A new analysis reveals green energy companies provided funding by the U.S. government’s ARPA-E filed almost double the amount of patents compared with other green technology startup launched at the same time.
ARPA-E (Advanced Research Projects Agency – Energy) was established in 2009 by President Obama to fund high-risk, high-reward research in green energy innovations. Given the success of the program, study co-author Laura Diaz Anadon, a professor of climate change policy at the University of Cambridge, argues the UK should consider the creation of a British ARPA as part of any COVID-19 recovery package.
“Focusing research and development on next-generation energy storage and renewables, and solutions for decarbonizing shipping, aviation and construction, could boost productivity and deliver large benefits to society," said Anadon. “The UK may well benefit from such an approach in a post-pandemic world, given the technological capital within its universities and private sector.”
From 2006 to 2008, the U.S. saw an increase in venture capital (VC) and private funding into green energy technology. The trend was short-lived, however, as the typically long development cycles of green tech did not help ROI. When the recession hit and funding dropped, the Obama Administration envisioned ARPA-E as a funding bridge that could de-risk technologies enough to make them attractive for private investment and commercialization.
In an evaluation of that vision, Anadon and colleagues examined green tech startups in ARPA-E, rejected from APRA-E and unassociated with ARPA-E for two outcomes: 1) innovation, measured by number of patents filed and 2) business success, measured by VC funding, survival and acquisition/initial public offering.
According to their paper, published in Nature Energy, 80 percent of ARPA-E funded startups filed a patient after their award in 2010, a much greater proportion than other groups. To control for various factors, the research team conducted a regression analysis, which confirmed their initial findings—ARPA-E companies filed patents at roughly double the rate that would be expected based on their age, sub-sector and pre-2010 company profile.
Beyond patents, however, the researchers did not find indications ARPA-E-funded startups performed better than other green tech companies not associated with the government program. Measuring market success through acquisition/IPO, survival through 2019, and amount of VC funding raised through 2017, the researchers detected no “statistically significant differences” between ARPA-E companies and non-ARPA-E companies. A greater proportion of ARPA-E startups raised VC funds post-2010 compared with other green energy startups (52% vs 40%), but the difference was within the error of measurement.
While ultimate success of ARPA-E startups was not impacted, the patenting advantage the companies showed are not shared by similar startups with R&D awards from other DOE divisions, indicated increased patenting is not caused simply by the infusion of public financial resources—and ARPA-E program directors are particularly skilled at choosing companies with the greatest potential for future patenting.
“Predicting research outcomes and success of technical projects is notoriously difficult, even for industry experts or venture capitalists. This could be an important result in itself given the environmental and societal importance of clean tech innovation,” the authors conclude.
Still, the overall results indicate barriers remain for innovative green energy companies in gaining market traction. The UK researchers suggest public funding, complementary innovation policies support from national laboratories and targeted procurement programs.
“While the UK dramatically increased energy investment over the last 20 years, it is still below the levels this country saw in the 1970s and 1980s," said Anadon. “The UK has solid recent experience in the energy space, but the past several initiatives have fallen prey to volatile government funding before success can be properly gauged. Future efforts will need consistency as well as a set up that would enable state-of-the-art and independent evaluation.”