ARUN MAJUMDAR: My life story has been described in gory detail. (Laughter.) But it’s great pleasure to be here. Let me start by telling you my story of ARPA-E.
When I came here about a year-and-a-half ago and asked to lead this agency, I thought it was an absolutely daunting task. I’d never been in Washington and here I’m trying to start a couple of agencies.
And so, you know, like anyone would, I looked for an instruction manual on how to start a federal agency and I couldn’t fine one. So I went to the Internet, like you might do, and typed out “how to start a federal agency.” (Laughter.) And I got this: “How to land a top-paying federal job,” you know? (Laughter.) Since I took a pay cut to come here, it wasn’t exactly helpful. (Laughter.)
So that’s when I realized I needed some serious help. So I actually reached out to many of the technology business top leaders of our nation and asked them, look, I’m starting this new agency. I’m really excited. I think it’s important. I need help.
And after 20 or 30 people that I reached out to, a kind of who’s who, I thought maybe two or three would say yes and the others would say, sorry, I’m too busy; energy is not my thing. But I was really pleasantly surprised that each and every one of them said, yes. Thank you. Thank you for what you’re doing. This is really important. I want to help.
So I invited many of them out here to this summit, and some of them are here. You’ll hear from them later on. But some of them couldn’t make it because of prior commitments – these are really busy people – so I wanted to share with you their thoughts. And I asked them two questions: Why are innovations and energy technologies important for our nation, and what is the role of the federal government?
So the first is Norm Augustine, who is the former chairman and CEO of Lockheed Martin, also the chair of the committee, “Rising Above the Gathering Storm,” the National Academies Committee that proposed ARPA-E. So here we go.
NORMAN AUGUSTINE: (From tape.) When we performed the “Gathering Storm” study about six years ago, the group’s unanimous conclusion was that energy was basically central to the issues we were dealing with. Whether one is concerned about building the economy, whether you’re concerned about the environment, the cost of energy itself or the supply of energy, national security is very closely tied to the ability of our country to obtain energy.
Energy is just very central, and that’s why we picked it to focus on and why it’s so important today. Innovation in any area and research, the application of research, has disadvantages in terms of the investment in the private sector. Given that, it’s an ideal candidate for something that the government should be investing in. The private sector can’t do it, yet it’s terribly important, and that’s what government is all about.
MR. MAJUMDAR: The next is an American hero, Vietnam vet, former Marine, Fred Smith, founder, co-chairman and CEO of the FedEx Corporation. Here we go.
FRED SMITH: (From tape.) The main feature of any industrialized economy is the use of energy, and particularly energy to permit mobility: cars, trucks and planes. We at FedEx believe that the nation’s dependence on imported petroleum represents one of our country’s largest economic and national security risks.
The federal government has to fund and provide basic research and development on new technologies that have significant effects upon the country’s competitiveness or ability to improve its standard of living for its citizens. This is certainly true today in the energy sector where the nation’s dependence on imported petroleum just cannot be sustained over a long period of time.
MR. MAJUMDAR: The next certainly needs no introduction: Bill Gates.
BILL GATES: (From tape.) Energy innovation is more important today than ever, whether it’s reducing the price of energy to make industries more competitive, whether it’s the security problems of our current energy approach, or the environmental problems being caused by the way we make energy today.
We have to have new ideas, new approaches in many critical areas, including medicine. The government has funded the basic research that’s allowed the United States to be a strong leader. Businesses have a role but for the basic work, the government has to be a strong partner. In the energy area we haven’t done enough, and so now we need to dedicate ourselves both to the science and to helping that science get out to the marketplace.
MR. MAJUMDAR: So, if I may summarize what they’re all saying in a single chart, it looks like this. The future of the United States of America depends on three securities: national security, economic security and environmental security, and the foundation of all this are the innovations in energy technologies. So let’s go a little deeper into some of these securities that we saw a little bit earlier.
We are importing more than 50 percent of our oil from other nations. And you saw the number: $300 billion, now steadily rising, per year. You’re spending about a billion dollars per year. If you could spend that amount locally, you would be creating jobs and providing security.
This makes us vulnerable, not only from an economic security point of view but also tremendously from a national security point of view. In my lifetime I would love to shave off a few zeros of this number. But while you think this is a national security and economic security issue for our nation, it is for other growing economies as well, so let’s see what’s going on in the rest of the world.
This is the population density of the world. You can see where the population is in the United States. And look at the population density in the other parts of the world. It’s no only the density in Asia – China and Asia – India and other countries, but the population growth is also higher.
And if you look at the energy use around the world, you can see the United States to be bright, and if you overlay the two, you find that the energy use and population do not collate. We are bright and we need to make ourselves brighter in a sustainable, affordable way, but there are many parts of the world where people have not yet turned on the lights. And as their incomes rise, they want to turn on the lights, and if we can enable them to turn on the right kinds of lights, that is the biggest business opportunity of the United States of America.
And we have this opportunity, but speed is of essence. But those future technologies, to enable that, have not all been invented. So the future is still up for grabs. So how do we win the future?
Well, first is to invent affordable, clean energy technologies – very simple. Make them locally; sell them globally. And that is a route to economic security. But this has to start at home first. So the map that you saw earlier has to go the other way. And just like we did in information technology and biotechnology, we could do this in clean energy technologies.
But there is a global competition and speed is of essence. So what is the base and scale of innovation that we need in clean energy technologies? The best way to explain that is to compare what happened in the last hundred years.
So here is what we did in the last hundred years. We invented – these are game-changers that happened: agriculture, artificial fertilizers, green revolution. Most of us in this room would not be here but for that – airplanes, polio vaccination, electrification, nuclear energy, space, transistor-integrated circuits, fiber optic wireless communication and the Internet.
And almost all of them happened in the United States, which is why the 20th century is often called the American century. Now, imagine all of that happening for clean energy in the next 10 to 20 years. That is what we need to secure America’s future, and that future is yet to be invented. So allow me to show you a glimpse of that future.
If oil – the imported oil is such a big issue. Let’s start talking about oil. Today we’re looking at biofuels for photosynthesis. If you take sunlight, if you take carbon dioxide and water, and combine them in plants in various forms – sugar cane, corn, algae and cellulose – you can get oil. And this is the route that – you’ve heard about the Joint BioEnergy centers, et cetera.
And these are very important. We need to go down this path and reduce the cost so that it’s cost competitive with petroleum – traditional petroleum. But you’ve also got to realize that this is less-than-1-percent efficient, which means you need the land and you need a lot of water.
So we in ARPA-E started thinking a little bit differently about this. We said, is there a better way; is there a different way of doing business? And so we created a program for electrofuels. This word does not exist in any dictionary yet, just a select few. So how does it work?
Well, you take electricity from wind or nuclear or solar, or the waste product of oil and natural gas that you throw away, hydrogen sulfide, or hydrogen, and you take carbon dioxide and use non-photosynthetic microbes – non-photosynthetic microbes and produce oil. And this process is more than 10 percent more efficient.
And if you think that this is in the future 10 years from now, all that, science fiction, think again. This is a bottle of oil – this is electrofuel being formed by a group in North Carolina State University, combined with OpX Biotechnologies – both ARPA-E-funded – and it’s producing oil.
And if you think that’s the only one, here’s the one produced from MIT. They are competing with each other. These are the first electrofuels that have been made using non-photosynthetic microbes. And there are (30 ?) other teams trying to compete with them, trying to outdo each other in trying to make electrofuels.
And so, what ARPA-E does best is to identify the opportunity and create the competition. And these things will take – this is a start – it will take at least 10 to 20 years for them to scale, and some of them will drop out, some of them will be cost-competitive. And eventually the market will pick the winners, but ARPA-E creates the competition – creates competition between these people.
So, whether it’s photosynthetic biofuels or electrofuels, we have to try these out. But let’s assume that maybe none of them in the future will be cost-competitive for traditional petroleum and producer imports so that we can not producer-import oil. Let’s say we take the worst-case scenario. I hope not, but let’s see what that is.
We have to look at other options for the transportation sector, and the best option that we have today is to electrify transportation. So we’ve created a program called BEEST – Batteries for Electrical Energy Storage for Transportation, or BEEST. And just like you have Intel inside – in most of your computers, I hope you have BEEST inside the electric cars in the future.
The goal of this program is very simple: Electric cars – make those rechargeable batteries that will make electric cars go longer-range and then lower life-cycle costs and gasoline costs so that they would scale without subsidies.
What do I mean by that? Let’s say you have to make a 300-mile journey in your car and you have to go from, let’s say, Chicago to St. Louis, 300 miles on a single charge that is cost-effective and cheaper than gasoline-based cars. Today you will not be able to do it because today’s lithium battery will not allow you to do it.
So the BEEST targets a technology agnostic with twice the energy density and three times reduction in cost than today’s battery. And so we created this competition, and out of that competition came all different ideas for the next-generation batteries, all electron batteries – lithium sulfur batteries, a whole class of metal-air batteries, magnesium-ion batteries, lithium-ion flow batteries and lithium-oxygen batteries.
And they’re going at it. We don’t know which one’s going to win at the end, but you’ve got to try them out to see if perhaps one or two of them might. And if you think that this is 10 years from now, 20 years from now, et cetera, well, think again.
Let me pick the lithium-oxygen, which is the “holy grail,” highest energy density battery. And people think this is impossible to do. Let me show you an example. As some of you know, lithium is explosive in water, so we funded a small company called PolyPlus to make a lithium-oxygen battery. Here we go.
(From tape.) This battery is a lifeless lithium-ion battery. There’s oxygen in the water, and is the highest specific energy – (inaudible) – in the history of batteries. So, to prove that, you take a beaker and add just some drinking water to fill the beaker. Then you take the battery. You just immerse it into the beaker.
MR. MAJUMDAR: Isn’t that amazing? This battery takes the oxygen that is dissolved in water, uses water as the electrolyte, and makes it work. It’s like a fish but it’s a battery. This is amazing what they are doing.
But if you are to electrify the transportation sector, we need to provide clean and inexpensive electricity so that it can scale without subsidies. And I’m putting a number out there – you heard the number earlier – 5 cents a kilowatt hour, because if it is 5 cents a kilowatt hour, you could drive from Chicago to St. Louis for full charge on less than $5, as opposed to the $50 that you might pay for gasoline today or maybe in the near future.
So, what does that cost? Well, today natural gas in a combined cycle is about 4 (cents) to 10 cents a kilowatt hour, but if you look at other clean energy sources, like solar – solar photovoltaics and others at the utility scale, it’s about 50 (cents) to 20 cents a kilowatt hour.
So we created a program across the BUE (ph) which includes ARPA-E, across the BUE called SunShot. Just like President Kennedy’s moon shot to go to the moon and come back safely by the end of the decade, here is SunShot to reduce the cost of electricity from solar down to 5 cents a kilowatt hour in the next six years. If you can get there, this would scale without subsidies.
We need to reduce the cost of wind, not just onshore wind but offshore wind, down to 5 cents a kilowatt hour, and others – geothermal, clean coal and nuclear – all the way down to 5 cents a kilowatt hour by increasing the efficiency of heat engines or by other means, and we are doing some of that and we will continue to do more in the future.
But if you look at the electricity that people use today, it has to use the infrastructure of the grid. And the grid today is old, is overloaded, sometimes unreliable and oftentimes not so secure. So we have to take a comprehensive look at the grid infrastructure as a system as well as new components. So we created a couple of programs on the grid. One is power conversion, power electronics, and then storage, which these are both game-changers. Let me explain and give you a glimpse of that.
If you look at substation transformers that we use, we’ve been buying most of them today from overseas. And these are behemoths. These are 10,000-pounds things that you’ve got to install with a crane. So we decided to take attempts at quantum leaps of these. And so if you go to high-frequency power electronics, you could reduce, potentially, the size of this and the weight of that to a hundred pounds so that it fits in a suitcase. That’s what’s going on.
And then these are not going to be – not only going to be cheaper and more reliable and lighter, they’re going to be smaller because they are using semiconductors like silicone carbide and making switches, and that’s what’s embedded in there.
On the storage, this is one – it’s the cheapest ways to store electricity at – (inaudible). I’m talking gigawatt – gigawatt (power ?) – (inaudible) – storage. The way we do that today is by pumped hydro, using the dam in reverse. And that’s about a hundred dollars a kilowatt hour, sometimes $200 a kilowatt hour. But you can only do that in certain ways.
So we created a program for grids to develop storage technologies, agnostic – technology-agnostic – (inaudible). You can even do that with batteries – (inaudible) – and other ways. To do that is the same cost – a hundred dollars a kilowatt hour – but you could use it anywhere in the world.
I’m just giving you a few examples of these, and I would encourage you to go down to the showcase where we’ve invited 100 of these ARPA-E projects to showcase. But what we also did was to not only showcase the ARPA-E technologies but also the ones that we could not find, because it will take more than ARPA-E to change the world, and we want, at the end of the day, the United States to win the future, not just ARPA-E. So we invited all of them, and I hope you get to see some of those technologies.
So, as I said, speed is of essence. And how do we measure success? These are risky propositions. And as Fred Smith, Norm Augustine and Bill Gates said, the government has to play a role to reduce the risks. Many of them will fail, but if they succeed, it will take 10 to 20 years from now for them to scale. And in the process, some or many will fail.
So, how do we measure success? Well, in the next three to five years, the only thing we can really talk about are indicators of success, and these indicators are, are we getting the best minds to manage R&D? Are we getting the best ideas? How many small companies have we started? And are we getting the best-in-the-world performance, and are we finding the largest number of patents and licenses?
And if this is of value to the private sector, is the private sector taking notice and investing? And as was mentioned, six technologies that ARPA-E invested in, about $24 million, this allowed them to do the research at scale that is unprecedented and reduce the risk, reach the performance ahead of schedule. And that’s when the private sector came and invested more than $100 million. And this is continuing to happen.
Again, these are indicators but these are good indicators that perhaps we have a shot to change the world, and that’s what we’re after. Speed, as I said, is of essence, and the kind of people that you’ve recruited in ARPA-E, this is in their DNA. Fast. We’ve got to move fast. And these people – the program directors are technically savvy. They’re part of the teams that you’re funding and helping them along because they have only three or four years in ARPA-E and then they have to leave. So they have the fierce urgency of now.
And we have created a process and streamlined the process totally in ARPA-E because if we are demanding speed of you, you ought to demand speed of us. And since we have created a process where we are looking for five E’s – this is what the process is:
“Envision” a new program, new idea. “Engage” the scientific community in a dialogue and have many internal debates to create a program. Once we create a program, we “evaluate” through thorough technical managed review. And after that we “establish” the program by award selection and then contracting. And all of this happens in unprecedented speed and efficiency in six to eight months. The contracting is done in two months. And then we “execute” by hands-on, active program management. That is what is going on.
So let me summarize what I’m saying. Folks, this is real. This is happening. This is now. We can win the future. You’ve just got a glimpse of the future. But if you step back for a moment and ask the question, what is that future, who is there in the future, some of us will be long gone; some of us will still be here, hopefully.
But I can tell you that there are 60 students from 30 universities who are here, and these are members of the energy clubs that have sprung up in many of our campuses. They’re here. It is their future. And in the future are our children and grandchildren. And every American generation has worked hard to create a future that is better for them than what they lived in. And we have to come together to provide the national security, economic security and environmental security for our children and grandchildren and those students.
And so that is what ARPA-E is all about. We’re here to serve you. Thank you very much.