4

Managing the Department of Energy’s Research and Development Portfolio

To meet our 21st century energy needs, the U.S. Department of Energy (DOE) must have the right balance of investments in its research, development, and demonstration (RD&D) portfolio and a strategic approach that integrates its component offices and capabilities. The fourth session of the workshop examined how DOE can better manage its RD&D portfolio, with sufficient attention both to early-stage research and development (R&D) and to later-stage technology demonstrations. Venkatesh Narayanamurti, Harvard University, introduced the session and moderated the discussion following the panelist’s remarks. Dan Arvizu, New Mexico State University, addressed the federal government’s role in building critical infrastructure and establishing robust domestic supply chains. Arun Majumdar, Stanford University, advocated for a holistic consideration of the energy innovation ecosystem, catalyzing the private sector in new ways, and integrating silos across DOE. Cherry Murray, Arizona State University, drew from her experience at Bell Laboratories to provide suggestions on how DOE’s innovation system can be enhanced and accelerated. George Crabtree, Argonne National Laboratory (ANL), reflected on U.S. innovation over the past 70 years and described critical elements to maintaining U.S. leadership in transformative innovations.

VENKATESH NARAYANAMURTI

Benjamin Peirce Professor, Emeritus, Harvard University

The previous sessions covered DOE’s current activities related to clean energy technologies, highlighted the effects of user pull, and examined the

U.S. Department of Defense’s (DoD’s) role as an end market and expertise with technology transfer, said Narayanamurti. This session will focus on another part of the innovation equation: the U.S. RD&D portfolio. RD&D is executed in many parts of the U.S government, but DOE is the primary player and largest funder of physical science in the country. Within DOE, research and development encompasses aspects related to physical and national security, but the discussions in this panel will focus on RD&D specifically related to energy technologies, with particular attention on how DOE can further accelerate innovation within the national laboratories.

DAN ARVIZU

Chancellor, New Mexico State University

The federal government has a fundamental role in planning and enabling infrastructure, which requires a combination of basic and applied RD&D to enable commercialization, said Arvizu. Further, global supply chains must be agile enough to respond to major disruptions. Within the energy sector, Arvizu emphasized that technologies, policies, and markets must align to optimize the impact from the energy innovation ecosystem. U.S. public policy tends to lag technological development. In addition, benefits are often privatized, while costs are socialized. The system is capital-intensive and risk-averse. The combination of these factors presents challenges and opportunities for improvement.

As the United States continues its energy transition, a new workforce is being created, said Arvizu. The clean energy industry has already created approximately 4 million jobs, with an expectation that they will grow by another 3.4 million jobs in the next couple of years. Arvizu noted that these jobs are not just for higher education degrees, but suitable for a skilled technical workforce.

However, basic R&D alone is not sufficient to capture expected benefits of energy innovation, continued Arvizu. While the United States has spent billions on clean energy R&D, the past few decades have seen a decrease in government spending and rise in private sector investment (Figure 4.1) At the same time, China is on track to outspend the United States in public R&D investment within the next few years (Figure 4.2). The European Union, led by Germany, and Asian countries, led by China, have spent magnitudes more than the United States to develop markets for clean energy and establish global manufacturing and associated supply chains, respectively. The nations that have made those investments have seen significant benefits of job creation and economic growth.

To drive further growth in the United States, Arvizu offered some observations about the RD&D system. The nation must bridge the gap

between RD&D and commercialization, he urged. It also must develop agile responses to changes in the market while managing risk, promoting resiliency, establishing place-based innovation hubs, and recognizing local value creation and economic viability. Arvizu presented the New Mexico Produced Water Research Consortium as a model of effective research partnership spanning policy makers, industry, and the scientific and academic communities. The result was enhanced regulation, better environmental performance, increased productivity, and sustained revenues.

Arvizu expressed optimism that the United States is beginning to better utilize national investments to connect research and deployment. The Endless Frontier Act,¹ IMPACT for Energy Act,² Leveraging Our National Laboratories to Develop Tomorrow’s Technology Leaders Act,³ and Securing American Leadership in Science and Technology Act⁴ are all focused on building better partnerships, enhancing technology transfer, and improving commercialization. In conclusion, Arvizu summarized that the federal government has a vital role in building critical infrastructure and enabling a robust U.S.-centric supply chain. National investment is required through the entire R&D spectrum to ensure global economic competitiveness. New mechanisms for public-private partnerships and place-based innovation will be necessary to achieve national objectives.

ARUN MAJUMDAR

Jay Precourt Professor, Co-Director of Precourt Institute for Energy, Stanford University

Majumdar framed his remarks with the defining dual challenges of the 21st century: affordable access to energy for all and climate change. Addressing these challenges will require a revolution in all aspects of the economy. It will be a huge undertaking, yet “we are entering the third decade of the 21st century with an energy infrastructure and system built largely in the 20th century,” said Majumdar. In the coming decade, we need innovation at scale and speed not just in technology, but also innovation and alignment in policy, finance, and business.

___________________

¹ Endless Frontier Act, S.3832—116th Congress (2019–2020), https://www.congress.gov/bill/116th-congress/senate-bill/3832/text.

² IMPACT for Energy Act, S.2005—116th Congress (2019–2020), https://www.congress.gov/bill/116th-congress/senate-bill/2005/text.

³ Leveraging Our National Labs to Develop Tomorrow’s Technology Leaders Act, H.R.5965—116th Congress (2019–2020), https://www.congress.gov/bill/116th-congress/house-bill/5965/text.

⁴ Securing American Leadership in Science and Technology Act, H.R.5685—116th Congress (2019–2020), https://www.congress.gov/bill/116th-congress/house-bill/5685/text.

The transition requires holistic consideration of value chains from basic science and engineering to technology maturation, manufacturing supply chains, and markets with active feedback loops. For example, lithium-ion batteries are a key component in the electrification of transportation. Majumdar noted that the United States has superior scientific infrastructure to conduct research in lithium-ion batteries but that it must also establish domestic manufacturing supply chains—otherwise, most manufacturing will remain overseas.

DOE must also catalyze the private sector in new ways to successfully commercialize technologies. For example, deep penetration of renewables will require long-duration grid-scale storage. These solutions do not currently exist at cost and scale and cannot be achieved by government alone, nor by a single corporation. DOE must incentivize the private sector to bring these technologies out of the laboratories and scale them with pilots, demonstration facilities, and test beds. Majumdar suggested a “10-10-10 model” involving the catalyzation of 10 companies to form a consortium for 10 years, each investing $10 million/year for a total of $1 billion over 10 years to develop the supply chain and commercial enterprise for emerging technologies. A DOE foundation could have a role here.

In their current organization, DOE offices complement each other and provide necessary hedging between sustained innovation at the applied offices and disruptive and transformative innovations at Advanced Research Projects Agency–Energy (ARPA-E). But current structure also runs the risk of being siloed, observed Majumdar. Efforts to enable crosscuts have historically been very successful, including the Sunshot Initiative,⁵ the Storage Tech Team that helped with creating the Joint Center for Energy Storage Research (JCESR),⁶ and subsequently the Grid Tech Team that morphed into Grid Modernization Lab Consortium.⁷ Majumdar promoted integrating across DOE under a single vision that leverages the basic sciences but also enables disruptive and sustained innovation.

CHERRY MURRAY

Professor of Physics, University of Arizona

Murray drew from her 27 years of experience in both research and management at Bell Laboratories to provide suggestions on how DOE’s

___________________

⁵ For more information on the Sunshot Initiative, see https://www.energy.gov/eere/solar/sunshot-initiative.

⁶ For more information on the Joint Center for Energy Storage Research, see https://www.jcesr.org.

⁷ For more information on the Grid Modernization Lab Consortium, see https://www.energy.gov/grid-modernization-initiative-0/grid-modernization-lab-consortium.

innovation system can be enhanced and accelerated. From 1950 to 1990, Bell Laboratories received ample, stable funding and employed a robust science and engineering staff. The work was mission-orientated, and Pasteur’s quadrant⁸ drove a large portion of the research portfolio, described Murray. The laboratory was vertically integrated and worked across the entire innovation ecosystem, from materials sourcing, R&D, and manufacturing to deployment. There was no hierarchy, and people were recruited with a focus on diversity of backgrounds and ideas. Work was done in self-forming interdisciplinary teams, and funding was flexible and allocated to people, not projects. Focus and reward were on impactful outcomes. There were rigorous annual performance reviews, and the atmosphere was at the same time both competitive and collaborative.

The DOE National Laboratory Complex is similar to the old Bell Laboratories, Murray observed, but under many more constraints. Murray suggested the organization of DOE and its management of the laboratories could be improved. DOE-funded projects at national laboratories and in academia have little flexibility and require contract modification to accommodate any changes. Laboratories can accept additional state agency or industry funding for specific projects, but Murray pointed out that an industry consortium could fund larger projects. With the exception of Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants, and direct ARPA-E funding, there is no dedicated funding to industry. To reproduce the superior energy innovation ecosystem of Bell Laboratories, national laboratories, academia, and industry must collaborate to solve Grand Challenge problems, said Murray. The necessary manufacturing and business knowledge is missing without industry involvement.

DOE’s applied energy programs are mostly organized by fuel, and this organization is clunky, outdated, and requires crosscuts, observed Murray. Further, the vast majority of science and energy programs fund early-stage technology, spanning only one of the multiple technology valleys of death. DOE has taken some actions to span science and applied programs but it needs to do more in the later stages of the innovation process. Murray suggested that DOE reorganize applied energy offices so that they are systems-oriented and minimize crosscuts in order to streamline funding. The new offices should be allowed to create application-orientated hubs.

The hubs should include funding for industrial partners, coordination with the Loan Program Office (LPO), or incentives for consortia to enable strong interaction between academia, national laboratories, and industry. Techno-economic modeling and assessment must be included, Murray added. Currently, hubs are funded for 5 years, and reviewed after-

___________________

⁸ Use-inspired basic research.

3 years. This is effective if Congress and the administration agree to keep the funding level. However, a 5-year funding strategy from Congress, as is done in Europe, would be better, she said. The hubs should be allowed to fund people, not projects, in the early technology stages at the national laboratories. This allows flexibility and commitment from the researchers.

In addition, Murray advocated for transfer of people between the laboratories and industry to better encourage technology transfer. DOE should utilize its Other Transaction Authority more regularly. Murray also recommended regular, rigorous reviews of the outcomes and impact of each program. Last, the laboratories that mostly work on renewable energy technology, such as the National Renewable Energy Laboratory (NREL), should not be burdened with management and operation contracts with standard Department of Energy Acquisition Regulation (DEAR) clauses for the nuclear laboratories. This will require a culture change, but it is doable, concluded Murray.

GEORGE CRABTREE

Director, Joint Center for Energy Storage Research, Argonne National Laboratory and University of Illinois, Chicago

In the decades after World War II, three key features conspired to make the United States a leader in pioneering new industries, said Crabtree. First, the United States had the largest market for goods and services. Second, the United States had a manufacturing base close to this market, which minimized shipping costs. Third, a strong culture of innovation existed based on superior education, business, and government institutions. This convergence of factors and their lesser prevalence elsewhere guaranteed leadership in business, innovation, jobs, and economic growth. The country was so strong that markets, manufacturing, and innovation could each advance separately and at its own pace, and still the combination would be successful. That has changed today, observed Crabtree. The largest markets are now in Asia and in developing countries. In these countries, there are lower labor and shipping costs, attracting manufacturing and subsequently innovation. Eventually, the convergence of markets, manufacturing, and innovation might be expected to shift intellectual, business, and economic leadership to Asia.

Although many markets and much manufacturing have already shifted to Asia, the United States and Europe retain the lead in education and innovation, Crabtree said. This lead is especially important in birthing disruptive new industries like smartphones and the internet. Establishing these disruptive industries requires radical innovation of the entire innovation ecosystem, from supply chain to new technology, manufacturing,

and market applications. “We have to unite these elements in a single holistic framework … the pieces have to develop interactively and in coordination,” said Crabtree. In this new framework, funding for the U.S. innovation ecosystem can become more powerful and effective by becoming more integrated across supply chains, technology, manufacturing, and markets. The United States devotes targeted RD&D funding to specific parts of the ecosystem such as basic research, applied research, advanced manufacturing, and technology transfer. These targeted programs are often too small and too focused to address ecosystem-level challenges. Crabtree advocated for larger and more-integrated units of RD&D funding to advance radical innovation more rapidly and decisively.

Crabtree provided an example from JCESR. High penetration of renewable generation on the grid requires stabilizing wind and solar against as many as 10 consecutive days of calm or cloudy weather, well beyond the 4-hour discharge duration of lithium-ion batteries. This stabilization is now provided by natural gas-fired peaker plants, which can operate for days at a time but produce significant carbon emissions in the process. JCESR recognized the unmet market need for a long-duration discharge battery to stabilize renewable generation without carbon emissions. In 2015, JCESR began to develop the concept of flow batteries made from ultra-low-cost earth-abundant materials. In 2017, after significant techno-economic modeling and laboratory demonstration, JCSER spun off the start-up Form Energy, which raised $50 million within 3 years and recently announced a 1 MW battery capable of discharging its full rated power for 150 hours that it will deliver to Great River Energy, Minnesota’s second largest utility. Such coordination of radically innovative supply chains, technology, manufacturing, and markets enabled remarkable speed from laboratory to commercialization but required the size and resources of an Energy Innovation Hub like JCESR to address the entire ecosystem at once, said Crabtree. He concluded that this holistic treatment of supply chain, technology, manufacturing, and markets to create disruptive innovation can be an example for DOE and other funding agencies to study, refine, and implement.

DISCUSSION

Following the speakers’ remarks, Narayanamurti moderated a discussion session that covered equity and alternative management structures.

Equity

Asked about the influence of systemic inequality on the R&D strategy, Arvizu responded that attention must be given to unintended

consequences of public policy, which can sometimes be regressive. For example, in the current utility model, the cost of technology upgrades is put into the rate base. Consequently, lower-income customers bear a disproportionate burden to modernize the grid. Arvizu suggested that encouraging the private sector, such as independent power producers, to make those investments alleviates the burden on the rate-payer and allows the private sector to share in both the risk and opportunity of innovative technologies. He urged early consideration of public policy so that the deployment strategy of new technologies is consistent with desired public outcomes.

Majumdar added that DOE programs such as the Low Income Home Energy Assistance Program and the Weatherization Assistance Program are targeted to assist low-income people. These are necessary but not sufficient. Moving forward, the benefits of clean energy infrastructure must be brought to the wider community. Broadly speaking, Majumdar urged building on the renewed movement against systemic social injustice in the United States. Crabtree agreed that now is the time to address inequities. Infrastructure bills, spurred by the COVID-19 pandemic, have not emphasized the clean energy economy. Herein lies a huge opportunity to address both, he said.

Murray added that the solution will involve expansion of the circular economy. She also argued that education and workforce need to be part of DOE’s mission. Narayanamurti said that in addition to equity, a focus on diversity is essential.

Management Structure/Governance

Narayanamurti asked the participants to elaborate on the interplay of management structure, funding fluctuations, and contracting constraints within the national laboratories. Part of the challenge is that the country has not made low-carbon energy economy a priority, said Arvizu. Only recently have clean energy technologies become more integrated into the long-term missions of DOE and the national laboratories. The focus must shift to encompass deployment in addition to R&D. He promoted the implementation of mechanisms to increase the national laboratories’ public-private engagement.

Murray provided the example of SEMATECH, a collaboration originating from the Defense Advanced Research Projects Agency (DARPA) between the federal government and industry, and noted that something similar for clean energy technology is feasible. She stated that matrix management is highly effective, and Crabtree added that DOE’s Innovation Hubs are highly matrixed. JCESR matrix manages its talented people against targeted research outcomes established by an open, bottom-up

decision process in which strategies are periodically refined. He believes that hubs are a success, and other projects funded similarly, such as Quantum Information Science Research Centers, are a step in the right direction.

Narayanamurti asked Majumdar about the appropriate entity to tackle scaling new technologies. Majumdar stressed the importance of both government and industry engagement. The convening power of the government can catalyze the private sector and stimulate markets; a DOE foundation may be a mechanism to enable this.