments to 
venture capital firms declined nearly 50 percent over the previous 
year. The number of venture firms able to raise funds fell to its 
lowest point last year since 1993. Further, the scarcity of capital 
across the board_in particular in the credit markets_has imposed a new, 
major obstacle in the path for renewable energy entrepreneurs.
    Total venture capital spending on greentech projects last year 
amounted to approximately $5 billion. While that may initially seem 
like a large figure, it represents a decline relative to 2008 funding, 
and, more importantly, a tiny fraction_less than three-tenths of one 
percent_of the $1.8 trillion U.S. market for energy and transportation. 
This three-tenths of one-percent, moreover, constitutes the lion's 
share of U.S. private sector renewable-energy research and development 
investment, since, as a rule, large energy companies have not been 
investing significant funds in R&D for renewable energy. And, 
unfortunately, if you show me an industry investing less than three-
tenths of one percent of its revenue on research and development, I'll 
show you an industry that's not preparing for the future.
    I must emphasize here that, to date, this lack of private 
investment in green energy R&D has not been made up by public sources. 
While the Federal Government has provided massive direct and indirect 
subsidies and benefits for the fossil fuel and nuclear industries over 
the last several decades, it has afforded only scant support for green 
energy technology research. In the years leading up to the creation of 
ARPA-E, the Federal Government provided little more than $1 billion 
annually for all non-nuclear, clean and renewable energy research. In 
the health care sector, in contrast, the National Institutes of Health 
has annually provided approximately $30 billion in research funding.
    The main result of the big greentech R&D deficit is a conspicuous 
shortage of renewable energy research projects at American universities 
and national labs. It's not due to any lack of technical talent or 
interest among researchers to invent breakthrough greentech products. 
To the contrary, American universities and our national labs are loaded 
with world-class scientific and engineering talent, many of whom are 
eager to devote their life's work to greentech research. To date, 
however, they've been held up by a lack of support for early-stage 
research. What this means for investors, to use a baseball metaphor, is 
that we simply aren't getting enough at-bats, even as our global 
competitors are making the necessary investments to continue hitting 
home runs.
    A final challenge facing the American greentech investment 
community and entrepreneurs_one that is rapidly becoming a threat to 
the U.S. economy as a whole_is the fierce competition coming from 
overseas. Here's an alarming example: Today, the United States is home 
to only two of the world's ten largest solar companies, merely two of 
the world's top ten wind turbine producers, and just one of the top ten 
advanced battery manufacturers. Summing up: only one-sixth of these 30 
top renewable energy companies are now based in this country. That's a 
paltry 17 percent market share.
    The momentum in this industry is rapidly moving outside our shores, 
and the bottom line is that America must either start investing a lot 
more today to build leadership in these new industries and jobs, or we 
can continue with business as usual and end up buying windmills from 
Europe, batteries from Japan and solar panels from China.

ARPA-E's Performance

    All I've said up to now may help explain why my colleagues and I 
are so hopeful about ARPA-E. And all that we've seen to date of this 
remarkable agency has raised our hopes even more. ARPA-E is no panacea, 
but it does begin to address America's deficit in high-risk, high-
reward renewable energy research projects.
    Commendably, you've designed the agency to mirror the successful 
traits of its worthy predecessor, DARPA. Like DARPA, ARPA-E is small, 
nimble, and to all appearances unafraid of risk, with a flat, non-
hierarchical management structure. It clearly has ample cabinet-level 
sponsorship and support, with its new chief, Dr. Majumdar, reporting 
directly to Secretary Chu. Within just a few months of his appointment 
last September, Dr. Majumdar has already come up with the creative idea 
of a new Fellows program for recent doctoral graduates.
    ARPA-E has made fast, impressive work of selecting its first 37 
grantees from an initial pool of 3,600 applications. As I review the 
list of these high-risk, high-reward projects, I'm heartened to see how 
many of them are aimed directly at tackling many of today's most urgent 
energy challenges. These include work on batteries for grid storage, 
which will assure a stable electrical grid even as we ramp up our 
supplies of clean but intermittent power sources from the sun and the 
wind. There's also funding for transportation batteries, which will 
accelerate the advent of electric transportation. Several other 
grantees are working on the urgent task of limiting greenhouse gas 
emissions from conventional, fossil-fuel power plants. Yet another 
project focuses on improving building efficiency, saving the vast 
amounts of energy that today are literally going out the window.
    ARPA-E's list of winners also showcases the kinds of partnerships 
we need to most efficiently ramp up new energy technologies. University 
researchers are joining entrepreneurs and government managers to 
transform today's good ideas into tomorrow's mass-produced solutions. 
These are all terrific models of how to mobilize America's inventive 
talents.

ARPA-E, Job-Creation and Technological Competitiveness

    As I've noted, the United States today remains a world capital of 
innovation. But we can't take our long-standing technology dominance 
for granted. Remember, today only one-sixth of the world's top solar, 
wind and advanced battery companies are based in the United States.
    Ask yourself: what if only one of the six top information 
technology companies were American? What if Microsoft were German, 
Apple were Japanese, and Google, eBay and Yahoo were Chinese, and only 
Amazon were based in this country? We'd be sending billions of extra 
dollars and hundreds of thousands of jobs overseas, to support other 
nations' economic growth.
    Unfortunately, this is just the situation we have shaping up in the 
renewable energy industries_the ones that will surely drive the second 
industrial revolution.
    Our competitors offer us a daunting challenge. Yet I doubt anyone 
here in this room is ready to concede this race. In fact, our purpose 
today is to chart a course to guarantee America's position as the 
leader in the 21st Century's race for energy innovation.
    Efforts such as ARPA-E are crucial in our quest to catch up in this 
contest, which is also our best hope of providing future prosperity. 
Renewable energy technologies we can scarcely imagine today are 
destined to lead to a cascade of diverse, breakthrough products and 
vast numbers of high-quality jobs: for blue-collar builders, factory 
employees, and maintenance workers; and white-collar engineers, 
salespeople, and managers.

We Can't Lose Momentum

    In a very short time, your determined leadership has brought us 
exciting progress. ARPA-E is serving an instrumental role in focusing 
researchers' attention on the right goals. But what happens after this 
year? It's distressing to imagine ARPA-E's funding may soon expire.
    I'd like to remind you that 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 Federal 
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. Certainly, today's jobs and environmental crises 
are every bit as threatening to our country's future as the impetus to 
DARPA's creation: the October 1957 Russian launch of the world's first 
earth-orbiting satellite, Sputnik.
    I urge you to extend and expand ARPA-E's charter. It should be 
treated not as a short-term experiment within the DOE, but rather as a 
pillar of U.S. energy policy. Only then can we show the rest of the 
world, once again, how to lead an Industrial Revolution.
    I appreciate the Committee's invitation to participate in today's 
hearing, and look forward to learning more about how we can work 
together to build a more secure and prosperous future.

                      Biography for John Denniston
    John Denniston is a Partner with Kleiner Perkins Caufield & Byers. 
At KPCB, John has worked with a wide variety of portfolio companies, 
with a primary emphasis on the Greentech industry. John was a member of 
the KPCB Partner team that many years ago conceptualized and launched 
KPCB's Greentech investment initiative. Since then, KPCB has been an 
active investor in the Greentech field, having invested in start-up 
companies across a wide variety of sectors. John is an active 
participant in KPCB's Greentech Innovation Network, a network of 
business, academic and policy leaders who meet regularly to identify, 
and then pursue, the most important green technology and public policy 
innovations.
    He is actively involved in Greentech public policy issues, having 
testified before several Congressional committees. John serves on the 
Board of Advisors of the National Renewable Energy Labs. He is a 
frequent speaker at Greentech industry conferences.
    Prior to joining KPCB, John was a Managing Director and Head of 
Technology Investment Banking, Western U.S. at Salomon Smith Barney. He 
also served on the Investment Committees for both Salomon's venture 
capital direct investment fund and CitiGroup's venture capital fund-of-
funds. Before that, he was a Partner at the law firm Brobeck, Phleger & 
Harrison, where he was the Head of the firm's Venture Capital Practice 
Group, co-head of its Information Technology Practice Group, and served 
on the Investment Committee for its venture capital fund.
    John has a B.A. and J.D. from the University of Michigan.

    Chairman Gordon. Thank you, Mr. Denniston. And now, Dr. 
Pierce.

 STATEMENTS OF DR. JOHN PIERCE, VICE PRESIDENT, DUPONT APPLIED 
                   SCIENCES IN BIOTECHNOLOGY

    Dr. Pierce. Good morning, Chairman Gordon, Ranking Member 
Hall, and Members of the Committee. My company, DuPont, is a 
207-year-old innovation-driven company. We have 2,000 Ph.D.s, 
worldwide R&D operations, and active research programs with 
universities, national labs and commercial partners. Our former 
CEO and chairman worked with Dr. Vest on the National Academies 
report, Rising Above the Gathering Storm, where ARPA-E figured 
so prominently, so I thank you for this opportunity to share 
our perspectives on DOE's program.
    We are active in a variety of energy efficiency solutions 
including bio-based materials, building efficiency and 
materials lightweighting. We are also active in low-carbon 
energy generation and storage technologies, including biofuels, 
solar, wind and advanced battery technology. Our seed company, 
Pioneer, expands the productivity of agriculture for food and 
fuel. With BP we are developing biobutanols and advanced 
biofuel that behaves like gasoline in existing autos and 
infrastructure. And Mr. Chairman, this Friday I am happy to go 
to Vonore, Tennessee, to celebrate the opening of our 
demonstration facility for cellulosic ethanol, which is a 
technology significantly enabled by DOE partnerships and 
Tennessee's visionary leadership and support. Our R&D portfolio 
is driven by market needs and expected returns for our 
shareholders. This serves near- and mid-term market needs 
fairly well, but public and private partnerships best serve the 
pursuit of riskier transformational technologies. ARPA-E serves 
a valuable role by focusing efforts on the critical energy 
sector as we have heard in the statements today and serves as a 
powerful springboard for promising pre-market concepts.
    If supported additionally by government programs that help 
move new ideas from initial concepts through to commercial 
demonstration, ARPA-E can promote the U.S. leadership we need 
in clean energy technologies that create all the new 
manufacturing jobs. While ARPA-E is new, we can offer some 
observations based on our experience to date. They did an 
absolutely impressive job reviewing an enormous number of 
proposals and initial concepts. The breadth of the first grants 
appropriately reflected a wide-range of recipients including 
universities, start-ups, established companies. This 
inclusiveness provides access to the breadth of expertise that 
is necessary to seek emerging technology concepts as well as 
evolve them to commercial production and jobs.
    Our ARPA-E selected project builds on our prior biofuels 
R&D investments. It enables our collaboration with Bio 
Architecture Lab, a start-up company in Washington State, with 
whom we will work on kelp_or seaweed_as an alternative 
feedstock for biobutanol.
    Now, given our significant prior R&D investments in energy 
technologies, the use of a technology investment agreement for 
our project was critical for our participation. TIAs provide 
approaches to patent rights and other terms that make it easier 
for commercial entities to partner with the government and 
integrate new projects into their existing R&D portfolio while 
being able to leverage the company's earlier work. A TIA can 
greatly reduce administrative complexity and facilitate 
effective collaboration between business and government, and we 
encourage a continued use of this instrument.
    We have been very impressed by the level of engagement and 
responsiveness of the ARPA-E staff and the commitment and the 
enthusiasm they demonstrated.
    Let me offer just a few thoughts as ARPA-E is built out. It 
is important to have a clear and transparent process for 
identifying funding areas, establishing priorities and 
systematically engaging stakeholders. And the anticipated fair 
upcoming is a great example of doing that. Regular funding 
cycles and rapidly evolving areas such as advanced 
transportation technologies would provide lead time to 
anticipate funding and assemble solid proposals. To fully 
realize the flexibility and timeliness required for their 
efforts, DOE should continue to give ARPA-E flexibility to try 
new and agile approaches. And of course, the effective 
execution of ARPA-E's mission requires highly qualified 
resources. I hope that we will see the appointment of more 
professionals in the near future as well as sustained 
Congressional funding.
    In closing, let me thank you again for the opportunity to 
share our views with you. DOE has done a solid job of setting 
this new organization up, but it is clearly in its early days 
with opportunities to strengthen the organization and refine 
its mission as it grows. We appreciate the focus of the 
Committee on this important subject and look forward to working 
with you as ARPA-E progresses.
    [The prepared statement of Dr. Pierce follows:]
                   Prepared Statement of John Pierce
    Good morning Chairman Gordon, Ranking Member Hall and Members of 
the Committee. My name is John Pierce, and I am the Vice President of 
Technology for DuPont's Advanced Biosciences efforts. I am pleased to 
be here today to share DuPont's perspectives on the Energy Department's 
Advanced Research Projects Agency. My personal perspective is informed 
by my work over the last ten years leading DuPont's R&D efforts in the 
area of industrial biotechnology that has yielded technologies like our 
Sorona biopolymer, for which DuPont received the President Green 
Chemistry Award, and the high performance biofuel biobutanol.
    DuPont has long been an innovation company, from the development of 
polymer chemistry in the 1930s and 1940s, the development of synthetic 
refrigerants to replace hazardous materials in refrigeration, specialty 
fibers like bullet resistant Kevlar and fire resistant Nomex through 
our current biotechnology and nanotechnology work. We currently employ 
almost two thousand PhDs, and conduct major R&D operations in multiple 
countries, including the US, Europe, China, and India. We have active 
joint programs with many Universities and National Labs as well. More 
than 35% of our revenues in recent years derive from new products 
driven by a very structured and targeted global innovation program with 
spending of about $1.4 billion each year.
    We have frequently collaborated with the US Government in our 
efforts over the years, whether through collaboration with the National 
Labs or competing for matching grant funding to advance technologies 
serving national interests. Our scientists also contribute through 
various external engagements with Universities, the National Academies, 
and Federal agencies. Our former CEO and Chairman Chad Holliday was a 
co-author of the seminal National Academies report Rising above the 
Gathering Storm, which originated the idea of an ARPA organization for 
energy.
    The development of sustainable energy solutions is certainly an 
area in which DuPont is already focusing much of our innovation. We are 
working on energy saving technologies such as biomaterials, high 
efficiency lighting, transportation efficiency and advanced materials 
for building efficiency and energy storage. We are also active in low 
carbon energy generation and storage technologies that include advanced 
biofuels, solar, wind power and fuel cells, advanced batteries and 
environmentally friendly improvements to current energy supply 
technologies.
    For example, we arc very engaged in advancing sustainable 
transportation solutions, including through biotechnology. We have 
developed technologies to produce advanced polymers from sugar that are 
going into automotive applications, and are deeply engaged in advancing 
biofuels on three separate fronts. Our seed company Pioneer is steadily 
expanding the productivity of grains used to produce first generation 
biofuels and sells varieties that specifically enhance biofuels 
production per acre. We have developed a technology to produce ethanol 
from cellulosic feedstocks such as switchgrass. I am happy to report, 
Mr. Chairman, that our biomaterials plant in Louden, TN is doing very 
well and on the 29th of this month we will hold a grand opening for our 
cellulosic ethanol pilot plant in Vonore, TN_a technology and facility 
that was significantly enabled by DOE partnerships. We have also worked 
with BP to develop the advanced biofuel biobutanol, which has high 
energy density and is compatible with existing autos and fueling 
infrastructure.
    So let me turn my attention specifically to ARPA-E. Our perspective 
here is informed by our role as a market driven science company. Our 
R&D portfolio and the prioritization of funding is driven by customer 
or market needs, specific product opportunities, and the prospect of 
returns for our shareholders, rather than more ``blue sky'' kinds of 
exploration. That is our appropriate role in the innovation economy. 
However, as you might imagine, the scientists in DuPont generate some 
pretty interesting concepts that don't get into our innovation pipeline 
because we need to prudently manage the risk of investing in very early 
stage technologies with uncertain market opportunities. This pragmatic 
approach to R&D funding prioritization is an economic necessity for the 
private sector. While it serves near to mid term market needs quite 
well, it does not provide for the development of transformational 
technology options with broad societal relevance. This is a gap that 
government funding can most effectively fill. ARPA-E serves a valuable 
role in focusing that government effort on the critical area of energy.
    An entity like ARPA-E can act as a powerful launching pad for early 
pre-market concepts to be evaluated and pursued. Cost sharing with 
ARPA-E can sufficiently reduce the risk to enable companies like DuPont 
to commit R&D resources to more transformational technology efforts, in 
collaboration with the government and other partners. This capability 
complements and enhances the incredibly valuable and robust US academic 
research enterprise that already receives substantial funding through a 
variety of government programs, and provides a necessary bridge across 
the ``valley of death'' between scientific discovery and commercial 
practice.
    Such efforts also need to be part of a web of programs that help 
new ideas get from initial concept demonstration through to commercial 
demonstration if the US is going to retain and expand its leadership 
role in critical technologies_and provide the high paying manufacturing 
jobs such leadership provides. There is a growing concern that the US 
is losing its manufacturing edge, which is a critical part of our 
innovation engine. We in the US are at the leading edge of biopharma, 
biomedical devices, and will soon lead in bioprocessing for small 
molecules. We have created that edge and maintained it thus far by 
keeping the manufacturing here. Government investment in the early 
phases of research_as in ARPA-E_as well as the development phase for 
building pilot plants and demonstration units for those areas of 
technology that are truly transformational will help us hold our edge.
    It is particularly important that the US find ways to expand and 
accelerate research, development and deployment of low carbon solutions 
in energy production and use. The cost, security implications and 
environmental ramifications of our current energy trajectory is clearly 
unsustainable, and the response to this challenge will be a significant 
area of economic activity and global competition in the coming years in 
which the US must not fall behind.
    While it is premature to draw detailed conclusions regarding the 
functioning of ARPA-E given its relative newness, we can offer some 
observations based on our experience in responding to their first 
solicitations and being selected for a matching grant.
    First, for the level of staffing they currently have we feel they 
did an impressive job of sorting through an incredible number of 
initial concepts submitted to them. Second, the breadth of topics 
selected for the first grants is a positive sign, suggesting an 
appropriate range of thinking and perspective. Third, they also 
selected a wide range of recipients, including Universities, start ups 
and established companies such as ours. This inclusiveness is important 
as it provides access to a wide range of expertise, including knowledge 
communities that the commercial world looks to for its technology 
pipeline, but also includes entities whose engagement is necessary to 
make the transition from technology concept to robust manufacturing 
methods to commercial production and stable jobs.
    For example, our project that was selected for ARPA-E funding 
leverages our significant prior biofuels R&D investments that I 
described earlier. It allows us to explore a new and promising area 
that, while attractive, we would not have funded on our own until well 
in the future as we allocate resources to nearer term technology 
applications.
    This funding will allow us to expand the potential of our 
biobutanol technology to new and promising feedstocks. Under the grant 
DuPont is partnering with a start-up company, Bio Architecture Lab of 
Washington State, that has close ties with the University of 
Washington. We are working to develop approaches to employing kelp, 
that is_seaweed, as an alternate feedstock for the production of 
biobutanol. This also illustrates how ARPA can help to facilitate 
collaborations amongst different kinds of players in the innovation 
pipeline, in this case an established firm and a technology startup.
    Given DuPont's significant pre-existing investment in technologies 
for sustainable energy, ARPA's ability to provide a Technology 
Investment Agreement (TIA) as the basis for our project made it easier 
for DuPont to participate in the first solicitation. TIAs provide 
approaches to patent rights and other government terms that make it 
easier for commercial entities to partner with the Government and 
integrate new projects into their existing R&D portfolio than is 
allowed by the more restrictive terms of alternative funding models. 
Unlike contract research entities, commercial firms do research with an 
eye to products and services, continually seek synergies across their 
research programs, and need the ability to see their way to future 
opportunities in a way that allows the seamless integration of self-
funded and government funded capabilities. A TIA can greatly reduce 
administrative complexity and thereby facilitate effective 
collaboration between business and government. We would encourage the 
continued use of this instrument in solicitations in the future.
    Finally, DuPont has been very impressed by the level of engagement 
and responsiveness by ARPA-E staff, and the commitment and enthusiasm 
that they have demonstrated. When agency staff responds to a question 
within two hours it is pleasant. When that question was submitted at 
8:00 p.m. and responded to by 10:00 it is a pleasant surprise.
    Going forward we would like to suggest a few considerations as 
ARPA-E is built out. We believe it is important for the program to have 
clear and transparent processes for identifying the grand challenges 
that merit funding; establishing priorities, systematically engaging 
the appropriate communities of knowledge at an early stage, and 
announcing focused funding opportunities in areas where sufficient 
scientific evidence exists to justify such investments. Establishing 
external advisory panels can help ensure that a breadth of perspectives 
is brought to bear in developing the ARPA agenda. It may also be 
helpful for ARPA-E to have regular funding cycles in critical areas 
where the science is evolving rapidly_for example, every three years 
ARPA could invest in advanced transportation energy technologies. This 
would allow researchers in this sector sufficient lead time to 
anticipate funding and assemble ideas and collaborations to develop the 
most competitive proposals. Clearly, the effective execution of ARPA-
E's mission requires the rapid addition of qualified program resources, 
and I hope that we will see the appointment of many more professionals 
in the near future, as well as sustained Congressional funding.
    In closing, thank you for the opportunity to share our views with 
you today. We think DOE has done a solid job of setting this new 
organization up, but it is clearly in it early days, with opportunities 
to strengthen the organization and refine its mission as it grows. We 
appreciate the focus this Committee has brought to this important 
subject, and look forward to working with you as ARPA progresses.

                       Biography for John Pierce



    John Pierce is vice president for DuPont Applied BioSciences_
Technology, with responsibility for DuPont's biotechnology research and 
development efforts in the production of fuels, chemicals, and 
materials.
    Dr. Pierce began his career at DuPont in 1982 as a research 
scientist in Central Research & Development (CR&D). He moved to 
Agricultural Products in 1988 and held research management positions in 
agricultural biotechnology and subsequently in crop protection chemical 
discovery. In 1994 he became director of Chemical and Biological 
Sciences in CR&D, where DuPont's current focus on industrial 
biotechnology began to take shape.
    From 1996-1998, Dr. Pierce was planning manager for Agricultural 
Products' Europe, Middle East, and Africa in Paris, France. Upon 
returning to Wilmington, he worked to integrate the agricultural 
biotechnology research efforts of DuPont and its subsidiary Pioneer Hi-
Bred International. He first served as director of Genetic Resources 
and subsequently as director of Strategic Resources and Planning for 
DuPont Crop Genetics Research. In 2001, Dr. Pierce returned to CR&D as 
director of Biochemical Sciences and Engineering and was named to his 
current position in June 2006.
    Dr. Pierce has been intimately involved in the evolution of 
DuPont's positions with respect to commercialization and acceptance of 
biotechnology products. He was a founding board member of the Society 
of Biological Engineering and currently serves on the Management Board 
of the BioEnergy Science Center at Oak Ridge and on the Scientific 
Advisory Board of the Great Lakes Bioenergy Research Center_two DOE 
sponsored consortia developing biofuels from renewable resources.
    Prior to joining DuPont, Dr. Pierce held postdoctoral positions at 
Cornell University and the University of Wisconsin. He holds a bachelor 
of science degree in biochemistry from Penn State and a PhD degree in 
biochemistry from Michigan State University.

                               Discussion

    Chairman Gordon. Thank you, Dr. Pierce. At this time, we 
begin our first round of questions and the Chair recognizes 
himself for five minutes.

                Keeping Jobs and Innovation in the U.S.

    Dr. Majumdar, in your testimony you mentioned that one of 
your worries was making sure that we kept this technology here 
in this country and turned it into a product and to jobs. And 
so I would like to ask Mr. Denniston and Dr. Pierce, what does 
he need to do so that the venture capital community will come 
in and major other companies will come in and take these 
technologies? At what level does he have to raise these?
    Mr. Denniston. Yes, I think it is a wonderful question and 
exactly the right one to discuss. So as I mentioned in my 
testimony, the investment community in the United States 
doesn't have a sufficient number of at-bats of high-quality 
research opportunities in energy. It is because the area has 
historically been grossly underfunded in my opinion and I think 
in the opinion of most researchers.
    I and my partners have gone around to the leading research 
institutions in this country, and it would shock you, 
notwithstanding the world-class talent that we have at those 
institutions, how few projects there are in the energy field_
breakthrough, revolutionary projects_and it is not because the 
interest isn't there, it is because there isn't funding.
    So the numbers, if you are interested, are that annually, 
setting aside ARPA-E, going back a decade or so, DOE has had 
roughly a billion and a little bit more per year to invest in 
renewable energy research throughout the United States. That is 
for an industry that in the United States is roughly $1.8 
trillion, a tiny fraction of the industry's size, by 
comparison. We are also working to cure human disease, and this 
Congress has for decades set that as a high priority to the 
extent that today NIH has an annual budget of $30 billion. That 
is terrific. Maybe it should be higher. It certainly shouldn't 
be less. The interesting thing to bear in mind is the 
healthcare industry is almost the same size as our energy and 
transportation industries, 15 percent of GDP each, and yet we 
have a 30-to-1 funding differential between the two. On the one 
hand, curing human disease, on the second, putting this country 
in a position poised to win and lead the second industrial 
revolution.
    So what ARPA-E and its leaders can do is keep on doing. I 
think they did a fabulous job in their first round of funding 
awards, and I think you, the Committee, the Congress, the 
Administration, can help them by, as I said before, extending 
and expanding ARPA-E's charter, making this a pillar of U.S. 
energy policy.
    Chairman Gordon. So you want a bigger menu? And what about 
you, Dr. Pierce? What is going to excite DuPont to make an 
investment here?
    Dr. Pierce. I agree with the assessment that the energy 
sector has been not looked after as much in basic research over 
the past as some others. The intention is changing with a lot 
of people with national security, greenhouse gases, climate 
change and the like. Same thing with our own company. These 
types of funds are very important. My company spends $1.4 
billion a year on R&D. So that is small by government terms, I 
understand, but we use it all up. And my scientists have got 
way more ideas than $1.4 billion, and we have to focus those 
ideas more on the near-term. So having the kind of investment 
that allows us to partner with start-up companies, to partner 
with universities for some of the riskier ideas, allows us then 
to flange up some of our more developmental capabilities and 
then take the technology from concept all the way through. So 
one has to have the concepts laying around to start with, one 
has to give them a little bit of funding to get them going, but 
one also has to flange those up to scalable processes. And that 
is what excites us at my company.
    Chairman Gordon. This the 50th anniversary of the laser, so 
it is a good example of how that research is paying dividends.

                   Scaling Up Fledgling Technologies

    OK. So, Dr. Majumdar, it seems to me that we have to do 
more than just put, you know, throw money at it. I think that 
you have also got to somehow again raise the level, help these 
new ventures to be able to determine they can be scalable. What 
else are you doing to get them ready for the venture capital 
field or for the big corporations?
    Dr. Majumdar. I think it is very important for ARPA-E as an 
organization to pay attention as to who we recruit because I 
think we really need to have the best and the brightest to come 
on board for a short time and help. So what we are doing right 
now, as I mentioned in my oral statement, is that we are 
recruiting some of the best and the brightest to come on board, 
and what they are doing is to provide technical support and 
scrutiny for these teams out there, like Tony Atti's team out 
there. And the idea is that if there is a technological 
barrier, these program directors go out there and say why don't 
you talk to this person? Can you read that paper out there? And 
that is the kind of thing that is absolutely helpful for small 
businesses or teams in academia to actually make progress fast. 
And if they fail, it is important to learn quickly where they 
are failing and learn from that and make progress.
    Chairman Gordon. It is almost like an MEP [manufacturing 
extension partnership] program that you are providing them with 
in-house?
    Dr. Majumdar. That is right. So that is the first aspect. 
The second aspect is about the adoption of technology that Mr. 
Denniston talked about. I think that is one of the fundamental 
differences between DARPA and ARPA-E. In DARPA there is a 
customer, and we know where this technology is going to go. And 
the Secretary of Defense can say thou shalt buy the technology. 
That is not quite true in the energy sector. So who adopts the 
technology and what is the commercialization pipeline is very 
critical. And so what we have done is to put an adoption team, 
a commercialization team, to look at what is the landscape 
beyond what happens in the labs right now. And then, of course, 
we have an operations team which is trying to expedite the 
process. And as I said, we have been able to do things in three 
months which have really not been done before. So that is the 
other thing. Then we are putting together a team looking at the 
outreach side, to be able to tell the public what we do, and 
the value of what we do.
    So when someone gets dollars from ARPA-E, they get the 
whole team to work for them, and we are trying to look at the 
other side where it would be awardees, and trying to find out 
best practices of their team so that these teams can work 
together. So that is what we are trying to do right now.
    Chairman Gordon. Thank you, sir. And now I recognize my 
skeptical friend from Texas and hope he is feeling better.

                      Prioritizing ARPA-E's Goals

    Mr. Hall. Mr. Chairman, thank you. I do feel better, and I 
continue to be amazed at the quality and the caliber of the 
panels that you have attracted here. President of MIT? I 
couldn't have got in MIT, and I sure couldn't ever got out of 
it.
    This is a subject that I think this Chairman is going to be 
remembered for always, and it has been a pleasure. Dr. 
Majumdar, I hope I said that right, I note that you were 
probably confirmed earlier than anybody in the history. I see 
here you were appointed in September by President Obama, and 
you were confirmed in October. If that was in the same year, I 
think it took you about 15 days to get confirmed. So your 
reputation was here ahead of time. Thank you for the service 
you are going to give us.
    I will ask you my first question. I think the statutory 
charge for ARPA-E states that its goals should include pursuing 
energy technologies that, A, reduce our dependence on foreign 
energy, and that is something every candidate says they are 
going to do, B, reduce greenhouse gas emissions. Recognizing 
that there is some overlap between these goals, how do you 
prioritize them? Would you like to start with that?
    Dr. Majumdar. Sure. I think that is a great question, 
Congressman. Let me answer that question with an example. In 
the second round of the funding opportunity announcement, one 
of the topics that we focused on was something called 
electrofuels. That was the program that we created. That is a 
completely new concept. What it does is killing four birds with 
one stone. Let me explain that. Electricity, when you move 
electricity from wind or solar, it is hard to store, and with 
the intermittency, the storage is a problem. Hydrogen is hard 
to store. The best way to store hydrogen is hydrocarbons, which 
is gasoline. Carbon dioxide is a greenhouse gas. So the program 
is putting targets and challenges for the technical community, 
how to combine electricity, hydrogen and carbon dioxide to 
create gasoline, which we import 60 percent. And so this is a 
program where it is killing, as I said, four birds with one 
stone, carbon dioxide, hydrogen, electricity, and create 
gasoline.
    And so that is something that is an example of how we can 
solve two problems or three problems with one approach.
    Mr. Hall. I thank you for that. Were that if all things are 
equal, how you would weigh the potential of one project to 
improve energy security versus this potential to reduce 
greenhouse gas emissions?
    Any of you want to comment on that?
    Dr. Pierce. I might comment. I think that the goals of 
getting renewable transportation fuels couples just straight 
ahead and overlaps dramatically with the security situation. We 
have lots of advantages in the United States with agriculture, 
we do have knowledge of how to make transportation fuels, and 
since today, basically all of the transportation fuels other 
than the stuff we grow at home, come from elsewhere, then 
moving along in the area of renewable transportation fuels goes 
to the very heart of the national security as well as 
greenhouse gas emissions issues.
    Mr. Hall. I thank you and I will also ask in pursuing ARPA-
E's statutory goal to reduce dependence on foreign energy that 
is all of our thrust here, how much focus have you or will you 
give to supply-side technologies that increase domestic energy 
development and production including, and I am from an oil and 
gas state, for example, oil and natural gas as opposed to those 
that reduce demand through increased efficiency?
    Dr. Majumdar. Well, let me give you an answer with an 
example again. For example__
    Mr. Hall. I like those four times completion.
    Dr. Majumdar. Well, we do have imports. We are importing 60 
percent of our oil from countries that may not always like us. 
On the other hand, we have the largest reserves of coal, but 
the problem with coal is that the carbon dioxide emissions have 
greenhouse impact, climate change impact. So now the other two 
funding opportunity announcements that we have made in the 
second round, one is in advanced batteries because if you can 
store the electricity that is created from coal, then you could 
use that for transportation and reduce our need for imports of 
oil. So that is one. So at the same time, the carbon dioxide 
that is emitted could also be harmful. So the second program 
that we announced is called IMPACCT. It is Innovative Materials 
and Processes for Carbon Capture Technology. So if you can now 
look at collectively the carbon capture side and the battery 
side, we could then collectively address the problem of energy 
security as well as greenhouse gas emissions.
    Mr. Hall. I yield back any time I have, Mr. Chairman. Thank 
you, and thank you for those good answers.
    Chairman Gordon. I think Mr. Hall wanted to know how you 
can pump more oil and gas there in Texas. I think there is 
still going to be plenty of room for that.
    Dr. Baird is recognized for five minutes.
    Mr. Baird. Thank you, Mr. Chairman, and thanks to our 
distinguished panel.

     Retaining Intellectual Property and Manufacturing in the U.S.

    We have all hit on an issue that I think is absolutely 
critical, and there was a very troubling article in Harvard 
Business Review last year which addressed much what Mr. 
Denniston and Dr. Vest had talked about and that is that we 
often develop the core technologies only to see them exported. 
And Mr. Denniston, your comments about battery technology, my 
understanding from that and other readings in science and 
elsewhere is that it was not just a lack of funds. It was, we 
developed the technology and folks said, OK, you know, we can 
outsource the manufacturing of this, the fabrication of it. But 
once you outsource the fabrication, your engineers lose the 
hands-on experience and the interaction with it. And that then 
leads--we outsource battery manufacturing for cell phones, and 
then of course now we want to build big batteries for cars. We 
don't have the know-how to do it. So my question really is, and 
Dr. Majumdar, I am really impressed with this idea that you 
have got a complex organization that mentions how specifically 
to help people get to market. That article and others have 
given specific suggestions about what fundamentally has to 
change in our government structure and our funding structure 
and our regulatory structure and our manufacturing processes. 
How are we going to address that side? Because if the wonderful 
wizards who come up with these things do so only to see it 
exported in its fabrication or further development, we haven't 
solved anything. We have just helped other countries beat us 
again. Give us some insights into this.
    Dr. Majumdar. So let me just say that is one of the things 
I mentioned in my oral statement is that this is a concern of 
mine, that we innovate and then someone else does the scale-up. 
I think as I mentioned that part of the reason why we are 
having this Energy and Innovation Summit is to figure out what 
are the specific recommendations that you can have both on the 
policy side, on the financial side, and what tools and 
instruments that we can create to keep the innovations out here 
for scale-up and then export the high-value items.
    As I mentioned, one possible route, and I don't know 
exactly how to work this, but as I said, the government is a 
big purchaser of energy. And if there could be some provision 
that if a technology and its manufacturing in the United States 
meets certain performance standards and cost metrics, not to 
give them any break in cost, and if that could be pulled in, 
that creates a demand pull, which I think could really help 
getting small businesses and others get a foothold. And once 
they get a foothold, then let the business take over and then 
they can export the goods. I think that is one__
    Mr. Baird. A very similar issue gets raised in the area of 
pharmaceuticals in terms of developing orphan drugs and where 
is the market going to be. And you are exactly right. In DOD, 
they have got a market. You build it, we may buy it. So I think 
we ought to look at that, Mr. Chairman, and we ought to look at 
that with other aspects. The Transportation and Infrastructure 
Committee has looked at it, for example, and actually in 
stimulus, as you know, there were some measures to put 
renewables on more Federal buildings.
    Mr. Denniston?
    Mr. Denniston. Yes, Representative Baird, I think it is a 
wonderful question. I will say this, that my firm, Kleiner 
Perkins, has invested in nearly 50 renewable energy companies, 
green tech companies, and I will tell you that many, many of 
them are aiming to ramp up their initial production in the 
United States of America. And it makes all the sense in the 
world to do that because from an effectiveness and an 
efficiency perspective, it makes a lot of sense to have 
manufacturing near research and development.
    And so I think you will see manufacturing, blue collar 
jobs, happening in the United States as we ramp up the green 
tech sector. So the question is from a policy perspective, what 
can be done? Take your battery example. You are absolutely 
right. A lot of those innovations occurred in the United 
States. The U.S. market share for advanced batteries today is 
one percent. It is shameful. It is absolutely shameful. But 
imagine if DOE had had funding over the past couple of decades 
for advanced battery technologies, and just imagine that a 
breakthrough had occurred here in the United States that has a 
five- or ten-fold performance advantage over the incumbent 
batteries.
    Mr. Baird. But my fear is, and I respect that, but my fear 
though is we come up with the technology, and it exports for 
the fabrication side.
    Mr. Denniston. And my answer, Representative, is we have 
got to take it one step at a time. And what I am telling you as 
from a business perspective, it makes all the sense in the 
world to have initial production near research and development. 
And if we invent the technology here, there is a very good 
chance that the initial production will be in the United 
States. Then we can talk about the next step. How do we keep it 
here? We need it here from the get-go. We have this new 
industrial revolution where there will be all sorts of 
breakthrough technologies invented. They are happening now 
overseas. We don't have enough funding here. That is the gap 
that ARPA-E needs to fill.
    Mr. Baird. Mr. Wu wanted to offer a comment.
    Mr. Wu. Yes, and Mr. Baird may have already commented on 
this, but when I took a test ride in an electric car right here 
in front of this office building, the electric car people said, 
you know, this technology was developed here but we are going 
to build the batteries in China, and that is very, very 
concerning to me. I yield back.
    Mr. Baird. Thank you, Mr. Chairman.
    Chairman Gordon. Thank you, Dr. Baird. I would quickly add 
that part of the equation is the other piece of COMPETES and 
that is we have to have a workforce here. These aren't minimum-
wage jobs that are going to be created with these 
breakthroughs. They are going to be higher level. We have to 
have a technical-level workforce, and we will do that with 
other parts of the COMPETES bill.
    Now as usual, my friend from California is always an early 
arrival, and so my comrade Rohrabacher is recognized for five 
minutes.

              Intellectual Property and Commercialization

    Mr. Rohrabacher. Thank you, Mr. Chairman. Let me just 
identify myself with the points made by Mr. Baird which I think 
are significant, and I am going to be very generous and say 
that I don't believe the answers he received are adequate to 
deal with the problem that he outlined.
    Perhaps the solution, and let me ease into this, is that we 
make sure that anyone who manufactures an American-developed 
product has to pay the royalties that are necessary for the 
intellectual property that they are using because what we are 
creating is intellectual property here. Is there any type of 
requirement with this money that we are providing for research 
and development will go--who owns the intellectual property at 
the end and is there a requirement that the intellectual 
property should be used and could we make that restriction that 
it could be only used in manufacturing or certain fees would 
have to be paid to the United States government for providing 
this benefit?
    Dr. Majumdar. Sir, one of the requirements that we have 
since this is Recovery Act money that we are awarding is that 
90 percent of the manufacturing is done within the United 
States, the 90 percent of the work is done within the United 
States in the ARPA-E awards that we are making.
    Mr. Rohrabacher. The work that is done in the development 
but not afterwards?
    Dr. Majumdar. Right.
    Mr. Rohrabacher. After someone owns the--who owns the 
intellectual property in this?
    Dr. Majumdar. The company owns the intellectual property. 
The Department of Energy has rights to that. If they want to 
take it outside, they have to come to the DOE for waivers. And 
so the DOE can then--Department of Energy has marching rights 
if they are not doing anything with the intellectual property 
as well.
    Mr. Rohrabacher. OK, but the Department of Energy owns the 
intellectual property? You get a grant from--DuPont studying 
seaweed. Now, I am going to have to tell you when I ask you 
this in a moment, for the taxpayers to be subsidizing a huge, 
multi-billion dollar corporation in order to study seaweed does 
not sound like a good decision for me. But let us say that it 
comes through, you know. Let us say that DuPont's research, 
this $9 million we have given this multi-billion dollar 
company, actually does produce a new idea about using seaweed 
for energy. Who owns that? Does DuPont own that or do we have, 
as taxpayers, have some share in the ownership?
    Dr. Majumdar. I think that is a very important question. I 
think what the Department of Energy or the government can do is 
to help the technology advancement and then help enable them 
to, you know, succeed in business. So in that sense, the 
intellectual property that is owned by the company, but the 
Department of Energy has rights that if they want to take it 
outside the United States, they have to come for a waiver. And 
so we want to make sure that the manufacturing__
    Mr. Rohrabacher. So anybody who manufactures utilizes the 
technology that DuPont has, DuPont is going to continue making 
all the profit but the Department of Energy has a waiver on 
whether they can sell this, let the Chinese manufacture this?
    Dr. Majumdar. No, they have to come to the Department of 
Energy for a waiver, and then we have to consider that for, you 
know--the point is to have the benefits__
    Mr. Rohrabacher. I am not talking about the money being 
spent on research. I am not talking about outsourcing research. 
I am talking about the same point Mr. Baird brought up is that 
we are spending all of our money on research, and we end up 
doing nothing but serving as an engine for China and other 
countries to out-compete us with what we have developed here.
    Dr. Majumdar. Which is the concern that I also mentioned 
earlier, that I think it is very important to make sure that 
the scale-up of these innovations really happens in the United 
States.
    Mr. Rohrabacher. OK. Now, let us talk a little bit about 
DuPont. Why is it that we, taxpayers and everybody is having to 
pay for this, is subsidizing this research for a multi-billion 
corporation into seaweed?
    Dr. Pierce. Yes, sir. Let me make one comment or 
clarification about your questions before, about the 
commercialization.
    Mr. Rohrabacher. All right.
    Dr. Pierce. It is absolutely right that the requirement is 
that this be substantially commercialized in the United States, 
and one must go to the DOE for a waiver if one wants, if DuPont 
decides that China is a good place to commercialize this. We 
have to go ask the DOE, and the DOE will point to the statute 
and discuss, have you substantially done something in the 
United States, and if not, why not?
    Mr. Rohrabacher. OK. So in other words, this new technology 
that you are developing, seaweed or whatever, once you have 
accepted this grant, your company cannot sign a contract that 
permits a Chinese company to build the seaweed manufacturing 
facility over there unless our government approves of that? Not 
the development, the actual utilization__
    Dr. Pierce. You are talking commercialization right now, 
right?
    Mr. Rohrabacher. So does DuPont, is there some sort of 
ownership rights that we have to the intellectual property, the 
government maintains?
    Dr. Pierce. My understanding is, and if there are some 
lawyers in the room that would be helpful, but DuPont owns the 
intellectual property. We have rights to use it in a certain 
way. We are required to commercialize substantially in the 
United States. That doesn't say you can't do anything anywhere 
else, but you have to do it substantially in the United States. 
And if some argument arises as to this is the reason one cannot 
do it substantially, and I don't know what it would be, but let 
us imagine, right? Then one goes to the DOE with that argument, 
and the DOE__
    Mr. Rohrabacher. OK.
    Dr. Pierce. --passes on that argument.
    Mr. Rohrabacher. So we do have some leverage to handle the 
problem that Mr. Baird brought up?

            Justifying Support for R&D at Large Corporations

    Dr. Pierce. Right. And then in terms of big old DuPont 
getting $9 million, let me say that from a straight government 
perspective, DuPont__
    Mr. Rohrabacher. OK.
    Dr. Pierce. DuPont has invested many multiples of $9 
million of our shareholders' money to enable a bunch of 
technology which is being leveraged by the government's 
investment of $9 million. So if we were looking at this from a 
straight commercial transaction point of view, a little bit of 
governmental money is leveraging a whole lot of private sector 
money.
    Mr. Rohrabacher. Is there a time limit on this restriction? 
Just one last question on this. Is there a time limit on this 
control that we have that says what the research money will not 
be used for manufacturing overseas, at least substantially it 
would have to be here? Is there a time limit on that 
restriction?
    Dr. Majumdar. There is no time limit, sir.
    Mr. Rohrabacher. OK. Thank you.
    Chairman Gordon. Feeling better?
    Mr. Rohrabacher. Thank you, Mr. Chair. Well, am I ever?
    Chairman Gordon. Ms. Fudge is recognized.

    U.S. STEM Education and Federal Renewable Electricity Standards

    Ms. Fudge. Thank you, Mr. Chairman, and thank all of you 
for being here today. I do want to just raise the point that as 
we talk about competition with China, if you look at college 
graduates in China, more than 50 percent of them receive 
diplomas in engineering or natural sciences, where in this 
country it is about 15 percent. So I certainly hope that as you 
talk about how we turn some of this around, that there is some 
serious consideration given to how we change that in a very, 
very short timeframe. I mean, you know, we are talking about 
STEM and a lot of things but right now we have the same problem 
with our NASA people and all across the board. So there has to 
be something done to get more people into either STEM 
education, but I think that is a long-term process. I think we 
have to find a way to get more people into engineering and 
natural sciences.
    But my question for the panel is would the implementation 
of a Federal renewable electricity standard have any impact on 
the investor community? Do you think that that is something 
that would help? Anyone.
    Mr. Denniston. I am happy to answer that. The answer simply 
is absolutely, yes. I think it is a fabulous idea because it 
would give certainty of a market. And so 29 states have done 
that, but the policies between the 29 states that have an RPS, 
RES, use the acronym that you wish, are not consistent. And so 
I think having a consistent RES at the national level would 
send a wonderful and strong signal to America's entrepreneurs, 
innovators and inventors. And I am very, very positive on that 
idea.
    Ms. Fudge. Thank you.
    Dr. Atti. Ms. Fudge, if I could add to that quick comment 
on your previous statement in terms of education, the one thing 
that absolutely keeps me awake every night as an entrepreneur 
is how to staff our company with the best and brightest, and it 
is not easy. I think the importance of ARPA-E at this stage in 
bringing in the professional investment community that Mr. 
Denniston represents is now I can leverage not only my network 
of top scientists, but also their network and ARPA-E's as well, 
which is so critical because now time is my enemy, and bringing 
those people on board is very important. So the more dialogue 
between the investment and technical communities that we can 
encourage, the absolute better.
    In terms of a standard, while our company is still very 
early in technology development, I have been shocked at the 
number of potential customers that have reached out to our 
small start-up company. Many, particularly on the industrial 
waste heat recovery side, heavy users of electricity, heavy 
industries here in the United States, first look at waste heat 
as a real issue of lost efficiency and mitigating their 
electricity costs. Many feel that there is some standard coming 
down the pike, either in terms of CO2 emissions or 
renewable mandate, but they don't know what it is. So they are 
interested in this waste heat recovery both for practical 
purposes in terms of mitigating a pressing need right now, but 
also looking at a standard that may or may not evolve at the 
state, local or Federal level.
    So my ability to position our company and our products in 
the marketplace can only be helped if there is some 
streamlining of those standards.
    Ms. Fudge. Thank you.
    Dr. Vest. If I might comment very briefly on both of these 
lines of question, first of all, across Asia, 20 percent of the 
college graduates are engineers. Across Europe, about 13 
percent of the college graduates are engineers. In the United 
States, that number is 4.5 percent. This is frightening because 
it is in fact the engineering community that has to translate 
these new ideas and these research results into real products 
and services.
    Secondly, if I might, I have great empathy for concern that 
our answers are not sufficiently specific on this issue of 
globalized manufacturing, et cetera. But I must return to 
basics. This is all about igniting people and innovation. Part 
of the solution to this educational problem is to set an 
exciting vision and agenda for science and engineering, and 
energy has got to be at the core of that. The fact of the 
matter is, we are not going to stop globalization. We know 
that. But our only chance is to be the ones leading in the 
newest technologies and grab them and develop them as fast as 
we can, as much of it done here as possible. It is eventually 
going to spread around the world, but if we are not generating 
the new stuff, then we are in deep trouble.
    Dr. Majumdar. Can I just add a quick answer to that?
    Ms. Fudge. Yes, thank you.
    Dr. Majumdar. I think it is a wonderful question. I have, 
for my adult career, have been in the university, in academia, 
and one of the things that I am seeing right now is this grass 
roots movement, a sea change of interest among the students, 
whether it is science or engineering or business or public 
policy, where they have all come together and they are really 
energized about energy. And this is new. This was not there a 
few years ago. And I think we need to grab that and run with it 
and give them a little bit of power, empower them. And the 
ARPA-E Fellows Program is really to do that.
    Chairman Gordon. Thank you. And Mr. Smith is recognized for 
five minutes.

             Leveraging Public Money for Private Investment

    Mr. Smith. Thank you, Mr. Chairman, and witnesses for your 
giving of your time today.
    I know that we have touched a little bit on my concern, but 
certainly the challenges that we are facing, kind of like being 
asked an either/or question and responding with yes, and you 
know, what should come first, the private venture capital or 
what is appropriate, private venture capital or these 
government dollars and then who owns the technology from there.
    So, Dr. Majumdar, if you wouldn't mind telling us or maybe 
giving us a good example of where perhaps private dollars 
preceded or followed public dollars and how maybe that was 
leveraged, is it appropriate? What might you have to say?
    Dr. Majumdar. Well, I think this is a very important 
question that we are discussing sort of almost on a daily 
basis. I think an example in terms of private dollars--you said 
private dollars preceding the public dollars? Is that what you 
meant? Well, I can't see if I think in the cases that we have 
seen it is public dollars really preceding. I mean, what we are 
trying to do is invest in many different approaches to the same 
technology_we don't know which one is going to actually win. 
And let the business take over and see which ones actually win.
    I am going back to an example of the days of the 
transistor. If you look at the microprocessors today, there is 
only one design of the transistor which has worked. But if you 
go back, there have been 10 or 20 different designs of the 
transistor. Not all of them worked out. And so what we are 
trying to do is to look at the various approaches, and one of 
them or a few of them could be business-ready and let the 
private sector take over. But we are investing in sort of the 
upstream part of it.
    Mr. Smith. Thank you. Dr. Pierce?
    Dr. Pierce. Yes. Let me give an example that's close to 
home and evolving right now. I had mentioned that we are 
opening this cellulosic ethanol facility in Tennessee on 
Friday, and that came out of the joint work that we and our 
partner__
    Chairman Gordon. Not in my district, just so everybody 
knows.
    Dr. Pierce. It is right next to his district, though, I 
believe. And this was enabled by DOE funding, both to ourselves 
and the Genencor enzyme company. Now, one of the reasons we 
were competitive for this is that DuPont independently back in 
the early '90s started learning how to do this modern biology. 
We set up a fancy fermentation facility to make a molecule 
called propanediol, also in Tennessee it turns out. And we 
learned how to do all this new technology with DuPont 
shareholder money, and once we had that kind of technology, 
kind of like some of the panelists were saying, we had a 
capability to do something so that when we approached DOE, DOE 
could say, oh, you are pretty good at that. Here, have some 
more money to do this riskier cellulosic ethanol stuff.
    So this is all a continuum of back and forth government-
private things, and I think you can find numerous examples of 
all permutations.
    Mr. Smith. And what would happen if you did not have access 
to public dollars?
    Dr. Pierce. Well, I can tell you. We were feeling really 
frisky after we came up with the technology for this 
propanediol, and this is a molecule DuPont had wanted to make 
since the 1950s but we could never make it cheaply enough 
chemically. And then the biologists did it, so we were feeling 
good. But we sat down. I remember sitting in Wilmington saying, 
boy, we think--this was in 2001--we think cellulosic ethanol is 
a big thing, and that is before it got all crazy, you know, in 
2005 where everyone was talking about cellulosic ethanol. But 
we looked at it and saw the size of the challenge and said 
there is no possible way we can approach that in a serious way, 
despite feeling strong and being a big company, without 
government support, and we started getting on the train and 
coming down here and talking to you all about it.
    Mr. Smith. OK. Thank you. And I just want to use briefly 
the remainder of my time to touch on and perhaps if any of you 
wish to respond that, you know, I believe it is this Committee 
and this Congress' responsibilities to encourage innovation, 
and I am very concerned that some other policies, and I won't 
elaborate on those, are an attempt to regulate something into 
existence. I know that that is a far different story than 
regulating something out of existence. And I hope that we can 
be innovative about things and not try to get too clever into 
attempting to regulate something into existence. If anyone 
would wish to__
    Mr. Denniston. I would appreciate the opportunity to 
respond to that. Different Members of Congress can have their 
own objectives in mind. I don't look at ARPA-E as trying to 
enable something into existence. This market is happening, and 
as I pointed out in my testimony, it is happening overseas. We 
are behind in this race, and we are behind in this race in 
significant part because of the dangerously deficient funding 
at the Federal level for technology breakthroughs. These are 
massive markets. I will give you an example. The solar market 
today is in excess of $40 billion globally. That has already 
surpassed the size of the internet search market. These are 
massive industries, large and growing and we are not in the 
game the way that we need to be, the way that we historically 
have been. And with respect to the issue that has come up from 
a number of the questions is how can we keep the jobs, 
particularly manufacturing in the United States, and I would 
respectfully suggest that we don't--all of us share the concern 
about jobs in the United States, blue collar, white collar, not 
having manufacturing bleed overseas, no question about that. I 
don't believe that the answer and the solution to that is to 
cut research and development. That doesn't solve the problem. 
If Congress is interested in solving the jobs bleed problem, I 
would highly recommend that this Committee and others have a 
hearing on that subject. The topic of this hearing is Research 
and Development for Advanced Energy Technologies, and as I said 
before, in our portfolio, I can tell you that many of those 
companies will manufacture in the United States for the reasons 
that I suggested. Others need to. Fuels, for example. They 
weigh a lot. It doesn't make sense economically to transport 
them from overseas. And even if some of those breakthrough 
technologies in part in the future get manufactured overseas, 
there will be research and development jobs here, and it gives 
us a chance. So I am very concerned about manufacturing, too. I 
think we are conflating two issues, and again, I don't think 
the solution to the manufacturing jobs issue is to cut or limit 
research and development here or to put strings on funding so 
that companies can't manufacture overseas. I don't think 
protectionism is the answer to the problem. I think it is 
innovation.
    Chairman Gordon. Thank you, Mr. Smith.
    Mr. Smith. Thank you.
    Chairman Gordon. And Ms. Dahlkemper is recognized.

         Helping Small Businesses Achieve Market Breakthroughs

    Ms. Dahlkemper. Thank you, Mr. Chairman. I want to thank 
the panel for joining us today.
    Dr. Atti, I want to ask you a question. I am from Erie, 
Pennsylvania, so you certainly know the kind of district that I 
have.
    Dr. Atti. Yes.
    Ms. Dahlkemper. It was always a manufacturing base. We have 
lost a lot of our manufacturing. I see this research as being 
the innovation that we need to help those manufacturers 
throughout that region to come forward. I have some people who 
have great ideas. What I want to ask you about, your company, a 
small firm, what do you see as a biggest barriers for small 
companies to reach the market with breakthroughs? What extra 
tools and resources do we need to provide through ARPA-E to 
enhance that transfer of technology from the program to our 
business community so that areas of mine can see the positive 
economic effects going forward? And after you answer, anyone 
else who wants to comment on that, please do.
    Dr. Atti. That is a heavy question. There are a lot of 
parts to building a start-up company. Geography is just one 
very important part. It goes to the heart of the question of 
how do you appropriately transfer technology out of a 
university setting? So if you think technology agnostic for the 
moment, whether it is energy or IT or biotech, you want to try 
and build some kind of a cluster that involves your 
universities where this fundamental research is done, 
partnership with the industries that are in the area or the 
infrastructure that exists in terms of our neck of the woods. 
There is a lot of infrastructure and capacity that is under-
utilized. There is a very strong regulatory element to it as 
well in terms of our company, when we ultimately decide where 
module fabrication goes. We will take advantage of an existing 
semiconductor infrastructure here in the United States. There 
will be infrastructure upgrades and equipment capex [capital 
expenditures] purchases that we will have to make that my 
investors are not always willing to pay for through equity 
where credit can be used to help accelerate those purchases. 
And then lastly, bringing the people together in critical mass 
in a particular area as opposed to having to search all around 
the country to bring them together. There is no one fell swoop 
answer to this particular issue.
    In our instance, I live in Raleigh-Durham, North Carolina. 
There is a very strong entrepreneurial community there that 
have sort of come together on their own. I am seeing that in 
Oklahoma where our company is currently based. I think that 
ARPA-E it provides an umbrella to bring all of those resources 
together in one particular area so I can go to one resource to 
leverage the investment community, the entrepreneurial 
community, or the technical community. And I think in terms of 
this conference that they are putting it together. The one 
missing piece that concerns me is bringing the likes of DuPont 
or the larger industrial customers into it. The companies that 
you mentioned that have had issues in our neck of the woods are 
not always aware of the entrepreneurial startup community or 
how to interface with them. So I think whether it is the forum 
that Dr. Majumdar is sponsoring or through entrepreneurial 
economic development in the local area, you really need to find 
a forum to jam everybody together to talk about these issues 
because as an entrepreneur in a company at our stage, I am as 
concerned with basic operating risks of power outages at our 
facilities as I am of what customers are going to adopt our 
products down the road. So having a resource like that that 
brings it together is critically important.
    Dr. Majumdar. Congresswoman, that is a very important 
question for our whole Nation. If I look at, let us say the Bay 
Area, where I am from, or look at Boston, there is an ecosystem 
that exists with people with knowledge, knowledge-based from 
the universities, et cetera. There is an entrepreneur ecosystem 
out there, there is manufacturing, et cetera. So that ecosystem 
is extremely important to create the kinds of jobs and the 
technologies locally.
    So let me tell you a few things we are specifically doing. 
We just had a meeting yesterday with what are called regional 
innovation clusters. These are the Great Lakes Association, 
Boston Association, from the south, et cetera. And they wanted 
to meet me individually, and I said, why don't you all come 
together. And we had a meeting yesterday to say, let us look at 
the best practices that are there and more so with the advanced 
ones, Boston and the Bay Area, and see how can those best 
practices be used locally and create that infrastructure so 
that start-up companies and all can actually flourish? And in 
the Energy and Innovation Summit that I mentioned, we are going 
to have a panel just on that. So how do we create that 
ecosystem in other parts of the country, not just in Silicon 
Valley and Boston.
    Dr. Atti. If I could add to that, I think what ARPA-E has 
demonstrated is the venture capital community will go beyond 
its traditional coastal boundaries to invest in interesting and 
innovative ideas. So the money is willing to go there, it is 
building that ecosystem that Dr. Majumdar mentioned where you 
bring the people and the local resources into it. So money will 
follow an innovative idea. So we are seeing that through this 
program. That is one very, very critical element that we can 
then follow up on.
    Ms. Dahlkemper. I thank you very much. My time is up.
    Chairman Gordon. Thank you, Ms. Dahlkemper. Sounds like you 
need to have someone at that summit from home. Dr. Ehlers is 
recognized.

    A Historical Context and Protecting DOE's Overall Effectiveness

    Mr. Ehlers. Thank you, Mr. Chairman, and I want to reassure 
you and defend you. I am sure that DuPont did not build their 
plant near your district because of you. It is clear to me that 
what they were taking advantage of is this mammoth potential 
workforce of people in Tennessee who have experience in 
backyard stills, and so you didn't have to train these people 
very much to switch over to seaweed. My apologies, Mr. 
Chairman.
    Just a question, a rather broad question that Dr. Vest and 
Dr. Majumdar might want to comment on. If you look at when the 
Department of Energy was created in 1977, it was to undertake 
responsibility for long-term, high-risk research and 
development of energy technology, Federal power marketing, 
energy conservation, nuclear weapons program, energy regulatory 
programs and a central energy data collection and analysis 
program. It is a very broad agenda, but I think it fell on bad 
times for a number of reasons. I think the nuclear weapons 
program was the only one that has ever really gotten all the 
money it ever needed, and I worried when we passed the ARPA-E I 
was very skeptical about it because I thought it might weaken 
the Department of Energy's programs even more than they had 
been weakened by a lack of funding or a lack of good direction 
from certain secretaries over the years. And I think back to 
the glory days when Glenn Seaborg, Nobel Prize winner, really 
got things off to a kick-start. I suspect that was probably 
when it was still the Atomic Energy Commission rather than the 
Department of Energy. But I have just seen it go downhill in a 
lot of ways over the years. They have their stellar accelerator 
projects and that, but I think much of the original intent in 
'77 was lost.
    I was afraid that ARPA-E might in fact hurt the department 
even more by taking the research away and putting it outside.
    It appears that is not happening. It appears that this is 
in some ways innervated, the Department of Energy, to engage in 
its research more seriously and try and tackle these problems 
that are on the 1977 list. Am I deluding myself with that or is 
that in fact happening? Is there a new spirit at the 
department, and if so, is he part of the reason or is having a 
Nobel prize-winning physicist running it the reason? I would 
just appreciate some comments so we can evaluate well whether 
or not we did the right thing with ARPA-E and whether or not we 
set it up properly.
    Dr. Vest. Let me open, Mr. Ehlers, with my comment on 
origins and then obviously Dr. Majumdar can speak to the 
current situation.
    The Department of Energy started off and built as is 
absolutely inevitable into a large, bureaucratic organization. 
It has got a huge scope of responsibility, just as, by the way, 
the Department of Defense had done back in the '50s and '60s. 
And so the Rising Above the Gathering Storm Committee really 
saw ARPA-E as a small organization that could frankly be a 
bureaucracy buster, that could do things in new and different 
ways, and we hoped that that would not only directly accomplish 
its purposes by supporting and building the kind of innovation 
ecosystem around our universities and entrepreneurial 
organizations and so forth, but also infect the Department a 
little bit. We never saw it as diminishing the stature or 
importance of the core elements of DOE. But I think bringing 
new players to the table, generating a new excitement, getting 
innovators to address the energy problem who were unwilling or 
unable to go through the more traditional routes is what ARPA-E 
ought to be all about. And I think they are off to a great 
start in that regard.
    Dr. Majumdar. If I may just take a shot at this question: 
first of all, I am a proud former colleague of Glenn Seaborg at 
Berkeley. I have been funded by the Basic Energy Sciences [BES] 
of the Office of Science pretty much all my career, and I 
understand what their role is. And this is about basic science, 
understanding matter, and the interaction of matter and energy, 
and perhaps just exploring that. And I worked for the Applied 
Offices as well, and they have a tremendous role to play. What 
ARPA-E can do, for example, is that if there is a discovery in 
the Office of Science and that discovery has relevance for the 
market, how to create a technology in a very rapid accelerated 
fashion so that the businesses can look at that and so that, 
aha, this is interesting. We can actually create a business out 
of it. That is the kind of role that ARPA-E can play to 
accelerate the process. To be honest, the Secretary is a huge 
reason why we are all here. He has led the way, and that is one 
of the reasons I am here as well. And we have, as Mr. Chairman 
pointed out, we are calling ourselves the band of brothers and 
sisters because that is the sense of mission and freshness that 
is there right now, and ARPA-E is being used as one of the 
instruments to see whether something actually works in a rapid 
manner and perhaps look at that as best practices for the rest 
of DOE.
    Mr. Ehlers. Just one other aspect of this I want to 
mention. I am very glad to hear that, and I hope it continues 
to go that way.

                 The Structure of ARPA-E's Grant System

    In the awarding of grants, one government agency that has 
been doing this for years and has done it extremely well is the 
National Science Foundation. Did you or have you followed the 
model of the foundation? Did you work with them in establishing 
this to try to set up a good system or did you develop one that 
was completely independent?
    Chairman Gordon. Dr. Ehlers, if you don't mind, he will 
have to get back with you on that. We are getting ready to have 
votes, and I would like to try to--you are two minutes over, if 
you don't mind__
    Mr. Ehlers. That is fine.
    Chairman Gordon. --so we could move. Mr. Wilson, you are 
recognized.

             Criteria for Funding Opportunity Announcements

    Mr. Wilson. Thank you, Mr. Chairman. Thank you, gentlemen, 
for having our group here today that we can discuss these 
issues with.
    My first question is to Dr. Majumdar. What criteria do you 
feel is different in the ARPA-E funding opportunity 
announcement of May 2009 versus December of 2009? And if I 
could put a third part on that, what changes if any in the 
criteria are anticipated in the third opportunity?
    Dr. Majumdar. I think that is a very good question. The 
criteria that we are using in ARPA-E is that, number one, is it 
a potential game-changer? Is it new? If it succeeds, will it 
change the ballgame in terms of reducing our imports of oil, of 
greenhouse gas emissions and will it provide technological lead 
for the United States? So these are the criteria we are using. 
And I think this is sort of universal, across the board. The 
other things that we are also considering are, is it white 
space? Is it an area where DOE has never gone before but is 
absolutely critical? For example, grid-level storage. This is 
an infrastructure which does not have a bank, and we need that 
and that could make the grid much smarter than what we are 
proposing today. So that is an area that we got into. 
Electrofuels is another area where it hasn't been conceived, 
even. So that is the criteria that we are looking at is where 
is the white spaces, where are the gaps in the market that we 
could enter and whether it is transformational or not.

                   Economic Recession and Innovation

    Mr. Wilson. I see. Thank you. The second question I have, 
Dr. Vest, you and Dr. Denniston made some very good points 
about how far behind we are in innovation and what we really 
need to be doing, especially in the amount of engineering 
graduates that we have in America today. We were told this a 
year or so ago by Bill Gates when he came for a visit saying, 
you know, American needs to get in the game, and we need to 
understand it.
    Do you feel that the financial crisis that we are in now in 
our country has impacted our ability to do the innovation, to 
create the engineering group that we need? Maybe I would do 
that to Dr. Denniston if I can?
    Mr. Denniston. Absolutely. Yeah, the financial crisis has 
affected everything in the economy. If you look at budgets_I 
will let DuPont speak to this_but there are budget impacts 
across the board. And so I think it is a challenge for a lot of 
reasons. Markets have been impacted. That affects research and 
development budgets.
    Having said all of that, from our perspective as a venture 
capital investor, the entrepreneurs are still coming up with 
wonderful, wonderful ideas. We are more excited now than we 
have ever been about the innovation potential, not just in 
renewable energy but in information technology and the life 
sciences. If I could share with you the details of what we are 
seeing and the great entrepreneurs that we are just privileged 
to be able to interact with, we have more than a chance. We 
have a great chance. And what they lack mostly now is the 
funding to give them the encouragement to go and invent.
    Chairman Gordon. Mr. Wilson, if you don't mind, we have got 
votes on, and I would like to be able to move on.
    Mr. Wilson. That is fine.
    Chairman Gordon. In order that they were received, Ms. 
Giffords, Mr. Garamendi, and Ms. Edwards, so maybe if each of 
you could try to do one question and we could all get it in?

                ARPA-E and the Global Solar Power Market

    Ms. Giffords. Great. Thank you, Mr. Chairman, and to our 
panelists, what a terrific opportunity to hear from our 
experts.
    I am a big fan of ARPA-E, and I am really excited about the 
possibilities. I don't think the general public quite 
understands the potential of ARPA-E, but I come from the sunny 
State of Arizona. Very passionate about solar energy. So I 
would just like a couple of folks, but particularly Dr. 
Majumdar, to talk about a ARPA-E's project with solar and then 
if someone could talk about the fact of where we are in the 
global solar market, where we all complain about importing oil 
from foreign countries, mostly hostile countries, but now we 
are in the process of importing solar panels from other 
countries like China. So please, Dr. Majumdar.
    Dr. Majumdar. Thank you very much. I actually lived in the 
State of Arizona for three years, and I loved it. So I really 
enjoyed__
    Ms. Giffords. Well, please come back.
    Dr. Majumdar. So in the solar area, I think there is a 
tremendous opportunity. Let me just explain a little bit of a 
technical matter. Solar cells today, if you look at the whole 
balance of system and the cost of installation, it is about $3 
or $4 per watt. And if you can bring the cost down to about $1, 
$1.50, then the scalability will be obvious.
    So the question is, where is the major cost? Some of it is 
materials cost. If you can make thin films and single crystals, 
then it is high efficiency, and that efficiency reduces the 
balance of system cost. The other is the balance of system cost 
of power electronics, et cetera, and those things. For example, 
in the United States, we have lost the art of power 
electronics. We invented it out here. It has gone elsewhere. So 
we are having a workshop on February 9 on power electronics and 
how to create, how to use our innovation to create smart 
modules, which are much lower cost and that will enable the 
impedance matching in the solar cells photovoltaic devices, et 
cetera.
    So that is the kind of thing we are trying to do. I think 
it is extremely important to bring down the cost so that it 
scales up.
    Chairman Gordon. Ms. Giffords, is it OK if we go to Mr. 
Garamendi?

               Funding Constraints and National Security

    Mr. Garamendi. I have got about 25 hours of questions. 
Extraordinary panel, terrific testimony. I think I am just 
going to really shorten this. This is really about national 
security in the most fundamental way, and every way you can 
consider it, and I won't go into all the details, but it is 
also about the allocation of resources. We just heard from the 
President we are going to have a no increase in the 
discretionary budget. This is a discretionary budget. You are 
zeroed out. ARPA-E doesn't exist after this second round of 
money. It is gone. And the question that we are faced with is 
where to put the money. Are we going to put $30 billion more 
money into Afghanistan with perhaps national security or are we 
going to put money into this? These are the questions we are 
faced with. We are spending $10 to $15 billion a year 
subsidizing an extraordinary industry, the oil industry. We 
have done it for a century. Why in the world are we continuing 
to do that? Money needs to be moving to those things that 
create future national security, and that is where you are. You 
can comment all you want. You need to know where I am coming 
from. This is where we need to put our money into this 
secondary stage, moving from the basic research into the 
venture capital sector and then beyond. We also need to make 
sure the money flows into the valley of death.
    So these are where the subsidies need to go. I don't want 
in this process to forget about the basic research that is 
being done at the laboratories, the university campuses as well 
as the laboratories, and this is the next stage moving it out 
of there. A lot of things need to be done. We don't have time 
to get into it. My comment, I would love to talk to you about 
it in detail. I guess we are going to go.
    Chairman Gordon. Yeah, I think this panel would agree with 
you, and so if it is OK__
    Mr. Garamendi. Well, let us do it.
    Chairman Gordon. Let us move to Ms. Edwards.
    Mr. Garamendi. You have got 10 votes here, what more do we 
need?

         Potential Changes to FOAs and the Need for Investment

    Ms. Edwards. Thank you, Mr. Chairman, and I appreciate 
being able to bring up the rear here. And thank you all for 
your testimony.
    My question actually has to do with the first set of 
awards, 37 awards, spread out over the range, and I wonder if 
you have any questions or concerns as you think about the 
future. I think we got to figure out the money question for the 
future but of ARPA-E as to how you might spread that 
differently, what you might do differently in the process 
actually to reach, for example, minority serving research 
institutions, to spread out the range of types of small 
businesses that you are reaching. And I wonder, I think Mr. 
Denniston, if you could talk to me about the limitations of 
venture capital which underscores why we need to make a Federal 
investment in ARPA-E and innovation in research and technology? 
Dr. Majumdar first.
    Dr. Majumdar. I think the first round of the funding 
opportunity announcement was an open round, let us see what is 
out there in terms of ideas. And the second round that we are 
doing is more focused, and that has come about because of our 
workshops. And so it is the workshops that will bring people 
from different communities and bring them together so that we 
allow them to team together. And then they can form teams and 
actually compete.
    So that is the process that we are following, and maybe 
down the line we could have a few open ones as well because who 
knows, maybe there is an idea that doesn't quite fit into these 
boxes that we are creating. So that is something that we plan 
to do.
    Ms. Edwards. Well, I just want to also draw your attention, 
Bill Gates had a blog post, and in that blog post he said, you 
know, basically, what are we doing here? I mean, the future is 
in this kind of innovation, and we are way behind the curve, 
and we don't have any money in it. And so I think, again, that 
underscores what you are trying to do with this program in 
terms of, you know, not let the 1,000 flowers bloom because I 
understand risk-taking. But there is a fair amount of risk-
taking here, and that should be OK with us.
    Dr. Majumdar. Yes, I agree with you.
    Ms. Edwards. Mr. Denniston?
    Mr. Denniston. Yes. A wonderful question, again, 
Representative. The role that the venture capital industry has 
traditionally played in information technology in the life 
science industries is to look to invest in the phase after a 
technology's highest risk phase has been removed. That is what 
venture capital partnership investors are looking for, high 
probability results, higher technologies that have established 
a proof of principle. And so the challenge that the investment 
community in America is facing today, I use my baseball 
metaphor from before, is America isn't getting enough at-bats 
for renewable energy because the funding at the Federal level 
is dangerously deficient. The rest of the world is hitting home 
runs, we are way behind in market share, and if we don't find 
the funding, we will slip further.
    Ms. Edwards. And I heard your comments there about, you 
know, concerns around protectionism in terms of how you are 
moving and investing in these technologies. But I want to just 
draw your attention, I think a couple of months ago the 
Financial Times did a series about the kind of investment that 
Germany is making, deep financial investment, in lithium 
battery production. It is not protectionism. It is saying, you 
know, this is our money, this is our market. Let us grow it.
    Mr. Denniston. Yeah, let me elaborate if I may for a minute 
on that.
    Chairman Gordon. Or less.
    Mr. Denniston. Thirty seconds. The notion raised earlier is 
that we have to string our funding so that manufacturing can't 
go overseas. I think if we do that, as in tariffs, we can 
expect other countries to respond in kind. One of America's 
major assets is our entrepreneurs. And so if that is a result, 
then our entrepreneurs won't be able to license great 
technologies from overseas, and I would strongly suggest that 
Congress and this Committee think about that before we put 
strings on funding.
    Chairman Gordon. Mr. Denniston, we are in the ninth inning, 
and there are two minutes and 39 seconds left before we have to 
go before votes are concluded. So let me thank this Committee. 
I think you have made some good progress, and I will also say 
that the record will remain open for two weeks for additional 
statements from Members and for answers to any follow-up 
questions the Committee may ask of the witnesses. The witnesses 
are excused, and again, thank you for coming.
    [Whereupon, at 11:46 a.m., the Committee was adjourned.]
                              Appendix 1:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Arun Majumdar, Director, Advanced Research Projects 
        Agency-Energy (ARPA-E) 

Question submitted by Representative Ben R. Lujan

Q1.  Dr. Majumdar, thank you for testifying, the work you have done 
with ARPA-E in this short time is very impressive. In your testimony, 
you state that you would like to encourage many of the teams who did 
not get funded to return to ARPA-E with their ideas for future 
programs. Can you elaborate on what role you would like regional or 
geographical diversity to play in future funding opportunities and 
programs?

A1. ARPA-E does not consider regional or geographic diversity as a 
factor in evaluating or selecting proposals. Our mission is to fund the 
best ideas, regardless of their origin. Still, ARPA-E's recipients and 
subrecipients are located in nearly every state in the U.S.
    ARPA-E has invited many of the teams which were not selected for 
funding to participate in our technical workshops. Some of these 
workshops have led to new programs, and these teams have submitted 
proposals. We also invited teams that did not get funding to showcase 
their technology at the ARPA-E Energy Innovation Summit (held in March 
2010), and many of them used that opportunity.
    Some have suggested that we should organize regional mini-summits 
around the country to bring together local technical, entrepreneurial 
and investment communities. We are considering this idea. And, ARPA-E 
has begun to work with regional energy innovation clusters and other 
regional groups in more than a dozen states to support the development 
of energy technologies, similar to the highly productive regional 
clusters which formed around and encouraged growth in the information 
technology and life sciences sectors.

Questions from Representative Bob Inglis

Q1.  Have you experienced significant overlap between your program and 
existing programs at DOE? Has this been problematic for deciding which 
types of projects to support?

A1. We have not experienced significant overlap between ARPA-E's 
program and other programs at DOE. ARPA-E has a fundamentally different 
mission and function from other DOE programs: ARPA-E focuses on 
breakthroughs in technology; it funds the development of 
transformational energy technologies with high technical and market 
risks, but short-term R&D potential for game-changing results. For 
example, one ARPA-E project seeks to convert an aluminum manufacturing 
process into a liquid metal battery for grid-level electricity storage_
this approach is too application-oriented for the Office of Science and 
too high risk for applied energy offices.
    I would add that as ARPA-E organizes workshops, creates new 
programs and reviews proposals, we engage the relevant people from the 
Office of Science and the applied energy offices. This helps us avoid 
significant overlap between ARPA-E and other DOE programs, while 
allowing us to benefit from the expertise of other programs within DOE.
    It is helpful to differentiate ARPA-E's mission with the other two 
most closely related DOE initiatives_Energy Frontier Research Centers 
and Energy. ARPA-E funds small groups focused on breakthroughs in 
technology. ARPA-E uses a highly entrepreneurial funding model to 
support specific new technologies where a short-term R&D effort could 
deliver game-changing results. By contrast, Energy Innovation Hubs are 
large, multi-disciplinary, highly collaborative teams of scientists and 
engineers working over a longer time frame to achieve a specific high 
priority goal. They are led by top researchers with the knowledge, 
resources, and authority to nimbly guide efforts, seizing new 
opportunities or closing off unproductive lines of research. Energy 
Frontier Research Centers are small groups of researchers focused on 
breakthroughs in science. They are mostly university-led teams working 
to solve the specific scientific problems that are blocking clean 
energy development.
    We don't know where the big energy breakthroughs are going to come 
from_only what has worked in the past. To reach our energy goals, we 
must take a portfolio approach to R&D: pursuing several research 
strategies that have proven to be successful in the past. This work is 
being coordinated and prioritized, with a 360 degree view of the 
pieces, and these pieces fit together. Discovering new energy solutions 
will take smart collaborators pushing the frontiers of science. It will 
take risk-takers working out of their garages. It will take robust 
research teams on a mission. And it will take a Department of Energy 
that brings together the different parts of this research strategy to 
accelerate the innovation process.

Q2.  I have corresponded with Assistant Secretary Zoi about an 
innovative wind turbine designed by a constituent of my district. We 
agree that ARPA-E is an excellent platform for further research in this 
design. Is ARPA-E going to issue a funding opportunity announcement to 
support wind energy in the near future?

A2. ARPA-E is considering issuance of an open funding opportunity in FY 
2011 which, like ARPA-E's initial FOA, would allow proposals for any 
technology, including innovative wind turbines. We plan to hold 
workshops on high impact areas to determine if there are specific 
technological barriers around which we might structure a future funding 
opportunity announcement.

Questions from Ranking Member Ralph M. Hall

Q1.  The statutory charge for ARPA-E states that its goals should 
include pursuing energy technologies that (a) reduce our dependence on 
foreign energy and those that (b) reduce greenhouse gas emissions. 
Recognizing that there is some overlap between these goals_as you noted 
during hearing Q&A period_how do you prioritize between them? That is, 
if all other things are equal, how would you weigh the potential of a 
project to improve energy security versus its potential to reduce 
greenhouse gas emissions?

A1. Pursuant to its statute, ARPA-E prioritizes projects that will 
enhance the economic and energy security of the U.S. and ensure that 
the U.S. maintains a technological lead in developing and deploying 
advanced energy technologies. ARPA-E evaluates all proposals against 
these objectives. ARPA-E is investing in a portfolio of technologies 
that could work in synergy and address multiple goals. For example, 
ARPA-E is investing in next-generation batteries for transportation 
that could allow U.S. leadership in hybrid electric vehicles. But, 
these electric vehicles would also significantly increase demand for 
electricity. So, ARPA-E is also investing in new carbon capture 
technologies that could allow cleaner production of electricity from 
domestic coal. The combination of batteries for hybrid vehicles and 
carbon capture from coal power plants will enable the U.S. to: (i) use 
an increasing percentage of electricity for transportation, while 
decreasing dependence on imported oil; (ii) secure U.S. technological 
leadership in electric battery manufacturing; (iii) allow increased use 
of domestic coal for electricity generation with reduced greenhouse gas 
emissions.
    ARPA-E will look at our overall portfolio with the goal of creating 
programs and funding projects which will provide economic and energy 
security while simultaneously securing technological leadership. Since 
the major economies of the world (e.g., China) are heavily investing in 
clean energy technologies that reduce greenhouse gas emissions, any new 
APRA-E-funded clean energy technology would help the U.S. gain 
competitive leadership and enhance our economic security.

Q2.  In pursuing ARPA-E's statutory goal to reduce dependence on 
foreign energy, how much focus have you given (or will you give) to 
supply-side technologies that increase or enhance domestic energy 
development and production_including fossil fuels such as oil and 
natural gas_as opposed to those that reduce demand through increased 
efficiency, etc? How many proposals did you receive in this area, and 
what kind of priority did the topic receive in the evaluation process?

A2. Pursuant to its statute, ARPA-E prioritizes projects that will 
enhance the economic and energy security of the U.S. and ensure that 
the U.S. maintains a technological lead in developing and deploying 
advanced energy technologies. Nearly one-third of ARPA-E's projects are 
intended to enhance domestic energy development and production. For 
example, ARPA-E is funding the development of an innovative thermal-
mechanical drilling technology that will increase drilling rates up to 
10-fold relative to conventional drilling technologies. This increase 
in drilling efficiency will result in a significant reduction in 
drilling costs.
    In addition, ARPA-E is funding the development of a novel process 
for separating useful elements from refinery off-gas (ROG). It is 
difficult and expensive to separate the useful elements in ROG, so 
refineries typically burn the ROG rather than putting it to productive 
use. Because of the sheer scale of refining in the U.S., even seemingly 
insignificant inefficiencies add up to massive losses of potential 
fuel. This new process could allow 42 percent of ROG to be converted 
into approximately 46 million barrels of gasoline per year.

Q3.  A concern with the ARPA-E legislation in 2007 was its apparent 
vagueness of mission, particularly as it related to the various stages 
of research and the other R&D programs within DOE. Now that you are up 
and running, how would you characterize the mission and scope of ARPA-E 
in this context? Do you expect to primarily fund basic and foundational 
research, or early- or late-stage applied research, or 
commercialization, and what other criteria will drive the balance of 
your portfolio?
         Related to this, what funding criteria has been developed as 
        part of the requirement in section 501(e)(2) of the legislation 
        authorizing ARPA-E, and when do you expect to complete the 
        strategic vision roadmap required by section 5012(g)(2)?

A3. ARPA-E has a fundamentally different mission and function than 
other DOE programs. ARPA-E focuses on breakthroughs in technology. 
ARPA-E uses a highly entrepreneurial funding model to support specific 
new technologies that have high technical and financial risks, but 
where a short-term R&D effort could deliver game-changing results. For 
example, an ARPA-E project is converting an aluminum manufacturing 
process into a liquid metal battery for grid-level electricity storage_
this approach is too application-oriented for the Office of Science and 
perhaps too high risk for applied energy offices. This is what we 
define as the ARPA-E ``white-space.'' Recipients of ARPA-E funding 
include consortia of small businesses, universities, nonprofits, and 
others. Energy Innovation Hubs are large, multi-disciplinary, highly 
collaborative teams of scientists and engineers working over a longer 
time frame to achieve a specific high priority goal. They are led by 
top researchers with the knowledge, resources, and authority to nimbly 
guide efforts, seizing new opportunities or closing off unproductive 
lines of research.
    We don't know where the big energy breakthroughs are going to come 
from_only what has worked in the past. To reach our energy goals, we 
must take a portfolio approach to R&D: pursuing several research 
strategies that have proven to be successful in the past. This work is 
being coordinated and prioritized, with a 360 degree view of the 
pieces, and these pieces fit together. Discovering new energy solutions 
will take smart collaborators pushing the frontiers of science. It will 
take risk-takers working out of their garages. It will take robust 
research teams on a mission. And it will take a Department of Energy 
that brings together the different parts of this research strategy to 
accelerate the innovation process.
    By contrast, other DOE programs, such as Energy Frontier Research 
Centers, focus on breakthroughs in basic science. EFRCs, for example, 
consist of small teams of academics and others who work to solve 
specific scientific problems that are blocking clean energy 
development. As an example, one EFRC is working to improve our 
scientific understanding of the chemical reactions in battery 
electrodes.
    Pursuant to its statute, ARPA-E prioritizes projects that will 
enhance the economic and energy security of the U.S. and ensure that 
the U.S. maintains a technological lead in developing and deploying 
advanced energy technologies. ARPA-E evaluates all of the proposals 
that it receives to determine whether they will achieve these 
objectives.
    ARPA-E intends to complete the strategic vision roadmap by December 
15, 2010.

Q4.  Please elaborate upon an clarify your comments from the hearing 
regarding the tools available to and used by your office to encourage 
that technologies developed through ARPA-E funding are manufactured 
domestically, and, more generally, how we can best ensure that the 
benefits of ARPA-E-funded activities go to American citizens. More 
specifically, are there any restrictions that prohibit companies from 
manufacturing products developed through ARPA-E support outside of the 
U.S., and if so, what is the legal origin of these restrictions?

A4. ARPA-E requires small businesses to manufacture substantially in 
the U.S. any products used or sold in the U.S. that embody subject 
inventions (i.e., inventions that were first conceived or reduced to 
practice under the award). If the small business assigns or licenses 
intellectual property rights relating to the subject inventions, the 
assignees or licensees are required to manufacture substantially in the 
U.S. any products used or sold in the U.S. that embody the subject 
inventions.
    ARPA-E requires large businesses to manufacture substantially in 
the U.S. any products that embody subject inventions, whether they are 
used and sold in the U.S. or overseas. If the large business assigns or 
licenses intellectual property rights relating to the subject 
inventions, the assignees or licensees are required to manufacture 
substantially in the U.S. any products that embody subject inventions, 
whether they are used and sold in the U.S. or overseas.
    In both of the above circumstances, an award recipient for good 
cause may negotiate alternate legal obligations that provide a net 
benefit to the U.S. economy.
    These requirements exceeding any U.S. manufacturing requirements 
contained in any statute such as the Bayh-Dole Act or any other related 
Federal laws, or DOE regulations. They are reflective of DOE policy 
choices intended to maximize the benefit to the U.S. economy.

Q5.  What steps are you taking to ensure potential conflicts of 
interest in your proposal review and selection process are 
appropriately identified and addressed?

A5. ARPA-E requires all individuals who participate in the evaluation 
and selection of proposals to perform their duties with the highest 
standard of integrity and to avoid any actual or apparent conflicts of 
interest. ARPA-E requires all external individuals involved in the 
evaluation and selection of proposals to certify that they do not have 
potential conflicts of interest with any proposals. ARPA-E also 
requires these individuals to complete a nondisclosure agreement. 
Internal reviewers are subject to the conflict of interest statutes and 
regulations. They file financial disclosure reports and have received 
guidance from the Department's ethics officials concerning any 
conflicts that they may have.
    ARPA-E works closely with reviewers to identify potential conflicts 
of interest. Both internal and external reviewers are not allowed to 
access, review, or discuss any proposals for which they have potential 
conflicts of interest. ARPA-E's online review portal only allows 
reviewers to access and review proposals for which they do not have 
potential conflicts of interest. Both internal and external reviewers 
are also screened from discussions involving proposals for which they 
have potential conflicts of interest.

Question from Representative Adrian Smith

Q1.  The law establishing ARPA-E states that it should pursue ``high-
risk'' technological advances ``in areas that industry by itself is not 
likely to undertake''. This seems appropriate, and will presumably 
ensure that tax dollars don't compete with venture capital or other 
private equity, but rather are focused on advancing technologies 
through the ``valley of death'' that is too risky for private 
investment.
         Do you agree with this philosophy, and if so, what steps are 
        you taking during the application and review process to ensure 
        tax dollars are not spent on technologies where the risk is 
        already low enough to attract private investment? Among the 
        ARPA-E awards made thus far, did any go to companies that had 
        already received venture capital or private equity funding to 
        pursue the technology for which it received an ARPA-E award?

A1. I do agree with the philosophy outlined in the ARPA-E authorizing 
legislation. ARPA-E has a rigorous process for evaluating and selecting 
proposals. For its first funding opportunity, ARPA-E evaluated over 
3,700 concept papers, and selected only 37 submissions for award. ARPA-
E does not fund applications that are deemed to have low 
transformational value, meaning incremental improvements on existing 
technology. ARPA-E does not seek to ascend existing learning curves; 
instead, ARPA-E seeks to create entirely new learning curves. These 
types of projects have high technical and/or market uncertainty, and 
are not being funded by industry.
    We meet and communicate regularly with venture capitalists and 
other private investors to get a sense of their appetite for risk and 
the types of projects they are funding and not funding. In addition, I 
have hired staff with background in the venture capital industry in 
order to make more precise determinations of the types of high risk 
projects that are appropriate for ARPA-E to fund.
    Let me also explain through the figure below. The Office of Science 
funds research in basic science and, at times, feasibility of a basic 
idea or a concept. Private capital is generally available at Technology 
Readiness Levels when products can be made based on a technology, and 
customers are ready to buy such products. Therefore, from the concept 
feasibility stage to the product development stage, a big gap exists 
today where many good ideas perish because the concepts cannot be 
translated into technologies. When these technologies are disruptive 
and could make today's approaches obsolete, this translation of ideas 
to technology is too risky both for the private sector and the applied 
science offices in DOE, especially. ARPA-E's goal is to invest in 
translating such ideas and concepts into disruptive technologies and 
helping to make them market ready. Furthermore, ARPA-E will invest in 
multiple disruptive technological approaches to reach the same goal 
(e.g., high energy density, low-cost batteries for plug-in hybrid 
vehicles), and then let the private sector pick the winning technology 
based on what is best for business. Hence, ARPA-E's goal is to reduce 
technological risks at various stages of developing disruptive 
technologies.


                   Answers to Post-Hearing Questions
Responses by Chuck Vest, President, National Academy of Engineering 

Questions submitted by Ranking Member Ralph M. Hall

Q1.  As you know, the highest priority recommendation for research in 
the National Academies' ``Gathering Storm'' report was to increase 
funding for long-term basic research in the physical sciences_including 
the Office of Science at DOE_by 10 percent annually. In testimony 
before the S&T Committee in 2006, Gathering Storm committee member and 
then-Lawrence Berkeley national lab director Steven Chu stated that: 
``In funding ARPA-E, it is critical that its funding not jeopardize the 
basic research supported by the Department of Energy's Office of 
Science. The committee's recommendations are prioritized and its top 
recommendation in the area of research is to increase the funding for 
basic research by 10% per year over the next seven years.''
         In your opinion is this recommendation still valid, and should 
        the Office of Science remain the top research funding priority 
        at DOE?

A1. In my view, the DOE Office of Science should remain a high priority 
for funding, but so should ARPA-E. The Department of Energy (DOE) faces 
the enormous challenge of bringing new science, new technology, and 
above all, new players to stimulate and enable a national commitment to 
produce safe, secure, clean, and affordable energy in the 21st century. 
It must do so with full recognition that new scientific breakthroughs 
are needed, that such scientific breakthroughs must be translated into 
technologies that ultimately must be selected and implemented by the 
private sector, and that it is doing so within a DOE R&D budget that in 
real dollars is approximately 50 percent of what it was 30 years ago.
    Secretary Chu has approached this challenge by structuring an 
integrated approach to DOE research across fundamental physical science 
(Office of Science), frontier energy research (Energy Frontier Research 
Centers), breakthrough energy technology (ARPA-E), and large-scale 
multi-sector energy R&D (Energy Innovation Hubs). In my view, this 
integrated approach is both balanced and bold. The Office of Science 
funding provides America's ``seed corn'' of fundamental physical 
science as well as use-inspired basic science research that provides 
the foundation for transformational energy technology development. The 
Office of Science articulates well with the three integrated entities 
(EFRCs, ARPA-E, and EIHs) that together directly confront America's 
energy challenge, bringing to this task more of our best and brightest 
together from universities, the National Labs, the entrepreneurial 
community, and the business sector. It does not presuppose 
technological ``winners,'' and it provides balance across the spectrum 
of technology challenges from those, at one end of the spectrum, that 
are high-risk but with potentially high payoff to those at the other 
end of the spectrum that are low risk but important incremental 
technology improvements to help accelerate commercial adoption with 
many shades in between the two ends of the spectrum.
    To illustrate why I believe we need a new approach, and why ARPA-E 
was the sole new Federal entity recommended by the Gathering Storm 
Committee, let me cite the Academies 2002 report analyzing the relative 
effectiveness of DOE's energy efficiency, renewables, and fossil energy 
applied research programs, Energy Research at DOE: Was it Worth it? 
This report found that only a handful of research results produced 
benefits far exceeding the costs of carrying out the entirety of energy 
projects in those areas. The challenge is that despite the best of 
analysis it is impossible beforehand to select the handful of 
technologies that will deliver major benefits. It is even more 
difficult to pick those basic research areas that will ultimately yield 
transformational change, so seeking balance in dimensions of risk, 
scale and time is important.
    It is time for a new, balanced but bold approach, and that must 
include both the Office of Science and ARPA-E.

Q2.  Given the reality of dramatically increased budget pressures and 
the President's announcement to freeze non-defense discretionary 
spending for the next three years, how do you recommend Congress 
prioritize among DOE's Office of Science, applied technology programs, 
Energy Innovation Hubs, Energy Frontier Research Centers, and ARPA-E? 
Would you support funding ARPA-E if the only way to achieve it were by 
cutting DOE's other technology development programs such as EERE or the 
energy innovation Hubs, or are those programs more important?

A1. In the previous question I outlined the essential objective of 
maintaining balance and boldness across the overall DOE energy R&D 
portfolio in terms of risk, timing, and scale. Just as in the face of a 
major stock market change one wouldn't or shouldn't place all 
investments in high risk, and potentially high payoff stocks, a 
strategic approach to structuring the portfolio is essential to 
maintaining that balance.
    In my opinion, funding ARPA-E in the face of a possible 
discretionary budget freeze should not result in an automatic reduction 
in support of other components of the DOE R&D portfolio. This 
integrated portfolio should be thoughtfully rebalanced just as one 
would rebalance a stock portfolio. Meeting the energy challenge is 
essential to our economic viability and future employment base.
                   Answers to Post-Hearing Questions
Responses by Anthony Atti, President and CEO, Phononic Devices 

Questions submitted by Representative Ben R. Lujan

Q1.  Dr. Atti, in your testimony, you discuss the barriers you have 
faced to commercialization of your technology. For example, you mention 
market risk and state that if you build it, the customer won't always 
come. Can you comment on how ARPA-E can better support innovative 
energy research projects with commercial emphasis in order to minimize 
market risk and promote the commercialization of energy technology?

A1. In my experiences most government support of research and 
development focuses almost exclusively on technical development; namely 
the achievement of important scientific proof-of-concept principals. 
While the ARPA-E technical review was incredibly rigorous and thorough, 
most impressive was that almost 50% of the proposal was dedicated to 
business-oriented issues, including: target market size and specific 
opportunities; the identification of first market adopters; tangible 
impact on environmental remediation of either greenhouse gases or other 
pollutants; appropriate cost benchmarks through all stages of 
commercial development; and a roadmap for broad market penetration. 
These critical variables will help ensure that technical milestones and 
progress is in complete accordance with commercial expectations.
    I would encourage ARPA-E to solicit input from industry leaders, 
end-users, and best-in-class experts so that future technology 
solicitations will continue to track commercial targets. Furthermore I 
believe that a minimum cost share from the awardee will help to ensure 
that technical development is consistent with commercial goals.

Questions submitted by Representative Bob Inglis

Q1.  Do you see a role for ARPA-E in developing innovator-investor 
relationships outside of the grant issuing process? Do you think it is 
a reasonable goal for ARPA-E or DOE in general? If so, what would that 
role be?

A1. I believe ARPA-E should have the role of facilitator connecting 
innovators with investors outside the grant issuing process. For 
instance the ARPA-E summit on March 1-3rd, 2010 was an excellent 
example of how ARPA-E was able to provide a forum for awardee companies 
to profile their technologies. In this instance ARPA-E also gave space 
to companies that were not selected for an initial award as well; 
demonstrating that an award is not the only indicator of a good or 
investable idea. Considering that ARPA-E and the DOE have strong 
connections to energy-related industries and best-in-class experts I do 
believe that this is a reasonable goal. Too many government-supported 
research projects never achieve commercialization due to the fact that 
strategic partners are unaware of their research and/or venture capital 
tends to be regionalized and somewhat provincial in focus. As long as 
ARPA-E and the DOE avoid the appearance of choosing favorites or 
`winners', conferences or summits where innovators, investors and 
strategic leaders of industry can attend is a worthwhile objective.

Questions submitted by Representative Adrian Smith

Q1.  It seems based on your testimony that your company's technology 
has undergone several stages of development prior to receiving ARPA-E 
funding. Was that technology development funded by venture capital or 
other private investment, and if so, why wouldn't the private capital 
that supported the earlier stage development also support the shorter-
term commercialization needed to get your product to market?

A1. Phononic Devices has actually not undergone several stages of 
technical development or funding; I apologize if I left this 
impression. Our company was founded in October 2008, received a $1M 
financing from venture investors in February 2009, and only began 
scientific experiments later that year. Our technology is still very 
early in development and represents significant technical risk; it is 
highly unusual for a company at our stage of development to raise any 
venture capital financing at this stage. Our original projections 
planned on prototype demonstration and subsequent first market adopter 
sales in late 2012 or early 2013. The ARPA-E award coupled with another 
$1M in venture financing as part of our required cost share allows us 
to accelerate our development schedule to 2011 instead. ARPA-E 
represented an important independent assessment of our technology 
development approach and thus allowed us to better leverage private 
capital to accelerate time-to-market.
                   Answers to Post-Hearing Questions
Responses by John Denniston, Partner, Kleiner Perkins Caufield & Byers 

Questions submitted by Representative Bob Inglis

Q1.  Do you find it problematic that, unlike DARPA, ARPA-E does not 
have a specific customer for its products? In other words, do you think 
that the market will be receptive to ARPA-E technologies, or is the 
government taking on a risk better left to the private sector?

A1. On your first question, no, I don't. In my view, DARPA's key 
innovation wasn't to create a single-customer relationship, but rather 
to pioneer a model of ``translational'' research, in which the agency 
would anticipate its customer's needs_in this case, the DOD's military 
objectives_and direct government funds to research institutions and 
defense contractors, in a competitive process, to invent advanced 
technologies to achieve them.
    This is precisely the methodology ARPA-E is now deploying. Yet 
instead of engaging with a single customer, ARPA-E personnel join 
forces with numerous potential customers and collaborators in the 
energy and investment industries to establish the agency's funding 
priorities. Even in the absence of industry feedback, ARPA-E's 
management is well aware the private sector will eagerly embrace 
innovations with obvious commercial potential, such as solar power at 
grid parity cost and advanced batteries that triple electric vehicle 
mileage. Of course, as was the case with DARPA, the innovators who win 
ARPA-E funding will need to demonstrate the viability of their 
technologies before selling products.
    As to whether the Federal Government is taking on a risk better 
left to the private sector, I must point out that basic research 
funding has never been the central focus of the private sector, nor is 
there reason to believe that it will be in the future. Extending ARPA-
E's charter would ramp up U.S. basic research for breakthrough energy 
technologies which are in high demand by the private sector.

Q2.  Do you see a role for ARPA-E in developing innovator-investor 
relationships outside of the grant-issuing process? Do you think this 
is a reasonable goal for APRA-E or DOE in general? If so, what would 
that role be?

A2. I do indeed see such a role for ARPA-E, and would argue that it's 
more than a reasonable goal; it's a necessary one. Fortunately, ARPA-
E's forward-thinking managers are already pursuing this strategy. From 
March 1-3 in Washington, the agency held a hugely successful 
``Innovation Summit,'' with support from the National Venture Capital 
Association. The meeting drew about 1,700 energy industry leaders, 
including researchers, investors, and entrepreneurs, from 15 countries 
and 49 U.S. states. The summit highlighted the agency's first round of 
37 winning research projects (selected from a pool of nearly 3,700), 
and featured discussion about how to identify and successfully develop 
and commercialize game-changing technologies. By bringing innovators 
and investors together, the DOE and ARPA-E can catalyze energy 
breakthroughs, and in so doing, help secure America's energy future.
                   Answers to Post-Hearing Questions
Responses by Michael A. Blaustein, Technology Director, Science and 
        Technology Strategic Planning, for John Pierce, Vice President, 
        Dupont Applied Sciences in Biotechnology 

Questions submitted by Representative Bob Inglis

    Thank you for your e-mail note to Dr. John Pierce, regarding the 
question that was raised by Congressman Bob Inglis at the January 27 
hearing regarding ARPA-E. I am responding on behalf of Dr. Pierce who 
has since retired from DuPont.

Q1.  Do you see a role for ARPA-E in developing investor-innovator 
relationships outside the grant-issuing process? Do you think this is a 
reasonable goal for ARPA-E or DOE in general? If so, what would that 
role be?

A1. The successful commercialization of breakthrough innovations in 
many technology arenas increasingly requires the active networking of 
several stakeholders, who collectively enable the translation of 
creative concepts into sustainable solutions. The investor community 
(VCs and corporations) are a natural part of such communities of 
interest.
    ARPA-E (like DARPA) is uniquely positioned to create such 
productive networks. The mission and role of ARPA-E in the innovation 
ecosystem makes it a natural focal point for many creative ideas from 
many sources. Thus, ARPA-E can achieve a wider view of what is possible 
than most individual players. From the wide range of ideas and 
proposals it receives, the agency is ideally positioned to identify 
parties with shared interests and complementary capabilities, and to 
create a richer, stronger and more robust pool of technology options by 
enabling combinations of these interests and capabilities that go 
beyond the issuance of grants.
    While it is important to maintain the confidentiality of specific 
ideas, it should be possible for ARPA-E to act both as a clearinghouse 
and as a matchmaker to bring together parties with shared interests, 
and to ensure that the innovation process_from idea generation through 
R&D to commercial development_takes full advantage of potential 
synergies between different players. ARPA-E's sister agency, DARPA, 
already has a reputation for being an effective enabler of such 
networks.
    In light of the above, I strongly recommend that mechanisms should 
be explored that will permit ARPA-E to play this important role as an 
enabler of collaborative innovations. Most importantly, this 
facilitative role needs to be explicitly acknowledged in ARPA-E's 
charter. The implementation of this role is more tactical in nature. 
Possible actions could include workshops involving diverse groups of 
potential collaborators organized by ARPA-E to brainstorm specific 
ideas before a call for proposals is issued, or targeted meetings to 
discuss specific technology concepts that emerge as common themes 
within the proposals received in response to a BAA or FOA. This will 
require a lot of personal initiative and proactive matchmaking on the 
part of the individual program managers, but we believe this is 
achievable.
                              Appendix 2:

                              ----------                              


                   Additional Material for the Record




 Statement of William J. Perry, 19th United States Secretary of Defense
    Chairman Gordon, Ranking Member Hall, and Members of the Committee, 
I want to thank you for the opportunity to present my perspective from 
a different vantage point on The Advanced Research Projects Agency-
Energy (ARPA-E): Assessing the Agency's Progress and Promise in 
Transforming the U.S. Energy Innovation System. ARPA-E is modeled after 
Defense Advanced Research Projects Agency (DARPA) at the Department of 
Defense (DOD). I should note that I have had significant experience 
working with DARPA. Much of the success during my tenures at the DOD 
and those of this country's current military strategy are due to the 
technologies that resulted from DARPA.
    As you may know, first as Undersecretary of Defense for Research 
and Engineering (DDR&E) (1977-1981), as Deputy Secretary of Defense 
(1993-1994), and then as Secretary of Defense (1994-1997), I know first 
hand how instrumental research organizations like DARPA are in solving 
great challenges the Nation faces. DARPA was created in 1958 in 
response to the launch of Sputnik by the Soviet Union and that 
country's growing military capacity after World War II. It was meant to 
ensure that America would not fall behind in transformational 
technologies. The political and defense communities recognized the need 
for a high-level defense organization to formulate and execute R&D 
projects that would expand the frontiers of technology beyond the 
immediate and specific requirements of the Military Services and their 
laboratories. Ominously, during the Cold War, the Soviets managed to 
build tanks, aircraft, and guns at a rate of about three times that of 
the United States and by the mid-1970s, they had achieved parity in 
nuclear weapons as well.
    The United States sought a strategy to restore the conventional 
military balance and this committee, along with several other Members 
of Congress, were key to seeing the need and creating a proposed 
solution. This effort was led by then-U.S. Secretary of Defense, Harold 
Brown, who held that position in the late 1970s. His approach was to 
develop high-technology systems that could give our military forces a 
qualitative advantage able to offset the quantitative advantage of the 
Soviet forces. Not surprisingly, this approach was called the ``Offset 
Strategy.'' At the time, I was Undersecretary of Defense for Research 
and Engineering and Secretary Brown gave me the responsibility and the 
authority to achieve this objective.

1. The DARPA Example

    Very early in my tenure, I went to DARPA for detailed briefings on 
evolutionary technologies that were to be the concept of the Offset 
Strategy. I was so impressed and saw such potential in transforming the 
defense industry landscape that I told the DARPA director he would have 
all the resources needed to prove out the concept as quickly as 
possible. The ultimate success of this Offset Strategy depended on 
three closely related components: (1) a new family of intelligence 
centers that could identify and locate in real time all the enemy 
forces in the battle area; (2) the development of ``smart weapons;'' 
and (3) the design of stealth aircraft and ships. Taken together, this 
new system of systems was initiated by the DARPA program and developed 
with the highest priority during the late 1970s, produced in the early 
1980s, and entered into the force in the late 1980s, just in time for 
Desert Storm.
    The results were nothing short of spectacular. It allowed the U.S. 
to change the rules of conventional warfare in a manner that many 
consider to be the forefront of a broad ``Revolution in Military 
Affairs'' (RMA). It also proved as a model to assemble the greatest 
minds in science and technology with industry and investors and bring 
products to the marketplace expeditiously.

2. ARPA-E

    Why do I detail this example above? Because it is exactly what DOE 
seeks to do with the technologies discovered through ARPA-E_transform 
the energy landscape by focusing on creative ``out of the box'' 
transformational energy research that industry by itself cannot or will 
not support due to its high risk, but where success would provide 
dramatic benefits for the nation. The need for energy innovation is 
profound. Like DARPA was driven by the Soviets' threat, ARPA-E seeks to 
face head-on the challenges of (a) energy security; (b) U.S. 
technological lead; and (c) greenhouse gas emissions and climate 
change.
    ARPA-E's strength as an organization is in its structure, or lack 
thereof. The agency owns no facilities and has no infrastructure that 
requires long-term programs for support. Instead, it pursues high-risk, 
high-payoff research through short-term projects with aggressive 
technical goals. Program Directors stay on for a limited amount time, 
and as a result there is personal pressure to advance the state of the 
art on very aggressive timelines that result in the engine of 
innovation.
    ARPA-E, also like DARPA, will bridge the ``valley of death'' and 
leapfrog over today's technologies. At the time of DARPA's 
establishment, it was felt that the U.S. had lost its technological 
lead, and that the Nation needed an organization that would invest in 
high-risk, high-reward R&D and connect technological innovation to 
business, which would then support the defense industry. Today, ARPA-E 
is working to streamline this process for the energy sector. Its goal 
is to require that technologies demonstrate success sufficiently to 
reduce the risk for further large-scale investments.
    This committee has recognized that our nation needs to invest in 
researchers, scientists, engineers, and technologies to address these 
and other global challenges. I have had the opportunity to spend time 
with the ARPA-E director, Arun Majumdar, and his team to understand how 
they are planning to build this organization, what kind of innovations 
they are introducing, and how they operate. I can assure you that they 
have certainly exceeded my expectations. In less than a year they have 
all the key ingredients that would place them on a road to success and 
they are off to a great start. While they have adopted the best 
practices of DARPA, they have also identified the significant 
differences between the defense and energy sectors of our economy, and 
have adapted ARPA-E to address the issues unique to the energy sector.
    An initiative that is new to the ARPA model, and a program I am 
particularly enthusiastic about, is the ARPA-E Fellows Program. This 
program will utilize the nations highly energized youth in colleges and 
universities who are deeply engaged in energy and the environment, and 
allows for them to serve our nation. Today, students are breaking the 
barriers between science, engineering, business, law, and public policy 
and are working together in energy. The ARPA-E Fellows Program brings a 
freshness, excitement, and sense of mission to energy research that 
will attract many of the U.S.'s best and brightest minds_those of 
experienced scientists and engineers, and especially those of students 
and young researchers, including persons in the entrepreneurial world.

3. Conclusion

    It is with this first hand experience that I write to you today 
about the importance of continued support of the Department of Energy's 
Advance Research Projects Agency-Energy. As I did with DARPA's director 
in the late 1970s by giving him all the resources needed to prove new 
defense technologies as quickly as possible, Secretary of Energy Steven 
Chu is attempting to do the same with ARPA-E and Director Arun 
Majumdar. This can only be done with this committee's support to 
reauthorize the America COMPETES Act.
    If properly supported, ARPA-E can make great strides in facing the 
threats which, if not addressed quickly, could lead to a drain on our 
economy, an uncertain future of relying on other countries for our 
energy demands, and negative impacts to our natural resources. Time and 
again the combination of investment in innovation and the nation's 
brightest minds and can-do spirit has led to new eras of our country. 
DARPA has proven that the model works and investments in science 
innovation such as in ARPA-E could well create a modem day industrial 
revolution. Furthermore, I am certain ARPA-E could bring much needed 
engines to spur our economy and retake our position as technological 
leader. As Chairman Bart Gordon stated in an interview two weeks ago 
(E&E Daily, Jan. 15), ``[ARPA-E] is a major innovation initiative as 
well as work force development . . . .Substantively, America COMPETES 
creates a model for an innovation agenda.'' I could not agree more.
    Thank you again for the opportunity to submit this statement for 
the record. I hope that my comments will be useful to the committee.

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