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The government agency is quietly funding some of the industry’s most exciting early stage companies.
When the George W. Bush administration established the Advanced Research Projects Agency - Energy, better known as ARPA-E, the number one goal for the new agency sounded an ambitious and patriotic note: “To enhance the economic and energy security of the United States through the development of energy technologies.” And from that uncontroversial foundation, a bipartisan bastion of cleantech innovation was born.
I knew I wanted to dig into the critical role that ARPA-E plays in the climate tech funding landscape after Rajesh Swaminathan, a partner at Khosla Ventures, told me that he views the agency as the “least talked about VC in town.” So I reached out to ARPA-E’s director, Evelyn Wang, to learn more.
Of course, ARPA-E isn’t actually a venture capital firm — it provides no-strings-attached funding to promising energy projects rather than aiming for a return on investment. “So a little bit different,” Wang told me. “Our mission is very much focused on energy independence, reducing greenhouse gas emissions, and enhancing energy efficiency.”
The Bush administration established ARPA-E in 2007 with the passage of the America COMPETES Act, which aimed to improve the technological competitiveness of the United States via investments in research and development. But the agency was funded for the first time in 2009, under Obama, as a part of an $800 billion stimulus package in response to the Great Recession. A substantial chunk of that funding — $90 billion — was allocated for clean energy, which the administration would go on to boast amounted to the “largest single investment in clean energy in history.”
Yet whether it’s been Bush or Obama — or Trump or Biden — in the White House, the messaging around ARPA-E has always trended less towards renewables and climate mitigation and more towards energy security and economic competitiveness. As the name suggests, ARPA-E is modeled after the Defense Advanced Research Projects Agency, or DARPA, which was established in 1958 in response to the Soviet’s launch of the Sputnik satellite. DARPA has since helped birth such little-known tech as the entire internet, GPS, automated voice recognition, and self-driving cars.
But while the de facto customer for DARPA-developed tech is always the Department of Defense, the pathway to commercialization for ARPA-E projects mainly relies on private sector interest. In that sense, the goal of ARPA-E is neatly aligned with that of venture capitalists: Get tech to market. Because while scientific learnings are all well and good, Wang said that “ultimately, we need to see these technologies commercialized — to actually be out there — to actually affect the ecosystem and change the energy landscape.”
Since ARPA-E can eschew the profit motive, it’s able to fund high-risk, high-reward projects at the earliest stages, when most investors would be reluctant to take on that level of uncertainty. Yet the inherent risk means the success rate for ARPA-E projects as measured by metrics such as the number of companies it’s spawned (157), exits via mergers, acquisitions or IPOs (30), and additional partnerships with other government agencies (360), can seem low compared to the 1,590 projects that the agency has funded over the past 15 years. A climate tech investor I spoke with on background told me that while they love ARPA-E and are glad it exists, they were expecting more success stories by now.
That’s at least partially because even after a project is funded and proof-of-concept has been demonstrated, there’s often still a ways to go before investors are ready to jump in. “I think when we first stood up ARPA-E, the idea was that at that point, it would be sufficiently de-risked for the private sector to then pick it up and invest,” Wang told me. But frequently, that hasn’t been the case. ARPA-E usually funds projects for one to three years, but often climate tech innovation relies on deeply complex and thus inherently slow advancements in science and engineering — think fusion energy, novel battery development, or direct air capture. Many venture funds have 10 year time horizons, so if investors don’t see a payoff happening in that timeframe, they’ll probably hold back.
The investor I spoke with on background told me that ARPA-E has become more effective in partnership with the Office of Clean Energy Demonstrations, established in 2021 under the Department of Energy, which uses its $25 billion budget to create model buildouts of new technology with private sector partners. Earlier this year, OCED selected six ARPA-E awardees focused on industrial decarbonization to receive a combined total of up to $775 million.
Even so, the investor told me, ARPA-E funding alone still might not be enough to get companies to a place where OCED would be interested. To help close that gap, ARPA-E started a program called SCALEUP, a mouthful of an acronym for The Seeding Critical Advances for Leading Energy (Technologies) with Untapped Potential, in 2019. It provides a small number of ARPA-E projects with follow-on funding to further prove out their concepts — provided they can identify at least one commercialization partner such as a potential customer, end-user, or supplier willing to take a stake in the development of the tech and help it get to market.
So far, Wang says the program has yielded some successes. The list includes LongPath Technologies, which monitors methane emissions and leaks in the oil and gas industry and received a conditional loan last year from the DOE’s Loan Programs Office; Natron Energy, which just opened the first commercial-scale sodium-ion battery production facility in the U.S.; and Sila, a battery materials manufacturer that has raised over $1.3 billion in total, and secured contracts with Mercedes-Benz and Panasonic.
When you look at ARPA-E’s success rate in terms of dollars in and dollars out, though, it starts to look pretty darn efficacious as is. Since 2009, ARPA-E has provided more than $3.8 billion for research and development, leading to over $12.6 billion in private-sector follow-on funding, while the 30 exits to date have yielded a combined market valuation of $22.2 billion. And since it often takes climate tech companies around a decade to mature to the point where they’re ready for an exit event, many of ARPA-E’s companies have yet to reach the acquisition or IPO threshold.
These days, ARPA-E projects are facing a completely different funding landscape than in the 2000s — one ripe with both excitement and cash as well as increasing competition. So while Wang told me that the agency’s goal is always to look for “technological whitespace” in the energy landscape, “it's getting more crowded,” she said. “And I think in that context, we've strategically decided that we should also think about broader vision type efforts.” To that end, ARPA-E has identified three comprehensive focus areas: developing clean primary energy sources such as geothermal, small modular nuclear reactors, fusion and geologic hydrogen; power delivery for non-electrical sources, such as energy transported via hydrogen or heat; and figuring out how to source carbon sustainably, such as via engineered plants and algae.
Now that ARPA-E has been supporting projects for a decade and a half, it’s getting more experimental when it comes to developing novel testbeds for its tech. Exhibit A is the San Antonio International Airport, whichrecently signed a memorandum of understanding with the agency to deploy a series of ARPA-E backed technologies.
Many major airports are actually higher tech than passengers may realize, and given the mounting pressure on the aviation industry to decarbonize, they’re also open to novel sustainability solutions. In San Antonio, the airport is deploying EV chargers from Imagen Energy and sodium-ion battery tech from Natron Energy, both of which could help electrify their ground vehicles, as well as a distributed energy management system from Autogrid, which allows airports to control their virtual power plants, microgrids, EV fleet, and demand response measures. Other tech, such as hybrid-electric planes from Ampaire, could be integrated into the airport in the future.
That’s a lot of technology development for not many headlines. And when a company raises a major round or goes public, sometimes you have to dig deep to discover their ARPA-E origins. Hence, the “least talked about VC in town” comment. In some sense, Wang says, this is intentional.
“When we think about success, if our teams, our companies are successful, and they shine, then we shine,” she told me, and maybe that’s the way it should continue to be. Because while advertising government investment in anything seen as “clean” or “green” can immediately draw both partisan praise and ire, funding for ARPA-E has been steadily creeping up nearly every year since 2015. And yes, that includes the Trump era, even though the former president seemingly wanted to axe the agency altogether. Congress, it turned out, was not on board with that plan.
“Our mission is about energy independence and bolstering our economy and I think everyone agrees with this mission,” Wang told me. “Everyone,” of course, will always be an overstatement. But perhaps Wang is right that the agency does function better as a behind-the-scenes player. As she put it, speaking of the companies the agency funds, “It’s more about them, right? And how that affects the ecosystem, and helps our nation in terms of what we need to do as a country, and how that sets an example for the world.”
Editor’s note: This story initially misstated the size of the American Recovery and Reinvestment Act and the amount of funding allocated to clean energy.
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Current conditions: Los Angeles is bracing for a massive rain storm that could trigger landslides in areas recently charred by severe wildfires • About 90% of districts in India have received little or no rainfall since the start of the year • Schools are closed in Kansas City, Missouri, where up to 6 inches of snow is expected today.
California’s state-backed insurance plan of last resort is short on funds to pay out claims from the Los Angeles wildfires. As a result, California Insurance Commissioner Ricardo Lara is asking private insurers that operate in the state to give the program, known as the FAIR Plan, $1 billion. The FAIR Plan is for people who can’t get private insurance coverage because their properties are considered high risk. As weather disasters get worse and private insurers pull back from the state, more people are relying on the FAIR Plan, and its policy load has doubled since 2020 to more than 452,000. The plan has received some 4,700 claims related to last month’s devastating fires, and paid out more than $914 million. But that’s not enough. The program expects a loss of $4 billion from the fires. This is the first time in 30 years that the program has needed to ask for more money. The fee will be divided between the private companies according to market share, and they’ll have 30 days to pay. Up to half of the cost can be passed on to their own policyholders. Even so, there are concerns that this will push private insurers to leave California to avoid further losses, exacerbating the state’s insurance crisis. State Farm, the state’s largest insurer, recently asked regulators to approve a 22% rate increase.
The U.S. added nearly 50% more clean energy capacity last year than in 2023, according to a new report from energy data company Cleanview. Most of the 48.2 gigawatts of new capacity came in the form of batteries and solar, with solar additions rising by 65%, mostly in southern states like Texas and Florida. As for battery storage, four states (California, Texas, Arizona, and Nevada) accounted for 70% of new capacity. Meanwhile, wind power missed out on growth, with capacity additions dropping by nearly a quarter year-over-year. The report says solar growth will likely slow down in 2025, battery storage could grow by nearly 70%, and wind capacity could grow by 80% if all planned projects manage to reach completion. One interesting tidbit is that Indiana is emerging as a solar hot spot. It ranks third on the list of states with the most solar additions planned for 2025, below Texas and California, but above Arizona. Of course, a lot will depend on the Trump administration.
Cleanview
Global air traffic rose by 10% to an all-time high last year, according to recent data from the International Air Transport Association. This means more aviation pollution. Air travel already accounts for 2.5% of global energy-related carbon dioxide emissions, and has contributed an estimated 4% to global warming. As Ben Elgin at Bloombergnoted, the rise in air travel comes as airlines fail to adopt “sustainable” aviation fuel at meaningful levels, with SAF accounting for a paltry 0.3% of commercial jet fuel production in 2024. “SAF volumes are increasing, but disappointingly slowly,” the IATA said in December. “Governments are sending mixed signals to oil companies which continue to receive subsidies for their exploration and production of fossil oil and gas.” Airlines are relying on SAF to curb their emissions, with many pledging to consume 10% SAF by 2030. But “even if airlines can somehow replace 10% of their fuel with lower-emitting alternatives by the end of the decade, those climate benefits would be wiped out by the industry’s expected growth,” wrote Elgin. Yesterday the Trump administration approved a $782 million loan for a plant in Montana to turn waste fats into biofuel. The loan was originally finalized under the Biden administration.
The CEO of Ford Motor yesterday warned that the company could be forced to lay off workers if President Trump raises tariffs on Mexico and Canada, and guts Biden-era legislation that supported electric vehicle production. “A 25% tariff across the Mexico and Canadian border will blow a hole in the U.S. industry that we have never seen,” Jim Farley said at a conference. He added that ending loans and subsidies for EV manufacturing projects would also put many Ford jobs at risk. The New York Times noted that his comments “offered a rare example of a corporate executive calling into question Mr. Trump’s policies or statements.”
Sales of electric vehicles were up 18% in January compared to the same time in 2024, but growth is slowing, according to research firm Rho Motion. Last month, 1.3 million EVs were sold worldwide. That’s down 35% from December’s numbers, and marks the third month in a row of slowing growth. China’s sales were down last month because of the Chinese New Year. Meanwhile, sales were up in Europe as new emissions standards came into effect. And in the U.S. and Canada, sales rose 22%. Rho Motion expects more than 20 million EVs will be sold this year.
$160 million – The amount raised in a Series B funding round by Chestnut Carbon. The startup focuses on planting trees and vegetation, and improving forest management practices to better remove carbon from the atmosphere. Chestnut will use this latest funding to build out afforestation projects — that is, planting trees in areas where, at least in modern times, forests have not existed.
Chestnut Carbon announces a major new funding round on the heels of its deal with Microsoft.
The embattled nature-based carbon removal market got a significant show of support today as Chestnut Carbon announced a whopping $160 million Series B funding round, led by the Canada Pension Plan Investment Board. The startup focuses on planting trees and vegetation as well as on improving forest management practices to better remove carbon from the atmosphere.
This announcement comes on the heels of the company’s recent deal with Microsoft to remove over 7 million tons of carbon dioxide from the atmosphere over a 25-year period. That involves planting about 35 million native trees over about 60,000 acres. It’s Microsoft’s largest carbon removal contract in the U.S., and one of the largest domestic carbon removal projects period — including those that rely on engineered solutions such as direct air capture.
Chestnut aims to fill a void in the forest carbon removal space by employing a rigorous measurement, reporting, and verification framework that it claims leaves little room for accounting errors and greenwashing, offering a solution that, hopefully, the market can finally trust. So far it seems, investors are buying it.
Chestnut will use this latest funding to build out afforestation projects — that is, planting trees in areas where, at least in modern times, forests have not existed. “We’re buying this farmland — this is marginal pasture land — and we are turning that back into a native forest,” Chestnut’s chief financial officer, Greg Adams, told me. The company buys land that is ill-suited for farming due to factors such as acidic, alkaline, or nutrient-poor soil or a climate that’s hostile to food crops but works for certain tree species.
The startup began planting native tree species in Arkansas and Alabama in 2022, and has since expanded into Mississippi, Louisiana, Texas, and Oklahoma. There are a number of benefits to planting in the Southeast, Adams told me. For one, the region’s climate allows trees to grow particularly fast, leading to more immediate carbon benefits. Also, the area isn’t very wildfire-prone, but is extremely biodiverse — so if one species of tree falls victim to disease or blight, much of the forest is likely to remain unscathed. “We look to build a forest that, if you had a time machine and you went back 100 years, would look very similar to what was there 100 years ago,” Adams told me.
While planting trees isn’t particularly expensive, land acquisition is, and that’s what the majority of Chestnut’s Series B funding will go towards. Adams told me that owning the land also helps to “reinforce the permanent nature” of Chestnut’s carbon removals, since the company has 100% control over land management decisions.
Forest-based carbon offsets are famously prone to fraud and other accounting improprieties. A 2023 investigation showed that many rainforest carbon credits approved by Verra, a leading credit certifier, for instance, were essentially bogus.
Chestnut is well aware that past scandals have eroded trust in nature-based removal efforts and aims to counteract the industry’s dubious reputation. While Verra does certify Chestnut Carbon’s “improved forest management” credits, another entity called Gold Standard certifies the company’s afforestation credits.
In addition to aligning with Gold Standard’s methodology, Adams told me the team uses a number of tools to verify the amount of carbon that its trees remove, including one that the company invented itself, which has plotted every parcel of land in the lower 48 states. This tool uses public and private data to inform Chestnut whether a plot of land is suitable for afforestation. Then, given a hypothetical mix of trees and their space relative to each other, an algorithm determines how much CO2 they would capture and sequester over a 50-year period. After the digital work is done, foresters visit the proposed site and develop a more nuanced analysis that takes into account factors such as expected yield over a given period of time and various mortality risks.
“We sell carbon credits, but we ultimately sell reputational risk insurance, because these are voluntary,” Adams told me, saying he recognizes the fragile nature of the market at this stage. “I want to make sure that what we do is seen differently, in a positive way, and ultimately it’s not going to blow back in our customers’ faces.”
Net zero was never going to be easy, but between AI and Trump, it just got a whole lot harder.
Of all of the executives who have cozied up to President Donald Trump over the past two months, Mark Zuckerberg has appeared perhaps the most eager.
In the weeks before Trump took power, the Meta CEO scrambled to ditch his company’s fact-checking program, rolled back hate speech protections, and took an ax to Meta’s diversity, equity, and inclusion programs (reportedly with the blessing of Trump’s current deputy chief of staff and homeland security advisor Stephen Miller). The billionaire founder has named Joel Kaplan, a former energy executive and a prominent Republican, to the role of vice president of global public policy and, on the night of Trump’s inauguration, Zuckerberg — who President Trump once said could spend “life in prison” — wrote on Instagram that he was “optimistic and celebrating.”
Zuckerberg has since tried to assure Meta’s left-leaning employees that the company is holding true to its values, but in an all-hands meeting in January, he stated plainly, “We now have an opportunity to have a productive partnership with the United States government, and we’re going to take that.”
The question now is just where Meta’s climate goals will fit in this partnership.
Since taking office, President Trump has used executive orders to pause tens of billions of dollars in environmental and energy spending and stop all new wind energy permits from going forward. He has withdrawn from the Paris Agreement and declared a “national energy emergency” designed to speed up approvals for energy projects — that is, with the exception of renewable energy projects.
The courts will ultimately decide the fate of these orders. But as Zuckerberg strains to stay in the new president’s good graces, the White House’s fossil fuel boosterism could complicate Meta’s climate commitments. That’s particularly true given that those commitments were already on shaky ground in the midst of the energy-sucking boom in artificial intelligence.
While Zuckerberg has never made climate action his primary cause, in a speech to Harvard graduates in 2017, he did call on the class to join in “stopping climate change before we destroy the planet.” And Meta has worked hard to do its part. Since 2020, the company has achieved net zero emissions throughout its operations, thanks to a combination of renewable energy credits, carbon removal investments, and the direct use of solar and wind energy to reduce its emissions. By 2023, it had the largest renewable energy portfolio of any corporate buyer in the country, and just last year, it struck what it said was a “first-of-its-kind” partnership to power its data centers with geothermal energy.
But beyond accounting for its operational emissions, the company has also committed to achieving net zero emissions throughout its value chain, from the copper wires spiraling through these gargantuan data centers to the construction materials used to build them.
That’s a far more challenging goal, particularly when every AI company is trying to build out their computing capacity as quickly as possible, said one former Meta employee familiar with the company’s climate and energy strategy. (The employee asked to remain anonymous to discuss private matters.) “The fear in the back of people’s minds is someone is going to say: These are voluntary commitments, and we’re just not going to do it anymore,” the former employee said, noting the “herd mentality” of Big Tech. “If one domino falls, do others?”
A Meta spokesperson declined to comment on how the company’s climate goals may be impacted by the changing political landscape and didn’t respond to a request for comment about whether this week’s layoffs have impacted sustainability work. But in its most recent sustainability report, Meta acknowledged that meeting its net zero goals by 2030 “will be significantly harder” in the age of AI. “The challenge of reaching our sustainability goals given the increased demand for energy and resources driven by AI is not unique to Meta,” wrote Rachel Peterson, Meta’s vice president of infrastructure for data centers. Indeed, Google and Microsoft have both said they’re falling short of their climate targets, and in 2023 alone, Meta’s own data center energy use spiked 34%. Peterson wrote that this demand “will require major shifts in how companies like ours operate.”
Some of those shifts are already underway. Shortly after the election, Meta issued a request for proposals for nuclear developers with the goal of adding up to 4 gigawatts of new nuclear generation capacity — enough to power a small city — by the 2030s.
Though the company has plenty of apolitical reasons to pursue nuclear power and plenty of company among tech giants investing in the space, it doesn’t hurt that nuclear power is also more politically palatable at this moment. Just last week, Energy Secretary Chris Wright, a former fossil fuel executive, promised to “unleash commercial nuclear power,” even as he skewered the pursuit of a net-zero future. Wright’s secretarial order made not a single mention of solar and wind power, which make up the bulk of Meta’s renewable energy mix.
Meta’s push into nuclear by no means indicates it’s giving up on wind and solar. A Meta spokesperson pointed me to a new agreement Meta struck last week to purchase 115 megawatts of power from an Oklahoma wind farm. (Google reportedly struck its own wind deal earlier this month in Virginia.) But it does mean Meta is diversifying its energy mix to keep up with AI demand at a time when the federal government is least likely to get in its way.
“There’s been no repudiation of the climate goals,” Benjamin C. Lee, a computer scientist at the University of Pennsylvania who was previously a visiting scientist at Meta AI working on data center energy usage, told me. “It’s just that there simply isn’t enough wind and solar, and if you’re looking to build another 100 megawatt data center, you have to get the energy.” (Lee is now a visiting scientist at Google.)
“Energy of any kind trumps no energy,” he added.
That includes energy from natural gas. A few weeks after the election, Meta said it would build its largest data center yet — a 4 million square foot behemoth — in Richland Parish, Louisiana, which will be powered by three new natural gas plants. Meta’s announcement made no mention of the site’s power demands, but instead emphasized how the company planned to offset its impact by investing in community action grants, water stewardship, and adding enough new clean and renewable energy projects to the grid to cover 100% of the data center’s electricity needs.
But Zuckerberg left all of that out of his post about the project on Threads in January. Instead, just days after President Trump announced a new $500 billion AI data center partnership between Oracle, OpenAI, and Softbank, Zuckerberg boasted that “Meta is building a 2GW+ datacenter that is so large it would cover a significant part of Manhattan.”
The pandering post signaled a pivot — not necessarily in Meta’s actual plans for the data center, but in its climate-friendly messaging about it. In Zuckerberg’s telling, the data center’s sheer size, not its attempts at sustainability, were the selling point.
Still, despite these rhetorical moves, three people I spoke with who have previously worked at Meta on energy and sustainability issues are doubtful that the company’s substantial investments in renewable energy — particularly solar energy — are going away. That’s largely because solar is still often cheaper than other forms of energy. Even if the political case is diminished, they said, the business case is still there.
But investing in renewables alone won’t get Meta to its ultimate goal. Achieving net zero emissions throughout the value chain requires relying on materials that often do carry a cost premium. And it requires doing that at a time when AI companies are racing to one-up each other by building bigger data centers faster than ever before.
It’s those commitments that appear far more vulnerable, particularly when the White House is offering every excuse for corporate America to give them up. “Net zero was always going to fall by the wayside, but that was because of AI,” said Lee. “The question is whether the gap between what we had hoped to achieve and where we are becomes larger.”