GreenScience Exchange
GreenScience Exchange

Strengthening the Entire Energy Innovation Ecosystem -

So Corporations and Venture Capitalists Can Work with the U.S. Government To Build the U.S. Renewable Energy Infrastructure

By Jim Hurd, Director, GreenScience Exchange

The United States is, this month and this quarter, at a critical crossroads in its energy policy. The Obama energy transition team is currently developing the initiatives that will shape the incoming administration's energy objectives.

The U.S. is in a global race to develop renewable energy technologies to compete with leading countries in Europe and with dynamic initiatives in China and Asia. Renowned New York Times columnist and author Tom Friedman makes this clear in his newest book, "Hot, Flat and Crowded." He talks about how the U.S. must be a leader in what he terms "ET" (Energy Technologies) the next multi-hundred billion dollar creation of global wealth. This will be the next wave of innovation, after the IT Revolution, which was key to the strength of the US economy in recent decades.

In order to compete, the US has to be strong in each and all of the fundamental stages of the Energy Innovation Ecosystem. An ecosystem is as weak as its weakest link. There are four stages in this process of innovation and adoption of technology.

Those steps are: 1- Research, 2- Development, 3- Commercialization and 4- Scale-Up & Job Creation

In the last stage of "Scale-up and Job Creation - we will see extensive "green" economic stimulus projects in the overall stimulus package i.e. stimulus projects that will aim to create tangible jobs through the building of wind, solar and other renewable energy projects. In addition to funding green projects that will create measurable jobs which one could say is on the last stage of the "Innovation Timeline" another obvious place for the incoming administration to put funding is first stage of the energy technology continuum, "Research".

But we also need to make sure that over the long run we are strengthening the near-term home run technologies that are two to six years away from Stage 4 Scale-up and Job Creation. This is where the investments of corporations and investors such as venture capitalists are key. As well, the buy-in and added expertise of these two groups is key to pushing a technology successfully toward Stage 4.

An example of a technology in this stage is cellulosic ethanol clearly a home run technology which the U.S. could quite possibly export to great profit. Celluosic ethanol is two to four years away from Stage 4, and is currently moving from Stage 2, Development, into Stage 3 Commercialization. The U.S. has led in the development of this breakthrough technology and we NEED to lead in the commercialization of this technology so we reap the vast economic rewards that will inevitably follow.

Also, the U.S. is paying its farmers NOT to farm fifty million acres of land currently. These acres could be used to grow grasses for cellulosic ethanol and at the same time improve the soil of those acres.

A great example of innovation and scale-up in cellulosic ethanol is Mascoma Corporation, which has raised about $100 million in equity investments, and has also brought in more than $100 million in state and federal grants. Mascoma has developed a partnership with Governor Jennifer Grandholm and the State of Michigan in developing a major cellulosic fuel production facility that uses non-food biomass to convert woodchips into fuel. In Michigan, the company has received $26.0 million from the US Department of Energy and $23.5 million from the State of Michigan to accelerate Mascoma's construction of their plant in that state. The CEO of Mascoma said, "Working with the state of Michigan, two of its leading universities, and JM Longyear on this significant project brings us closer to commercial scale production of biofuels that can promote energy independence, reduce greenhouse gas emissions, and stimulate regional economic development."

Note that this is a rare example of a leading start-up technology company that is working with state and federal government agencies and major corporations to scale-up and build major projects.

This is what our government should be looking to foster with its green initiatives now with a small but reasonable portion of its overall renewable energy effort. It is fine that the majority of funding will probably go to technologies in the 1st and 4th stages but we need to put a reasonable amount of money and effort into the 2nd and 3rd stages as well.

It is critical that we in the United States design these efforts in the building of ET Energy Technologies so that we move fast to compete in the global economic race.

Weakness in any one or two areas of this Energy Innovation Ecosystem make the whole ecosystem weaker. Each of the four parts of this Innovation ecosystem need to be analyzed and strengthened for the U.S. to be successful in leading in "ET" and reaping the global economic benefits. One of these areas, the "Valley of Death," is difficult because it has been fraught with frequent failure. Nevertheless it is a critical area to strengthen.

The "Valley of Death" refers to the difficult time that comes after a new technology has been developed, by an individual, by a university or a national lab researcher, and before the time when that technology is inside a company and ready for venture capital or other forms of private investment. Normally, private investors need to be paid back on this kind of investment between one and at most six or seven years. Some of the leading technologies in use today took ten years or more to commercialize successfully. Renewable energy technologies can often take longer than most to mature. On Capitol Hill, Republicans have often avoided funding the Advanced Technology Program, which focused on helping technologies cross the Valley of Death - saying that government should not be picking winners and losers in the private sector.

Kelly Carnes, former Assistant Secretary of Commerce for Technology Policy, and current President of TechVision21--an innovation policy consulting firm, says "the Valley of Death for renewable energy technologies is particularly deep and wide. Government funding and policies to promote prototyping, scale-up, and large scale pilot and demonstration efforts are essential to moving the U.S. toward the twin goals of energy security and competitiveness."

We need to wrestle with the challenges that the Valley of Death causes - or we will not be successful on a global scale in leading in ET (Energy Technologies). If we don't move forward very quickly - even if we have to pick winners in limited ways - we will lose out to far more nimble Asian counterparts.

We can not afford to be MEDIOCRE competitors in this race. We need to hit on ALL cylinders to successfully transition the U.S. into one of the leading economies in for the 21st Century. John Doerr, leading Silicon Valley venture capitalist, stated in his testimony before the Senate on January 8th, 2009, that we are not leading in this race. Mark my words, this transition will not be easy!

Copyright Jim Hurd 2008