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FEDERAL ENERGY R&D

Startups supported by ARPA-E were more innovative than others but an investment gap may remain

Nature Energy volume 5, pages 741–742 (2020)Cite this article

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An Author Correction to this article was published on 25 September 2020

This article has been updated

Startups funded by the US Advanced Research Projects Agency – Energy filed patents at twice the rate of similar cleantech firms. The high-risk high-reward funding model has succeeded in advancing energy technology, but more is needed to help these innovative firms cross the valley of death and bring new cleantech products to market.

Messages for policy

  • Federal R&D funding for cleantech startups should be expanded, as it can boost the rate of innovation. This is sorely needed given the underinvestment from the private sector.

  • Observational studies cannot prove the effectiveness of any funding agency, but current evidence suggests maintaining or growing ARPA-E, given the large potential benefits from cleantech innovation.

  • If ARPA-E is able to predict future patenting outcomes and fund companies with the greatest potential to produce new technologies, this could be a valuable contribution of ARPA-E in itself.

  • ARPA-E alone cannot fully bridge the valley of death. Additional interventions, such as demonstration and procurement programmes, are still needed to help commercialize new clean energy technologies.

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Fig. 1: Comparison of post-2010 annual patenting and VC funding rates for cleantech startups.

Change history

  • 25 September 2020

    An amendment to this paper has been published and can be accessed via a link at the top of the paper.

References

Further Reading

  • Gaddy, B. E., Sivaram, V., Jones, T. B. & Wayman, L. Venture capital and cleantech: The wrong model for energy innovation. Energy Policy 102, 385–395 (2017). This work documents the high risk and low private returns of venture capital investments in cleantech from 2006 to 2011.

    Article  Google Scholar 

  • Goldstein, A. P. & Narayanamurti, V. Simultaneous pursuit of discovery and invention in the US Department of Energy. Res. Policy 47, 1505–1512 (2018). This work shows that ARPA-E funding produced more patents than similar projects funded by other offices in the DOE, with no loss in the production of scientific publications.

    Article  Google Scholar 

  • Howell, S. T. Financing Innovation: Evidence from R&D Grants. Am. Econ. Rev. 107, 1136–1164 (2017). This study of the DOE Small Business Innovation Research program found a positive effect on patenting and venture capital investment for small businesses, based on rankings of funded and unfunded applicants.

    Article  Google Scholar 

  • An Assessment of ARPA-E (National Academies of Sciences Engineering and Medicine, 2017). A committee review of ARPA-E found that it appears to be making progress, although more time is needed to assess long-term outcomes including emissions reductions.

  • Pless, J., Hepburn, C. & Farrell, N. Bringing rigour to energy innovation policy evaluation. Nat. Energy 5, 284–290 (2020). This Perspective explains the empirical challenges plaguing evaluations of energy innovation programmes, including insufficient data and lack of a valid counterfactual.

    Article  Google Scholar 

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Acknowledgements

Funding for the original work was provided by the EU Framework Programme for Research and Innovation H2020 under the Grant Agreement no. 730403 (INNOPATHS), the Belfer Center’s Science, Technology, and Public Policy Program, as well as a grant from J. Armstrong and E. Armstrong.

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Authors and Affiliations

  1. University of Massachusetts Amherst, Department of Mechanical and Industrial Engineering, Amherst, MA, USA

    Anna Goldstein & Erin Baker

  2. Harvard University, Harvard Kennedy School, Belfer Center for Science and International Affairs, Cambridge, MA, USA

    Anna Goldstein & Laura Díaz Anadón

  3. Technical University of Munich, Campus Straubing for Biotechnology and Sustainability and School of Management, Straubing, Germany

    Claudia Doblinger

  4. University of Cambridge, Centre for Environment, Energy and Natural Resource Governance, Department of Land Economy, Cambridge, UK

    Laura Díaz Anadón

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  1. Anna Goldstein
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  2. Claudia Doblinger
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  4. Laura Díaz Anadón
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Correspondence to Anna Goldstein.

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Goldstein, A., Doblinger, C., Baker, E. et al. Startups supported by ARPA-E were more innovative than others but an investment gap may remain. Nat Energy 5, 741–742 (2020). https://doi.org/10.1038/s41560-020-00691-8

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