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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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Inside a wild race sparked by a solar farm in Knox County, Ohio.
The most important climate election you’ve never heard of? Your local county commissioner.
County commissioners are usually the most powerful governing individuals in a county government. As officials closer to community-level planning than, say a sitting senator, commissioners wind up on the frontlines of grassroots opposition to renewables. And increasingly, property owners that may be personally impacted by solar or wind farms in their backyards are gunning for county commissioner positions on explicitly anti-development platforms.
Take the case of newly-elected Ohio county commissioner – and Christian social media lifestyle influencer – Drenda Keesee.
In March, Keesee beat fellow Republican Thom Collier in a primary to become a GOP nominee for a commissioner seat in Knox County, Ohio. Knox, a ruby red area with very few Democratic voters, is one of the hottest battlegrounds in the war over solar energy on prime farmland and one of the riskiest counties in the country for developers, according to Heatmap Pro’s database. But Collier had expressed openness to allowing new solar to be built on a case-by-case basis, while Keesee ran on a platform focused almost exclusively on blocking solar development. Collier ultimately placed third in the primary, behind Keesee and another anti-solar candidate placing second.
Fighting solar is a personal issue for Keesee (pronounced keh-see, like “messy”). She has aggressively fought Frasier Solar – a 120 megawatt solar project in the country proposed by Open Road Renewables – getting involved in organizing against the project and regularly attending state regulator hearings. Filings she submitted to the Ohio Power Siting Board state she owns a property at least somewhat adjacent to the proposed solar farm. Based on the sheer volume of those filings this is clearly her passion project – alongside preaching and comparing gay people to Hitler.
Yesterday I spoke to Collier who told me the Frasier Solar project motivated Keesee’s candidacy. He remembered first encountering her at a community meeting – “she verbally accosted me” – and that she “decided she’d run against me because [the solar farm] was going to be next to her house.” In his view, he lost the race because excitement and money combined to produce high anti-solar turnout in a kind of local government primary that ordinarily has low campaign spending and is quite quiet. Some of that funding and activity has been well documented.
“She did it right: tons of ground troops, people from her church, people she’s close with went door-to-door, and they put out lots of propaganda. She got them stirred up that we were going to take all the farmland and turn it into solar,” he said.
Collier’s takeaway from the race was that local commissioner races are particularly vulnerable to the sorts of disinformation, campaign spending and political attacks we’re used to seeing more often in races for higher offices at the state and federal level.
“Unfortunately it has become this,” he bemoaned, “fueled by people who have little to no knowledge of what we do or how we do it. If you stir up enough stuff and you cry out loud enough and put up enough misinformation, people will start to believe it.”
Races like these are happening elsewhere in Ohio and in other states like Georgia, where opposition to a battery plant mobilized Republican primaries. As the climate world digests the federal election results and tries to work backwards from there, perhaps at least some attention will refocus on local campaigns like these.
And more of the week’s most important conflicts around renewable energy.
1. Madison County, Missouri – A giant battery material recycling plant owned by Critical Mineral Recovery exploded and became engulfed in flames last week, creating a potential Vineyard Wind-level PR headache for energy storage.
2. Benton County, Washington State – Governor Jay Inslee finally got state approvals finished for Scout Clean Energy’s massive Horse Heaven wind farm after a prolonged battle over project siting, cultural heritage management, and bird habitat.
3. Fulton County, Georgia – A large NextEra battery storage facility outside of Atlanta is facing a lawsuit that commingles usual conflicts over building these properties with environmental justice concerns, I’ve learned.
Here’s what else I’m watching…
In Colorado, Weld County commissioners approved part of one of the largest solar projects in the nation proposed by Balanced Rock Power.
In New Mexico, a large solar farm in Sandoval County proposed by a subsidiary of U.S. PCR Investments on land typically used for cattle is facing consternation.
In Pennsylvania, Schuylkill County commissioners are thinking about new solar zoning restrictions.
In Kentucky, Lost City Renewables is still wrestling with local concerns surrounding a 1,300-acre solar farm in rural Muhlenberg County.
In Minnesota, Ranger Power’s Gopher State solar project is starting to go through the public hearing process.
In Texas, Trina Solar – a company media reports have linked to China – announced it sold a large battery plant the day after the election. It was acquired by Norwegian company FREYR.What happened this week in climate and energy policy, beyond the federal election results.
1. It’s the election, stupid – We don’t need to retread who won the presidential election this week (or what it means for the Inflation Reduction Act). But there were also big local control votes worth watching closely.
2. Michigan lawsuit watch – Michigan has a serious lawsuit brewing over its law taking some control of renewable energy siting decisions away from municipalities.