Among the 2,500 attendees at the Department of Energy’s third annual innovation conference, held in a Washington, D.C., suburb in February were hordes of mid-level government scientists, academics and private-sector entrepreneurs well-versed in the highly experimental research topics that packed the agenda. Notably, also in attendance were senior Members of the House and Senate, Microsoft Chairman Bill Gates and other business leaders, as well as President Bill Clinton, who delivered the keynote speech on the closing day.

The presence of such high-profile figures highlights the buzz surrounding the small DOE office sponsoring the event, the Advanced Research Projects Agency — Energy, commonly referred to by the less wieldy acronym ARPA-E.  

Now entering its fourth year in existence, the agency has won early praise from many corners for its efforts to fulfill its Congressionally mandated mission — supporting high-risk, high-reward research into transformational energy technologies in which the private sector is unlikely to invest. “There’s probably no agency that is so small that has gotten the type of attention that ARPA-E has,” said former Rep. Bart Gordon, who helped create the agency when he was chairman of the House Science, Space and Technology Committee. (The Tennessee Democrat retired two years ago and is now at K&L Gates, a lobbying and law firm that specializes in high-tech and energy clients.)

 Since its launch in April 2009, ARPA-E has distributed $522 million to 181 projects across 12 research areas, including biofuels, energy storage, transmission and technology for capturing carbon dioxide emissions from coal-fired power plants. And the agency maintains that it’s getting results, noting that 11 projects that received a total of $40 million were able to demonstrate enough progress to attract $200 million in private-sector investment.

Its success, as well as widespread praise for the methods in which it awards funding, has caught the attention of Members of Congress from both parties, helping the agency land more than $900 million in appropriations since its creation. The figure includes more than $450 million in the current Congress — a notable amount given the intense deficit focus and widespread GOP suspicion of federal energy spending after the high-profile failure of Solyndra, the solar panel maker that filed for bankruptcy last year after receiving $535 million in federally backed loans.

Despite an auspicious start, serious hurdles remain for ARPA-E. Questions about its necessity and effectiveness have dogged the program from the beginning, almost derailing its reauthorization two years ago. Many observers say the federal government should be spending far more on energy research, which Gates recently estimated should be at least twice the current levels. “It’s crazy how little we’re funding this energy stuff,” he said at the ARPA-E conference in February. Yet maintaining even current funding levels remains a challenge. Gordon said a single poor showing in the annual appropriations process would be devastating for ARPA-E,
which was created to attract top talent from within and outside government for two- to three-year stints. “You have one bad year and you lose the people,” he said. “If you lose them, then the whole program goes away.”

Gathering Storm

The foundation for ARPA-E was laid in 2005, when the National Academy of Science released a landmark study on U.S. economic competitiveness. The report, “Rising Above the Gathering Storm,” carried a blunt warning that the nation’s advantages in competitiveness were at risk of falling behind other nations without a greater emphasis on improving education in math and sciences at all levels, as well as government research across multiple disciplines. Included among the many recommendations for forestalling decline was the creation of a new federal agency focused on “transformational research that could lead to new ways of fueling the nation and its economy” in a sustainable manner.

The recommended prototype for the new agency was the Defense Advanced Research Projects Agency, created at the Pentagon in 1958 as an in-house lab for testing military technologies. The agency, known universally as DARPA, is considered a resounding success in most circles; it’s credited with fostering technologies that led to the Internet and GPS, as well as the rockets that first carried Americans to the moon.

“We don’t know whether ARPA-E will be successful, but it wouldn’t have to be nearly as successful as DARPA to be a great success,” said Sen. Lamar Alexander, a Tennessee Republican who was among the lawmakers who requested the NAS review that produced the “Gathering Storm” report. During a March hearing on the DOE’s budget request for the coming year, Alexander called ARPA-E’s initial efforts worthy of continued federal investment. “The early signs are promising,” he told Secretary of Energy Steven Chu, who was a Nobel laureate physicist when he served on the NAS panel that recommended the program’s creation.

In an appearance before House appropriators last month, ARPA-E Director Arun Majumdar described the agency’s work as a continuation of the long-standing American tradition of leading global innovation. “We invented the future using technology innovations based on our strong foundations in science and engineering,” he said, citing the invention of the airplane by the Wright Brothers and the polio vaccine by Jonas Salk. “These and many other innovations by our parents and grandparents created a better and more secure life for all of us. ARPA-E’s goal is to catalyze similar innovations in the energy sector so that our children and grandchildren have a better future than we do.”

Among the early technology successes supported by ARPA-E that he cited is a rechargeable lithium-ion battery that holds double the energy of existing models — an improvement that could halve the cost of the expensive batteries that remain a key obstacle to widespread commercial deployment of electric cars. A separate project is attempting to insert genes from slow-growing, oil-producing algae into tobacco plants, which can thrive even in poor soil. If successful, Majumdar noted, the technology could help struggling tobacco farmers while cutting oil imports.

And a North Carolina company funded by ARPA-E is developing a type of electric transformer that weighs a fraction of current models, which Majumdar likened to a “quantum leap” for aging power distribution systems. Because the technology is based on a material whose production is dominated by U.S manufacturers, the project holds huge potential for export markets.

In its fiscal 2013 budget request — which seeks $325 million, a 27 percent increase over its current funding level — ARPA-E says it’s planning a new emphasis on technologies capable of transforming transportation, including natural gas conversion, advanced biofuels and batteries for hybrid and electric vehicles. The DOE spending bill unveiled last week by House Republicans would hand just $200 million to ARPA-E.

Just as DARPA is often linked to the creation of the Internet, Gordon said it’s only a matter of time before ARPA-E has its own technology breakthrough. “I truly believe there will be an ‘energy Internet’ type moment at some point,” he said. “But it is still very fragile.”

Lingering Skepticism

Doubts have surrounded ARPA-E from the moment the “Gathering Storm” report was first released. Many GOP lawmakers feared ARPA-E would absorb funding for basic research from DOE’s popular Office of Science or duplicate other energy programs within the department’s ranks, including at the Office of Energy Efficiency and Renewable Energy. Additionally, skeptics expressed concern that ARPA-E would end up supporting late-stage technologies already capable of attracting private-sector dollars.

But after taking control of the House in 2007, Democrats succeeded in adding provisions creating ARPA-E to a broad legislative package intended to boost U.S. competitiveness. While President George W. Bush signed the law in 2007, his administration opposed the creation of ARPA-E and never sought funding to get it off the ground. As a result, the agency did not officially launch until April 2009, after the Obama administration and Congressional Democrats included $400 million in seed money in the economic stimulus.

After taking back control of the House last year, Republicans began to scrutinize ARPA-E’s record. While acknowledging general support for the agency’s goal of supporting breakthrough technologies, Republican Rep. Paul Broun (Ga.) earlier this year noted that questions persists about ARPA-E’s role and methods for supporting technologies.

Doubts about the agency were reinforced for some by a January report for the House Science, Space and Technology Subcommittee on Investigations and Oversight, which Broun chairs. The report cited instances of companies that had previously received private-sector dollars for technologies similar to those that had also benefited from ARPA-E awards. Some of the companies freely acknowledged that they planned to combine their federal award with venture capital funds to accelerate product development.

Majumdar acknowledged that some firms had previously attracted private capital, but he said it had been to support “low-risk” ideas. “We have never funded any idea that has been funded by the private sector,” he told Broun at a January hearing.

While ARPA-E has generally fared relatively well in the appropriations process since its creation, mounting concerns over authorized spending levels and debt nearly tripped up a broad 2010 reauthorization of the law that created the agency. The measure ultimately squeaked through Congress but only with a significantly pared-back spending level.

Gordon said such difficulties highlight the precarious state ARPA-E finds itself in.

“When you have that energy Internet moment in 10 or 15 years, you look back at it and think, ‘Gosh, it could have been knocked out by one vote,’” he said.