ARPA-E dodges a bullet

What Utilities Gain From Advanced
Research Projects Agency-Energy

Advanced Research Projects Agency-Energy (ARPA-E) was created to provide access to funding for energy industry innovation. With the signing of the U.S. spending bill, ARPA-E dodged a bullet. This is a good thing for utilities.

Despite the common misperception that the agency is about only renewable companies, utilities and manufacturers also have benefitted from ARPA-E. A few companies born out of agency projects now provide products directly to the utility industry; other utility-related innovations are still in gestation. It makes sense for utilities to review what ARPA-E provides.

A bill proposed in the House last summer would have decommissioned the agency, using remaining money from the $306 million budget received in 2017 to “conduct an orderly shutdown.” In 2018, the House will conduct hearings on the Department of Energy’s (DOE’s) modernization. Nevertheless, the Senate will keep ARPA-E and fund the agency at $330 million. The budget proposed by the Trump administration in February 2018 proposed “to eliminate the ARPA-E program, recognizing the private sector’s primary role in taking risks to commercialize breakthrough energy technolgies with real market potential.” The omnibus spending bill passed by Congress, however, gives ARPA-E a 60 percent budget increase.

ARPA-E’s History

ARPA-E was created in 2007 under President George W. Bush and funded through the American Reinvestment and Recovery Act of 2009. ARPA-E was modelled after Defense Advanced Research Projects (DARPA), the Department of Defense’s engine for stimulating technology innovation for the military. ARPA-E’s mission is to ease the transition of innovation from concept to commercialization. The idea is to ensure that the U.S. maintains a technological lead in advanced energy technologies. As of 2016, according to National Academies of Sciences, Engineering and Medicine, ARPA-E had received funding authorizations totaling $1.6 billion for early stage projects—ideas are “projects” and not yet start-up companies—not including 20 percent cost sharing with sponsors.

DARPA and ARPA-E were not designed to deliver viable companies for each project. The nature of early stage funding is that it is not clear at the beginning exactly what practical applications will emerge. Typically, only one or two out of 20 ideas materialize. It is difficult to predict what will break-through. For example, 15 years from now, will wind turbines or ocean wave generators be commonplace? Even if a concept does not end up evolving to become a viable company, what is learned in the process can be valuable to other companies’ product development.

It’s Not Easy Getting a Hand Up

Financing early stage energy technology is not easy. ARPA-E projects are too far along for academic funding, but not far enough along for venture capital (VC) or corporate investment. Basic and applied research are supported by grants, but funding does not extend to proof-of-concept and prototyping—often referred to as the technology or feasibility “valley of death” (see Figure 1).

It’s hard for energy innovations to attract VC investment compared to other sectors, such as software and medical technology. Energy technologies take a long time to commercialize and even longer to become profitable. Projects are typically about science and hardware, such as PV cells, electronic switches, high capacity transmission lines and battery storage, that require many iterations to create a viable prototype. VCs shy away from inefficient capital—investments that are risky and take a long time to make a return. VCs are more likely to invest in a later-stage company that needs help with manufacturing scale-up, business model development and market traction.

Corporations are also risk averse and not as nimble as start-ups. A corporation might incubate one or two ideas in-house, but often won’t take on the risk of multiple innovations. Instead, they would rather fund late stage start-ups or acquire them. There are, however, a growing number of corporations that have venture funds. One example is Jet Blue, which is funding an experimental electric airplane. Its investment is about strategy more than return.

figure 1 : Gaps in Funding and Assistance for Energy Innovations

That said, strategic goals target a corporation’s own market and individual utilities have been reluctant to invest in early stage energy technology, despite knowing that in five to 10 years new technology will be needed. There are limited ways to recoup investments in prototypes. Utilities have a responsibility to customers and shareholders to invest wisely and regulators often are reluctant to approve large requests for investment in research and development (R&D). Southern Co.’s Energy Innovation Center is one of the few examples of an individual utility investing in R&D.

Unlike Silicon Valley, where the mantra is fail fast, learn and move on, utilities can’t fail when it comes to the grid and keeping the lights on. Grid technology is interdependent. Technologies that are tested in lab settings might not be able to scale in the field. The addition of distributed energy resources (DER) adds to the complexity, making field scalability and testing even more important.

Other utility-related organizations exist that complement ARPA-E, such as the Electric Power Research Institute (EPRI) and the Energy Innovation Program (EIP). EPRI was founded to provide R&D to utilities and EIP is a consortium of 14 utilities that saw the need to work collaboratively to develop innovative energy technologies.

These organizations, however, do not fill the gap that would be left if ARPA-E is eliminated. EPRI’s expertise is mainly electrical engineering, where ARPA-E has broader access to many other disciplines, such as material science, mechanical engineering and chemistry. In fact, ARPA-E funds some EPRI projects. Unlike ARPA-E which funds early stage concepts and projects, EIP helps later stage companies with revenues of $5 million to $10 million and sometimes more, upscale their business. ARPA-E also contributes to EIPs investment pipeline.

ARPA-E is, however, about more than funding. The agency provides engineering and technical assistance to help companies transition toward commercialization.

“Technical assistance is critical to getting projects to the next stage,” said James Schulte of EIP. “APRA-E mentors, coaches and guides each project, bringing to bear resources that are relevant to the energy industry.”

The Connection Between Utilities and ARPA-E

ARPA-E programs are really a collection of projects. About 70 percent to 80 percent of them impact utilities in a positive way. The impact can be direct or indirect. Directly applicable technologies end up in products purchased by utilities to improve generation and transmission and distribution grid operations. An example of a direct impact would be new types of semiconductors that are installed in electrical switches to more efficiently control electricity flow across high-voltage electrical lines. Indirectly applicable projects increase utility revenues or reduce costs. These are typically technology-based products that are purchased by end-use customers, manufacturers, third-party energy providers or a combination thereof.

TABLE 1 : Utility Priorities and ARPA-E Funded Technology Projects

Priorities

Type of Utility

Examples of Technology

System energy efficiency

Transmission and distribution(T&D) utilities

High-power superconductors; high performance computing for real-time transmission congestion management; optical high voltage switching; advancing long duration and seasonal energy storage; improvements in grid-scale energy storage management; demand response management systems; micro-phasor measurement units

Power generation improvements

Vertically integrated utilities, merchant generators

Air cooling technology for thermo-electric generating plants; thermal energy storage for nuclear power plants; increasing the efficiency of utility-scale electric power converters; supercritical fluid cooling for gas turbines

Resiliency

T&D utilities

Microgrid control technologies; grid modeling databases; testing of grid-scale storage; secure communications for automated switching

Reduced emissions

Vertically integrated utilities, merchant generators

Nuclear fusion; advanced carbon capture for coal plants; increased efficiency of PV cells; increased efficiency of wind turbines

Integrating distributed energy resources

T&D utilities with growing penetration of renewables

Improvements in grid-scale energy storage and energy storage management; increased efficiency of utility-scale electric power converters

Renewable power options

Regulated utilities and unregulated utility divisions

Hybrid photo-voltaic (PV) and concentrated solar power (CSP)

Safety and security

All utilities

Methane monitoring technology; grid cybersecurity models

End-use customer energy efficiency

Utilities with corporate goals, state mandates or incentives for energy efficiency

Power conversion efficiency in consumer appliances; advances in building cooling technologies; improving data center energy efficiency; lower cost window films; more efficient LEDs; fully automated energy audit using portable scanning; adjustable insulating clothing

Increased energy sales

Electric utilities, gas utilities

Electric vehicle battery storage; residential gas-fired CHP; natural gas fueled vehicles

New revenue streams

Regulated utilities and unregulated utility divisions

Electro-fuels produced from electricity or chemicals; software to determine when DERs can be optimally bid into wholesale markets; DSO design tools

A few more examples can help with the distinction. Nuclear fusion research is directly applicable, although perhaps not soon, to vertical utilities wanting an alternative to fission. Technology advances in in power line sensors and electronic low voltage regulators will help Hawaiian utilities facing a high penetration of intermittent PV solar. These types of technologies also might be used to help manage grid operations in states where renewable penetration is not as substantial.

ARPA-E can directly impact the evolving energy market. In the face of declining revenues, utilities are exploring new business models, such as becoming distribution system operators or earning revenue from bidding aggregated demand response into the wholesale market. These strategies require new sets of enabling technologies.

Indirect benefits include technology that advances power converter efficiency in LED lighting. End-users purchase LED products, but utilities benefit by helping customers improve energy efficiency, especially in states with energy efficiency resource initiatives. Electric vehicles increase electricity sales, but this also is in indirect benefit because lithium ion batteries are purchased by auto manufacturers.

Not all utilities’ priorities are the same. Table 1 associates utility priorities with technology development funded through ARPA-E.

Fitting Innovative Technology to the Industry

ARPA-E’s biggest advantage is facilitating the evolution from concept to products. Utilities purchase from trusted companies because their products have been proven through years of safe operation in the field. ARPA-E vetting and funding provides the cachet needed to open utility doors to innovative projects.

APRA-E provides an opportunity for utilities to help develop technologies that will meet industry needs. The agency actively encourages utility participation on advisory boards. Utilities inform prototype testing in a lab setting. Although the agency does not fund demonstration projects, ARPA-E helps “graduating” projects partner with utilities to test scalability.

Following are some examples demonstrating ARPA-E’s success:

AutoGrid—Power Flow to Distributed Resource Management System. Based on an initial start with funding from Stanford for power flow research, AutoGrid received a $3.5 million grant from ARPA-E to develop technology to manage renewables on the grid. AutoGrid has raised close to $22 million in follow-on funding from multiple investors, including EIP. Over the course of the project, AutoGrid evolved their original concept to produce a software as a service demand response platform to forecast supply and demand fluctuations. The product has gained traction with electric utilities such as Bonneville Power and the City of Palo Alto. In addition, National Grid engaged AutoGrid to support demand response for its gas customers. AutoGrid is extending its offerings to include other DER and virtual power plants.

“Overall ARPA-E’s reputation and extensive vetting process was instrumental for AutoGrid’s funding and credibility,” said AutoGrid’s Shane O’Quinn.

Smart Wires—Testing a Utility Concept. Smart Wires received a $3.9 million grant from ARPA-E from 2012 to 2014 to develop distributed power flow control for high-voltage transmission lines. The goal was to more efficiently increase impedance, diminish power flow on overloaded lines and redirect flow to lines with capacity. The concept was germinated at Georgia Tech by a group of utilities. ARPA-E funded the rigorous testing needed to meet industry standards. The company has since raised $50 million in additional funding and has technology deployed at EirGrid (Ireland), RTE (Ireland), Tennessee Valley Authority, Southern Co., Pacific Gas & Electric, Minnesota Power and TransGrid.

Advancing the Industry

Not every project ends up as a commercial product. One example is the BetterGrids Data Repository, which is a knowledge sharing entity that helps capture data and models as engineers retire. The repository is a free library of public grid models and research test data developed by GridBright with funding from ARPA-E. The database is maintained by the nonprofit BetterGrids Foundation, which relies on its members to contribute and update models. Detailed grid data and models are validated and anonymized. Researchers and engineers use the repository to collaborate and share information vital to maintaining grid optimization and reliability.

Why ARPA-E?

Unlike most other government agencies, ARPA-E’s structure was designed to streamline initiation and termination of projects based on performance. If ARPA-E determines that a project is not feasible, it is terminated quicker than it might have been under traditional DOE programs. The DOE, with line items in the federal budget, is restricted to the budgeting cycle. In that sense, too, ARPA-E has flexibility in where it focuses investment, making its priorities more susceptible to changes in the executive branch. That could be a plus for some or a minus for clean tech if the bulk of funding goes to fossil fuel research.

ARPA-E has flexibility to fund a wide variety of organizations—academic organizations, national labs, startups, corporations and more.

The Way Forward

Utilities would do well to learn about ARPA-E. Utility executives should take time to learn from their internal R&D and emerging technologies business units about the potential value of ARPA-E funded projects. It makes sense for utilities to be involved with on-going ARPA-E projects to help identify practical technology applications. In the long run, government investment in early stage technology moves industry forward and, at the time of this writing, ARPA-E solicitations are still going forward.

“The industry is good at knowable data and systems, but doesn’t know what it doesn’t know. As a big incumbent, the risks are asymmetric, but even so there is a need to explore the unknowable,” said EIP’s Schulte. “It is better to be involved with change in the industry and incorporate the change in a way that is good for your customers and good for the system.” | PGI

Jill Feblowitz is founder of Feblowitz Energy Consulting and an internationally recognized expert on innovation in the energy industry. With over 30 years of experience leading research and delivering consulting projects, Feblowitz provides advice to energy companies in the areas of energy markets, business models, operations, policy, regulation and technologies.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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