Executive Summary

Since it was established in 1977, the Office of Industrial Technology (OIT) of the U.S. Department of Energy (DOE) has played a key role in providing federal support for industrial research and development (R&D). Recently, OIT undertook a transition to a new strategy, the Industries of the Future (IOF) Program, which identified a number of energy-intensive industries whose R&D goals could help OIT leverage the limited funds available from government and private sources. The IOF program commenced in 1994 with the establishment of the Forest Products Industry Group. Subsequently, industry groups were established for the agriculture, aluminum, chemicals, glass, metalcasting, mining, petroleum refining, and steel industries.

The objective of OIT's research programs is to work with U.S. industry to improve energy efficiency, reduce waste, and increase productivity. The IOF strategy is intended to improve OIT-industry partnerships, ensure the relevance of research projects, encourage industry participation, and facilitate the commercialization of developed technologies. According to OIT's strategic plan, the long-term goals are a 25 percent improvement in energy efficiency and 30 percent reduction in emissions for the IOF industries by 2010 and a 35 percent improvement in energy efficiency and 50 percent reduction in emissions by 2020.

The objectives of the present study were (1) to evaluate the overall OIT program strategy, (2) to provide guidance during the transition to the new "market-pull" IOF strategy, and (3) to assess the effects of the new strategy on crosscutting technology programs, that is, programs to develop technologies applicable to several industries.



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Executive Summary Since it was established in 1977, the Office of Industrial Technology (OIT) of the U.S. Department of Energy (DOE) has played a key role in providing federal support for industrial research and development (R&D). Recently, OIT undertook a transition to a new strategy, the Industries of the Future (IOF) Program, which identified a number of energy-intensive industries whose R&D goals could help OIT leverage the limited funds available from government and private sources. The IOF program commenced in 1994 with the establishment of the Forest Products Industry Group. Subsequently, industry groups were established for the agriculture, aluminum, chemicals, glass, metalcasting, mining, petroleum refining, and steel industries. The objective of OIT's research programs is to work with U.S. industry to improve energy efficiency, reduce waste, and increase productivity. The IOF strategy is intended to improve OIT-industry partnerships, ensure the relevance of research projects, encourage industry participation, and facilitate the commercialization of developed technologies. According to OIT's strategic plan, the long-term goals are a 25 percent improvement in energy efficiency and 30 percent reduction in emissions for the IOF industries by 2010 and a 35 percent improvement in energy efficiency and 50 percent reduction in emissions by 2020. The objectives of the present study were (1) to evaluate the overall OIT program strategy, (2) to provide guidance during the transition to the new "market-pull" IOF strategy, and (3) to assess the effects of the new strategy on crosscutting technology programs, that is, programs to develop technologies applicable to several industries.

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Research Projects The IOF strategy was intended to improve the government-industry partnerships in OIT's research program, ensure the relevance of the research portfolio, encourage industry participation, and facilitate the commercialization of developed technologies. To implement the strategy, OIT (1) facilitated the development of industry visions and technology road maps, (2) initiated cooperatively funded R&D projects identified in the visions and road maps to develop enabling technology and reduce barriers to implementation, (3) sponsored generic (or crosscutting) R&D projects, and (4) disseminated research results and program benefits. The OIT program has three primary parts: IOF-specific programs to prioritize and focus OIT research on identified needs based on industry-developed visions and technology road maps. Crosscutting technology programs to conduct research projects applicable to more than one industry. Technology access programs to provide industry with information and technical assistance, and to assist with technology transfer and technology demonstrations. IOF-Specific Programs Allocation of Support Growing support for IOF-specific research reflects the industry groups' progress in developing visions and road maps to establish research priorities. Now that most of the industry groups have developed at least preliminary road maps, the committee recommends that OIT establish a rational, transparent process for allocating funds among IOF industries and allow the IOF industries to establish specific project directives (provided that the projects are consistent with OIT's mission). During the allocation process, OIT should assess the technical needs and priorities of each IOF group and consider several factors, such as the size of the industrial community, the potential effect of the research on OIT goals, the ability of the industry to support implementation, and other potential sources of support. OIT has continued to expand the number of IOF industries. The agriculture industry was added in 1997 and the mining industry in 1998. The committee believes that increasing the number of industry groups can be effective as long as the new industries meet the initial criteria as large users of energy and producers of industrial waste. The committee recommends that OIT continue to apply the established metrics of energy consumption and waste generation in selecting industries for participation in the IOF program. In the committee's opinion, the IOF program has been a success so far,

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principally in facilitating the creation of industry visions and technology road maps. Although the committee believes that the IOF strategy will make the OIT program more effective, the effect in terms of OIT's mission of reducing waste and energy consumption cannot yet be assessed. The committee recommends that OIT adhere to the IOF philosophy (i.e., working closely with industry and allowing industry to guide the process and set priorities). The committee also recommends that OIT take the following steps to maintain the positive momentum of the program: Continue to provide significant funding for research to address identified industry needs Utilize IOF industry representatives to monitor ongoing projects and evaluate planned projects (both IOF-specific projects and crosscutting projects) Finally, the committee recommends that OIT perform a "portfolio analysis" to evaluate the overall research program. The analysis should include technical risk, potential payoff (in terms of energy savings and waste reduction), and time frame (near-term or long-term). The overall portfolio balance should be considered in the evaluation, as well as the prioritization of research projects; projects should be added or trimmed to balance the portfolio, as necessary. Crosscutting Programs One purpose of this report is to determine how well OIT identifies, prioritizes, and manages crosscutting technology initiatives. Current initiatives include advanced turbine systems, advanced industrial materials, continuous fiber ceramic composites, and sensors and controls. To facilitate its assessment, the committee established three topical panels to review different types of crosscutting technology initiatives. The panels studied OIT's Intermetallic Alloy Development Program (a component of a mature program already focused on crosscutting R&D), manufacturing process controls (identified in several industry visions as critical to their competitiveness), and industrial separations technologies (identified in several industry visions as enabling technologies). Each panel produced a peer-reviewed report that included specific technological recommendations and provided a case study for the committee's overall program assessment. OIT's current program has two types of crosscutting research: (1) existing projects that predate the IOF strategy that have been relabeled as crosscutting projects and (2) projects of significant interest to several IOF industries that could be more efficiently managed and leveraged if they were merged into a crosscutting program. The committee believes that only the latter are consistent with the IOF strategy and recommends that OIT complete its transition to the IOF strategy by shifting the balance of IOF-specific and crosscutting research to emphasize industry-specific research identified on industry road maps.

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Crosscutting programs that predate the IOF strategy include major initiatives, such as the Advanced Turbine Systems Program (ATS), the Continuous-Fiber Ceramic Composite (CFCC) Program, and the Advanced Industrial Materials (AIM) Program. Although the committee did not evaluate these programs in detail, they do not necessarily fit in with the IOF philosophy because they were not developed in response to the vision and road map processes. The committee recommends that these initiatives be either (1) managed separately from the IOF-specific projects or (2) re-evaluated and brought within the IOF framework. The committee recognizes that relying on a market-pull strategy to define R&D objectives has inherent drawbacks. Crosscutting research opportunities are often related either to (1) embryonic technologies that have the potential for enabling major advances in multiple industries or (2) more mature, high-use technologies where incremental improvements could have a substantial effect. A key challenge for OIT is to manage crosscutting programs within the IOF framework in a way that will facilitate the development of specific R&D performance goals based on the common needs of several industries. Although there is no simple, self-reinforcing mechanism for identifying promising programs, the committee recommends that OIT follow the approach outlined below to manage crosscutting programs: Develop a consensus among the IOF industries that a certain percentage of R&D funds should be allocated for basic science and the development of crosscutting technologies. Using established management procedures, define and select a recommended list of basic/crosscutting technologies for development. Review these recommendations with the IOF industry groups and solicit their support and feedback. Collaborate with other DOE offices, including Basic Energy Sciences, other applied program offices, and relevant national laboratories, in crosscutting research projects. Establish a coordination group in each crosscutting technology area to develop short-term and long-term goals and to monitor the progress and results of research. Facilitate communication between researchers and potential IOF users (e.g., technical progress reviews and technology workshops). Finally, OIT should adopt metrics compatible with DOE's and OIT's organizational objectives for comparing and selecting crosscutting programs for the IOF program. These metrics should include (1) their potential for reducing the consumption of energy and raw materials and for reducing the generation of waste, (2) their consistency with the technology road maps of the IOF industries, (3) their commercial potential/market value, and (4) their potential for use in more than one industrial sector.

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Technology Transfer Commercialization As part of the change to the IOF strategy, OIT made a commitment to increase and document the commercial impact of its programs. Changing from a "technology-push" strategy to a market-pull strategy requires responsiveness and good channels of communication between OIT and industrial participants. For example, the recommendations in the previous section to involve IOF industries in the management of basic research and crosscutting technology development programs would facilitate technology transfer. However, technology transfer does not necessarily ensure successful commercialization. The commercialization of a new technology is a difficult and risky proposition even for corporations that specialize in, and depend upon, this commercialization. In some ways, it might be inappropriate for a government program to measure the success of its R&D by technology transfer and commercialization. Because it has no profit motive or profit-making capabilities, OIT or any other government agency cannot fully participate in the commercialization process. A third party must commercialize the technologies developed by OIT, and the committee recommends that OIT only participate directly in commercial insertion programs for the purpose of identifying additional technical hurdles. Although OIT should not participate in the final phases of the commercialization process, the committee believes that the following actions would facilitate commercialization: Maintain regular interactions with all critical stakeholders in the supply chain through all stages of program development, including raw material suppliers, parts makers, and systems integrators. Publicize the technical accomplishments of the program at popular trade meetings (e.g., the Society of Automotive Engineers, the Society of Plastics Engineers, ASM International, and the American Chemical Society). Use these meetings as an opportunity to meet and network with technical and business people. Establish networks that include not just technical people, but also sales, marketing, and senior management personnel. Expose technical personnel to basic business principles, including elements of cost estimation, value analysis, and market research. Insist that rudimentary business plans accompany each later-stage R&D program and have these plans critically reviewed by the industry stakeholders. Subsidize and participate with third-party practitioners of the technology in selected programs to demonstrate and de-bug the technology. These activities should not be confused with actual commercialization and should be limited to technologies that require additional technical devel-

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    opment. The government should not be the only supporter of ongoing insertion programs. Recognize that technology development is only one very small link, albeit an important one, in the commercialization process. Technology Access Programs OIT has a number of technology access programs designed to validate and commercialize new energy-saving manufacturing technologies. These include open competition grant programs, including the National Industrial Competitiveness through Energy, Environment, and Economics (NICE3) and the Inventions and Innovation (I&I) programs. Other programs are aimed at particular energy and environmental goals, including Motor Challenge, Climate Wise, and Industrial Assessment Centers. Although technology access programs can provide valuable assistance to businesses attempting to validate and implement industrial technologies that reduce energy use and waste generation, these programs predate the IOF strategy and do not correlate well with IOF road maps and priorities. The committee recommends that OIT establish technology access programs that are driven by IOF road map validation and commercialization plans established and planned from the onset of OIT participation. Program Management Role of Industry Groups in Managing Projects Each industry has developed processes to include the IOF industry groups in the management of industry-specific projects, including the development of solicitations based on industry road maps; the assessment and prioritization of proposed research; and, in some cases, the assessment of progress and dissemination of results. However, it will be difficult to manage crosscutting initiatives within the IOF framework in a way that facilitates the establishment of performance goals based on the common needs of several industries. The committee recommends that industry play a substantial role in the management of the entire OIT research portfolio, including IOF-specific and crosscutting programs. Communications OIT has a number of mechanisms for communicating the status and accomplishments of research programs, including technology workshops; technical publications; a detailed information site on the Worldwide Web; a biannual Industrial Energy Efficiency Symposium and Exposition; and the promotion of project solicitations in Commerce Business Daily, through the Worldwide Web, and through the industry associations involved in the IOF program. Nevertheless, the committee

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believes that the overall OIT program (including the IOF) could be promoted more effectively. In many cases, OIT is the only significant government sponsor of research focused on process industries. Broader promotion of current opportunities and wider dissemination of research results and accomplishments would encourage more industry participation in the program. The committee recommends that OIT promote the program in the following ways: Describe technical successes in the trade literature, at technical society and industry trade meetings, in the popular press, and through other high visibility communications media. Promote industry participation in programs to validate and implement technologies. Describe the program approach, objectives, and level of participation at high-level symposia or forums hosted by the secretary of energy to maintain the interest of industry executives in the program. Metrics There are many approaches to measuring the efficacy of R&D. Each method has proponents and detractors, and none is universally or even widely accepted. The committee recommends that OIT consider the following metrics as a basis for comparing and selecting projects to support: potential for energy conservation cost/benefit ratio (i.e., risk-adjusted return on investment) consistency with IOF business objectives and technology road maps commercial potential/market value potential for use by more than one industrial sector (crosscutting potential) The best metrics for measuring the efficacy of OIT research programs are likely to be some of the same measures used by the IOF industries internally. R&D managers from these industries should be contacted and polled regarding their approaches to setting priorities and measuring effectiveness. However, OIT should keep in mind that the "profit-based" metrics used by some industries may not be appropriate for assessing government-funded research. Program Turnover The success of the OIT program will continue to be measured by the level of industry participation. The implementation of new technologies and periodic reevaluations of the research agenda in response to changing industry priorities will be essential to maintaining industry support. The committee believes that the experience of mid-sized to large-sized enterprises that have a mix of technology development and product development could be used to guide OIT's management

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of project turnover. Industrial research and product development are typically based on four-year to five-year commitments (i.e., 20 to 25 percent of projects turn over each year). The committee recommends that, as part of the overall project management process, OIT develop a mechanism for the orderly termination of (1) projects that have met OIT objectives and have progressed to the market introduction stage of commercialization and (2) projects that do not have sufficient industrial interest to support demonstration, process development, and scale-up.