s private investors shy away from new energy technologies that require millions of dollars and many years to commercialize, Massachusetts companies are getting much-needed infusions of capital from a little-known federal agency modeled after a Defense Department program that developed the Internet and GPS technology.
The agency, the Advanced Research Projects Agency-Energy, or ARPA-E, has awarded more grants in Massachusetts than in any other state except California, providing a total of $97 million to 31 projects at Massachusetts companies and universities. The grants are helping local firms commercialize new technologies in solar power, biofuels, and energy storage.
FastCap Systems of Boston, for example, received $5.3 million to move its storage technology out of an MIT lab in 2010. The company is making a fast-charging, battery-like device called an ultracapacitor for use in hybrid vehicles and oil and gas drilling. It is just beginning to bring the product to market.
“FastCap wouldn’t exist without ARPA-E,” says Riccardo Signorelli, FastCap’s chief executive and founder. “The grant gave us the firepower to take the curiosity and the promising research that we worked on for so many years to the next level.”
Financing has become a major challenge for clean technology start-ups in recent years. Private investors, once enamored with the potential of alternative energy, have pulled back as both products and markets developed more slowly than anticipated. At the same time, the overall level of government funding has diminished since 2009 as high-profile failures — such as the California solar company Solyndra — make political leaders reluctant to commit taxpayer money to support the industry.
But ARPA-E has generally received support from both Republicans and Democrats. Congress authorized a budget for this year of $275 million, which was reduced by $25 million because of the automatic budget cuts know as sequestration.
ARPA-E is now filling the financing gap for many companies. It follows a similar approach to the storied Defense Advanced Research Projects Agency, DARPA, backing far-out ideas and risky research in the hope of developing and commercializing game changing technologies, such as the Internet.
For ARPA-E, those game changers might be a battery that allows electric vehicles to travel 500 miles without charging or home fueling stations for natural gas-powered cars.
Solar company 1366 Technologies received $4 million from ARPA-E, allowing it to more quickly develop its efficient, low-cost process for manufacturing silicon wafers used in solar panels and raise an additional $5.15 million in venture capital. Now, it’s scaling up: In January, it opened a Bedford factory employing 45.
In some cases, pursuing futuristic research has yielded nearer term products. Agrivida of Medford won $5.5 million to investigate making biofuels, such as ethanol, from switch grass by inserting specialty enzymes directly into plants. Switch grass-based fuel is still years away, but enzymes discovered through ARPA-E research can be used to make biofuel from corn leaves and stalks.
“Their support and funding helped the company grow and expand and really survive during what are pretty tough times financially,” says Agrivida president R. Michael Raab.
Nationally, ARPA-E has placed bets on 285 research projects, about a third of which are under development in private companies, rather than universities or national laboratories. But so far, no single effort has delivered a clear technology breakthrough that is being widely adopted.
ARPA-E deputy director Cheryl Martin, who leads the agency’s efforts to commercialize new energy technologies, is trying to change that. Martin, a Massachusetts native who still keeps a home on Cape Cod, earned a Ph.D in organic chemistry at MIT and worked for 20 years in industry before joining Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers.
She was tapped two years ago by then Energy Secretary Steven Chu to bring her business savvy to ARPA-E. Without a clear path to get new technologies to market, she said, they might just die on the vine.
“We want people coming out of the end of our pipeline with more momentum than they would’ve had without us being there,’ she said.
One of the big challenges for Martin and ARPA-E is finding long-term funding to support these companies as they wait for markets for their products to develop.
Unlike DARPA, which has a ready-made customer in the Pentagon, ARPA-E has to connect researchers with potential customers, including the military and energy industry partners.
ARPA-E provided $750,000 to Newton-based General Compression to finance the development of a compressed-air energy storage system to allow wind turbines to deliver power on demand, not just when the wind is blowing. But to do real world testing, it needed more help.
General Compression used the ARPA-E funding to complete a working prototype, which attracted Houston energy company ConocoPhillips as an investor and a partner on a larger-scale demonstration project.
A similar model already works in biotechnology, where large pharmaceutical companies help finance start-ups with promising research to gain access to new drugs for their product pipelines
Ultimately, ARPA-E, like many clean tech start-ups, is under pressure to produce results. The problem, clean tech industry officials say, is the high-risk research that ARPA-E finances can require years to bear fruit, but the agency must get its budget approved every year by Congress.
No doubt, industry officials said, delivering a few commercial home runs would help its cause.