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How to Power the Energy

Innovation LifecycleBetter Policies Can Carry New Energy Sources to Market

Sean Pool June 2010

Introduction

Freeing our economy rom is dangerous addicion o ossil uels and avering hecalamious risks o climae change will require a major echnological ransorma-

ion in he way we produce, ransmi, and consume energy. Invening, develop-

ing, building, and deploying hese new echnologies will require a new era o 

American echnological innovaion. e resul will be new indusries and jobs,

along wih more clean energy and less polluion.

e good news is ha we know ha innovaion is a undamenal driver o eco-

nomic growh, and America has led he world in innovaion or he pas wo

cenuries—rom he mechanizaion o exile manuacuring in he lae 18h

cenury o he invenion o he Inerne in he lae 20h cenury. Innovaion is

America’s rs and greaes compeiive advanage—or, as Presiden Obama said

“i’s in our DNA .” weny-rs cenury clean energy echnologies are already being

designed, buil, markeed, and insalled o replace more han a cenury’s worh

o enrenched ossil uel inrasrucure, and a recen repor by he Deparmen

o Commerce indicaes ha here are nearly 2 million clean energy jobs in our

economy oday, wih more on he way.

e bad news, however, is his: he Unied Saes lags behind many oher coun-

ries in hese emerging echnology secors because our public policy does no ully recognize he cenral role ha innovaion plays in susaining qualiy economic

growh and job creaion. Par o he problem is a lack o undersanding abou

exacly wha innovaion is, how i works, and more imporanly who is involved

(see box). Policymakers in paricular need o undersand how dieren public

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and privae secor players inerac o orm innovaion neworks, and how hese

neworks change over ime, which is why we’ve pu ogeher his primer on he

energy innovaion liecycle.

We’ll rs dene he dieren sages o he innovaion liecycle, hen describe he

nework o players engaged a each sage o he process. is “nework liecycle”approach can help us beter undersand who does innovaion, he processes ha

drive i, and he opporuniies or public policy o aid i a various poins in he

process. As you’ll see, our innovaion economy in he energy arena needs some

key reorms o perorm a is peak again.

“Innovation” is a broad and oten vague term, and its meaning varies in dierent policy

circles. But no matter what the context, innovation is undamentally the process o 

inventing, introducing, and adopting a new product, practice, system, or behavior.

An innovation can be a new product, machine, policy, business model, administra-

tive structure, managerial system, or even a new cultural or social norm that benets

society. But regardless o whether an innovation aects social processes, economic

process, or physical and technological processes, what distinguishes an innovation

rom an idea or a principle is that it creates value and improves society.

This paper ocuses on clean energy technology innovation—the invention andpropagation o new machines that generate, save, or transmit energy. But as we will

show, producing these new devices also requires the use o new modes o manuac-

turing, which can be thought o as technologies themselves, as well as new business

models that can nance, produce, market, and sell these new machines.

Creating a clean energy economy is just as much about “process innovation”—incre-

mental improvements to the materials and manuacturing process o technologies

we already know about—as it is about nding new or undiscovered “breakthrough

technologies.” Understanding the ve phases o energy “innovation liecycles” and

the ve kinds o participants in “innovation networks” will help show how these

seemingly separate goals are actually related.

Defining innovation: new ideas that create value

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The vital role of federal policy in catalyzing private sector innovation

Innovaion on he scale necessary o solve our climae and energy crises canno be

driven solely by he governmen—ye key ederal policy decisions and invesmens

are needed o caalyze privae secor innovaion. While counries such as China,

Spain, and Germany have pursued rapid energy echnology expansion hroughop-down governmen spending programs, America’s engine o innovaion is more

botom up. Innovaion in America has always resed wih is privae secor enre-

preneurs, small businesses, invenors, and invesors. Bu ha does no mean ha

he governmen has no role o play a all.

While he privae secor mus ulimaely supply he bulk o he money and exper-

ise o build he clean energy economy, he governmen mus creae he condi-

ions ha allow or his by correcing or win marke ailures ha keep privae

invesmen lower han he economically ecien level: he hidden coss o carbon

polluion, and he hidden benes o innovaion and knowledge spillover.

Because markes do no recognize hese hidden coss and benes (wha econo-

miss call negaive exernaliies and posiive exernaliies, respecively), privae

invesors and enrepreneurs end o underinves in clean energy innovaion.

For every $1 million in pros he producer o a new innovaion earns, some

esimae ha “knowledge spillovers” creae as much as $4 million in hidden

economic benes or sociey. ese spillover benes manies as he creaion

o new high-wage jobs, he esablishmen o new businesses ha use he new 

echnology, and he benes o uure innovaors who can build on he new 

knowledge in unexpeced and advanageous ways. e governmen is jusied

in helping companies innovae because o he addiional social bene o inno-

vaion ha privae invesors would oherwise ignore.

Many o he echnologies on which our modern economy now relies resuled

rom he unexpeced applicaion o knowledge creaed in par wih he help o 

governmen innovaion programs. Early microchips designed originally or use

in he Apollo space vessels and inerconinenal ballisic missiles gave rise o he

modern microprocessor upon which PC’s, mobile phones, and iPods are now 

buil. e Deense Advanced Research Projecs Agency, or DARPA, served as avial incubaor or he early compuer-o-compuer communicaion echnologies

ha evenually led o he Inerne, and early NASA saellie applicaions in he

1950s helped spur he developmen and demonsraion o phoovolaic solar cells.

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is is no o say ha governmen policies should “pick winners”—hey should

no. Companies and echnologies ha are he mos eecive and ecien should

compee airly o provide he clean energy soluions our economy so desperaely 

needs. Bu smar, argeed, and progressive governmen policies are needed o

ensure ha all possible soluions can compee on an even playing eld wih he

incumben diry echnologies ha are enrenched by heir exising inrasrucureand poliical clou.

Five phases of the energy “innovation lifecycle”

Energy innovaion is no jus he process o invening new echnologies and doing

research and developmen in governmen or universiy labs. Innovaion is acually 

a se o inerrelaed processes ha can be broken down ino ve basic phases:

• Discovery • Developmen• Demonsraion• Commercializaion• Mauraion

Each phase is underaken by a dieren and evolving nework o paricipans, and

each has is own disinc policy needs.

e ve-phase summary below is a synhesis o numerous academic innovaion

liecycle models daing back o Joseph Schumpeer, an Ausrian economis born

in he lae 19h cenury. I is imporan o noe ha raher han discree or enirely 

separae caegories, he dieren phases in his generalized model ake place along

a coninuum and someimes may overlap.

Discovery

Discovery  is he process o researching a basic idea or scienic principle ha may 

one day lead o a useul echnology, and is done mosly by researchers in universi-ies. is process also goes by he names “basic science,” “blue skies research,” or

“pure research,” and he rs goal o he process is o expand he sore o scienic

knowledge. echnologies a his sage in lie are no ully ormed, and mos will

never graduae o he nex sage o developmen due o echnical or cos-relaed

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consrains. Neverheless, he goal o public policy a his sage is o empower

smar researchers o cas as wide a ne as possible in he hopes ha one idea in a

hundred could one day revoluionize indusry.

Governmen grans or universiy research and unding o ederal labs are he

primary sources o unding or his early phase o innovaion, since here is noye a uncional echnology ha can produce pros or privae invesors. e

Energy Fronier Research Ceners are an excellen example o recen Deparmen

o Energy policy ha is supporing discovery by puting money in he hands o 

able researchers wih promising ideas on a compeiive basis. e discovery phase

creaes science research and adminisraive jobs.

Development

Developmen is he process o linking he basic science o a discovery wih unc-ional echnology, also someimes known as “applied research.” Universiies and

governmen labs oen coninue o play a lead role during developmen, alhough

promising echnologies may begin o atrac he atenion o poenial enrepre-

neurs, who seek ou “seed unding” o help creae sarup companies o work on

developing he echnology or even building uncional prooypes.

Because he risks are oo grea or ypical invesors, his early jol o privae capial

mos oen comes rom angel invesors—wealhy individuals who suppor enre-

preneurs wih personal unding—or venure capial rms, which do he same

wih larger pools o unding. Because unding or developmen is oen very scarce,

invenors and enrepreneurs hemselves someimes mus ap ino heir personal

savings—his is known as “boo-srapping.” is phase is also someimes reerred

o as he “seed sage,” as he poenial business generally has no developed a ull-

grown and proable business plan.

e Advanced Research Projecs Agency-Energy , or ARPA-E, was designed on he

same model as is older broher, he Deense Advanced Research Projecs Agency,

or DARPA. ARPA-E is an iniiaive o he DOE iniially unded by he American

Recovery and Reinvesmen Ac, and is an excellen example o suppor or devel-opmen-phase echnology innovaion. Job creaion during developmen includes

boh public and privae research and adminisraive jobs, as well as he possibiliy 

or business, managemen, nance, and perhaps small-scale abricaion jobs.

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Demonstration

Demonsraion is he process o nalizing prooypes and esing hem under

real-world condiions o assess operabiliy, echnical perormance, proabiliy,

and in some cases even regulaory issues. is may also be reerred o as “proo 

o concep” or “echnology ranser” because his is he phase when echnology mus begin o move rom labs and research insiuions o assembly lines and

businesses. Boh demonsraion and early commercializaion are someimes also

reerred o as “deploymen.”

Examples migh include he consrucion and operaion o a rs-o-is-kind

advanced nuclear reacor, a demonsraion scale cellulosic ehanol biorenery , or

a coal-red power plan wih carbon capure-and-sorage echnology. All o hese

are scienically undersood echnologies ha are undergoing small-sale demon-

sraion as a precursor o wider commercializaion. Manuacurers who build, con-

racors who insall, and uiliies ha operae and monior he echnology becomeessenial pars o he innovaion nework a his sage, and heir ineracions wih

researchers and nanciers promoe an imporan kind o real-world knowledge

creaion called “learning by doing.”

Alhough demonsraion projecs are rarely proable in isolaion, he primary 

goal o demonsraion is o indicae o he public, poenial invesors, and he

business communiy ha producion processes now exis and ha he echnology 

is nearing marke. As his akes place, he burden o nancing begins o shi rom

basic governmen research grans o much smaller “proo o concep” develop-

men grans and on oward privae nancing rom angel invesors and venure

capial rms, hough he risks are sill very high. For capial-inensive, indusrial-

scale echnologies, such as a commercial-scale carbon capure-and-sorage coal

plan, nancing or demonsraion may fow direcly rom esablished indusry 

players or oher large companies.

Bu privae invesors need o see a clear pah o proabiliy beore invesing, and

demonsraion projecs on heir own can rarely provide his wihou public sup-

por. In he highly regulaed and capial inensive energy indusry, he pah o pro-

iabiliy oen depends on signican governmen incenives and assurances. is isespecially problemaic or capial-inensive clean energy echnologies ha require

a lo o upron invesmen o develop land, build power lines, and consruc and

insall equipmen. e scarciy o privae nance is why many in he business and

policy communiy reer o he process o carrying a promising echnology rom

proo o concep hrough commercializaion as crossing he “valley o deah.”

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Commercialization

e commercializaion phase is when new 

echnologies mus mee he marke es.

Enrepreneurs mus prove ha hey can pro-

duce and sell he new producs proably oearly adopers and niche markes. is gener-

ally involves nalizing producion processes,

building a acory, obaining manuacuring

equipmen, developing relaionships wih com-

ponen suppliers, and nding enough poenial

buyers o make i all a worhwhile invesmen.

e “valley o deah” privae nancing problem is

acue a his sage, oo, as new unding is criical

o his cash-inensive and oen capial-inensivephase o he innovaion cycle. Follow-on rounds

o venure capial, privae equiy, and/or deb

nancing (ha is, borrowing rom a bank or

selling bonds) become increasingly prominen

sources o money, as small- o medium- scale

manuacuring and services operaions are

esablished. Sarup companies a his phase are

expeced o generae some cash fow rom sales

o he echnology, alhough proabiliy or he

rs ew years may sill depend on governmen

incenives such as ax credis or cash grans or

invesmen and elecriciy producion, loan

guaranees, or he sale o Renewable Energy 

Cericaes o uiliies who need hem o mee

sae renewable elecriciy sandards.

Commercializaion is a criical botleneck in

curren U.S. innovaion policy because enre-

preneurs have a growing backlog o echnically proven echnologies or which hey canno nd

aordable nancing o grow heir operaions

and achieve he economies o scale necessary 

o compee wih convenional incumben

echnologies. A Clean Energy Deploymen

Public funding for development-stage research in

defense and energy

While the Deense Advanced Research Projects Agency, or DARPA, has been

titan o research or development-stage deense technologies or decades, t

Advanced Research Projects Agency–Energy, or ARPA-E, has only begun to r

a small amount o unding or its operations since the passage o the stimulbill in 2009. Ensuring the long-term growth o this agency is critical to prom

healthy clean energy innovation networks.

Private venture capital funding for cleantech on th

America’s engine o innovation is the private sector, and venture capital un

supply billions o dollars to entrepreneurs with big ideas. Over the past decathese private investors have taken an increasing interest in clean energy

technologies. With a little more long-term certainty about uture governme

policies, these new clean energy industries are poised to really take o.

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

In billions of dollars

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 F(req

In billions of dollars

20052002 2003 2004 2006 2007 2008 2009 $0

$5

$10

$15

$20

$25

$30

$35

2%2%

2%

6%

1%

9%

14%

11%

Total U.S. venture capital unding U.S. cleantech venture capital

Deense Advanced Research Projects Agency (DARPA) budget

Advanced Research Projects Agency–Energy (ARPA-E) budget

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Adminisraion or “Green Bank” ha can provide loan guaranees and oher credi

enhancemens is one poenial policy response o his marke piall. e creaion

o a public-privae equiy invesmen parnership could be anoher way o break 

his nancing botleneck.

Commercializaion creaes more permanen manuacuring and consrucion jobs,as companies increase proabiliy and inves in and operae new manuacuring

aciliies, and as clean energy echnologies are deployed, insalled, and operaed.

Maturation

Mauraion occurs when new echnologies graduae rom niche o mainsream

markes by scaling up manuacuring, gaining marke share, increasing eciency,

and showing ha hey can compee on cos wih incumben sources o energy.

In he case o renewable energy, his oen occurs once echnologies reach “gridpariy”—he poin a which he renewable energy is equal o or cheaper in price

han exising power sources.

As new echnologies become commercially compeiive, hey gain marke share

and gradually begin o displace incumben echnologies. is process is some-

imes also called “diusion.” Maure innovaion neworks should ideally become

proable or all paricipans independen o governmen incenive programs,

alhough in he case o he incumben ossil uel indusry, many waseul subsidies 

coninue o persis due o poliical pressure. As proabiliy becomes posiive,

seed-sage invesors, angel invesors, and venure capialiss are able o “exi” heir

invesmens and make a pro, eiher by selling heir shares a an iniial public

oering or by selling he enire company o anoher larger corporaion.

e innovaion cycle begins anew a his sage as increasingly sel-sucien

clean energy manuacurers begin o reinves heir own pros in new research

oward incremenal improvemens o heir echnology and producion process,

or seek o acquire smaller companies wih promising ideas or how o coninue

o improve qualiy or reduce coss. Coninuing process innovaion remains

criical, even or maure echnologies, bu policymakers all oo oen ignore hisaspec o innovaion policy. e bailou o he U.S. auo indusry, or example,

can be seen as a ailure o a maure indusry o coninue o innovae.

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A major goal o public policy a his sage is o ensure ha cuting-edge researchers

and manuacurers coninue o collaborae eecively o organically develop and

commercialize he nex generaion o clean energy manuacuring echnologies.

Bu direc governmen incenives or invesmen and producion o he original

echnology should begin o sunse on a reliable pah.

Five kinds of participants in innovation networks

Innovaion is also a nework aciviy. An innovaion nework is he consellaion

o all public and privae secor organizaions paricipaing in he developmen o 

a cerain echnology. Each paricipan in an innovaion nework has is own iner-

ess and objecives, and dieren policy ools are needed o help dieren kinds o 

paricipans a dieren poins along he innovaion liecycle.

While here are many dieren ypes o paricipans, or he mos par, hey can becaegorized ino ve basic groups:

• Researchers (universiy, governmen, and corporae R&D researchers)• Producers (manuacurers o clean energy equipmen and componens)• Financiers (public and privae invesors in clean energy projecs and companies)• Users (uiliies, building owners and managers, privae power generaors,

vehicle drivers, or anyone who uses or operaes clean energy echnology)• Regulaors (hose who paricipae in seting he rules and apporioning public

resources or he above menioned aciviies)

Someimes hese groups may overlap, such as in he case o a large corporaion

wha does boh producion and research on energy echnology.

A paramoun objecive o innovaion policy is o align he disparae and a imes

conficing ineress o hese dieren public- and privae-secor players o orm

producive and collaboraive innovaion neworks. Comprehensive innova-

ion policy seeks o maximize he fows o money, inormaion, and risk ha ac

like connecive issue holding hese dieren innovaion nework paricipans

ogeher. o make sure he policy maches he needs o he nework o players aeach sage, i is imporan o undersand how he process and he players inerac

along he way and how policy ools could beter link he innovaion process and

innovaion neworks o he bene o our economy and sociey.

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The discovery network

Participants: During he discovery phase, researchers working on basic science

in universiy and governmen labs are he primary paricipans in innovaion

neworks. Some o his research is published in scienic journals, creaing public

knowledge raher han privaely owned inellecual propery. Ensuring academicindependence and reedom o scienic pursui allows researchers a dieren

insiuions o collaborae reely and build on one anoher’s eors.

Financing: e money ha drives discovery mosly fows rom governmen and

nonpro grans and universiy research budges. e vas majoriy o basic sci-

ence research does no resul in markeable echnology, which means he risks o

privae invesors a his sage are prohibiively high. Someimes, however, pioneer-

ing angel invesors and arsighed larger corporaions may dedicae some o heir

unding oward his early discovery process wih he hope o invening a break-

hrough echnology ha will earn big payback urher down he line. Becauseearly-sage research during discovery is usually ar away rom becoming a viable,

markeable, or proable produc, invesors and privae companies are no usually 

ineresed in nancing i.

Policy response: Increasing unding or he discovery phase o energy innovaion

is criical or helping achieve he marke-disrupive breakhroughs ha could

ransorm our energy economy in he coming decades. Breakhrough innovaion,

disrupive innovaion, or radical innovaion are all erms used o reer o hese

poenially high-impac echnologies. Bu because echnology in he discovery 

phase is neiher atracive o invesors nor markeable as a source o pros, here

is a unding gap ha mus be lled by public sources.

Public policy currenly supporing energy innovaion in he discovery sage

includes unding and operaion o he various DOE naional labs, and some

gran unding or research wihin he universiy sysem. DOE’s Oce o Science

esablished is program or Energy Fronier Research Ceners, or EFRCs, in

Augus 2009 o provide grans o $2 million o $5 million per year or ve years o

“universiies, naional laboraories, nonpro organizaions, and or-pro rms…

o develop he scienic oundaion or a undamenally new U.S. energy econ-omy.” O he 46 EFRCs seleced or unding, 31 are led by universiies, 12 by DOE

Naional Laboraories, wo by nonpro organizaions, and one by a corporae

research laboraory. Roughly a hird o he unding will come rom he American

Reinvesmen and Recovery Ac.

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Besides helping o und he vial aciviies o basic science research, hese EFRCs

play a crucial role in helping o build he bridge o he nex phase o innovaion by 

esablishing vial relaionships beween researchers and governmen innovaion

paricipans. ese relaionships are needed o culivae fows o inormaion among

researchers, governmen acors, and poenial invesors who may be able o provide

sources o capial urher down he road. Ensuring ha he Unied Saes mainainsis dominan posiion in basic science research and inormaion neworks will drive

economic growh and keep he Unied Saes compeiive in he long run.

Examples: Some examples o he exciing echnologies in he discovery sage a

hese ceners include: hybrid synheic-organic maerials research or solar power

applicaions a Universiy o Arizona, ucson; complex elecrochemical processes

criical o advancing elecrical energy sorage a Argonne Naional Lab in Argonne,

Illinois; and invesigaions o he behavior o meal alloys in exreme radiaion

environmens or applicaions in nuclear reacors a Oak Ridge Naional Lab in

Oak Ridge, ennessee.

The development network

Participants: e innovaion nework expands as echnologies move rom discov-

ery ino developmen o include poenial producers o he new echnology and

seed-sage nanciers in addiion o he exising base o researchers in universiy 

or governmen labs. Enrepreneurs seeking o sar up companies o produce and

marke he echnology may emerge during he developmen phase i hey can nd

angel invesors willing o ake on he risk o unding a echnology ha may no

pay o or many years, i a all. Faciliaing he fow o public and privae capial

and he exchange o inormaion among his growing nework o paricipans is

he primary goal o innovaion policy a his sage.

Financing: During developmen, mos unding or research aciviies sill comes

rom public sources such as governmen grans and research universiies because

he echnology is sill no ready or marke. Bu as he echnical viabiliy o he sci-

ence begins o ake shape, he possibiliy o uure pros may atrac some seed-

sage capial rom angel invesors or large corporaions who operae heir ownresearch labs seeking o gain a sraegic advanage or secure inellecual propery 

righs in he emerging eld.

Noneheless, he survival rae or echnologies a his sage is very low, so even

high-risk high-reward invesors such as seed and early sage venure capial unds are

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usually hesian o inves unless he echnology seems like i could one day revo-

luionize he indusry. In 2006 or example, seed-sage unding accouned or less

han 1.5 percen o he $2.1 billion in overall clean ech venure capial in he Unied

Saes. is is par o a larger rend o declining unding or sarup and early-sage

nance relaive o laer-sage nance ha makes i very hard or even good ideas o

ge o he ground. Creaing incenives o increase hese early fows o privae capialrepresens a subsanial poin o leverage or innovaion policymakers.

Policy Response: anks o he American Recovery and Reinvesmen Ac, he

DOE was able o und he Advanced Research Projecs Agency-Energy , which

was originally creaed by law in he 2007 America COMPEES Ac. ARPA-E

works o accelerae research and developmen by linking promising scienic

ideas in research universiies and governmen labs wih small sarup companies

seeking o develop hese ideas ino markeable echnologies. is achieves wo

imporan goals: increasing ineracion and exchange o knowledge among dier-

en ypes o innovaion nework paricipans, and increasing capial fows owardinnovaive ideas.

In is rs year o operaion, ARPA-E has doled ou $151 million in unding o

37 ambiious projecs in 17 saes. is is small compared o he $3 billion budge 

o ARPA-E’s older broher DARPA, bu i is already making a big dierence. O 

he projecs seleced or ARPA-E unding, 43 percen were led by small businesses,

35 percen were led by educaional insiuions, and 19 percen were led by large

businesses. Six o he seleced applicaions also included researchers a naional

labs in heir projec proposals, and 21 o he seleced applicaions (57 percen)

included universiy paricipans. is kind o public-privae collaboraion creaes

high-level employmen opporuniies wih he poenial o blossom urher as he

echnologies move oward commercializaion. e closeness o ineracion among

public and privae echnology researchers, nanciers, and producers is also a crii-

cal elemen o a successul innovaion nework.

Examples: ARPA-E has unded public-privae collaboraion around he develop-

men o new energy echnologies including he developmen o high-densiy 

lihium bateries ha could revoluionize elecriciy sorage, smar building energy 

eciency sysems uilizing inormaion echnology, new “DirecWaer” solar cellmanuacuring processes ha could cu coss by 90 percen, and research or cel-

lulosic and algae-derived second generaion biouels.

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The demonstration network

Participants: Demonsraion is he rs ime when paricipans rom all ve

caegories o an innovaion nework come ogeher: researchers, producers, users,

nanciers, and regulaors. By building a uncioning demonsraion projec ha

generaes elecriciy (or in he case o eciency echnology, saves i), he innova-ion nework becomes complee by adding boh he relevan sae and ederal

regulaors who mus approve he projec, as well a leas one user who will operae

and derive revenue rom he echnology.

Existing programs that try to bridge the nancing “valley o death” by

acilitating network ormation among small businesses and public and

researcher organizations are helpul, but limited in scope. They include:

Small Business Innovation Research grants

The Small Business Innovation Development Act o 1982 directs 11

ederal agencies (including the Departments o Energy and Deense,

the Environmental Protection Agency, NASA, and the National Sci-

ence Foundation) to reserve a portion o their R&D unding or com-

petitive grants or small business innovation. SBIR grants are provided

in two phases—$100,000 over six months, and then $750,000 over

to two years—to help small, American-owned business obtain the

capital necessary to explore new technological ideas and assess their

marketability. This has the eect o helping potential producers join

innovation networks and undertake the applied research necessary

to move toward demonstration and commercialization.

Small Business Technology Transfer grants

Similar to SBIR grants, STTR grants are unded through the R&D bud-

gets o ve ederal agencies including the Department o Energy, and

are awarded competitively each year to innovators with promising

technologies in two phases. The main dierence is that STTR grants

are awarded specically to public-private partnerships between small

businesses and ederally unded research and development centers

located in universities or other nonprot research organizations, rather

than to small businesses alone. By design, this creates incentives or

researchers and potential producers to orm relationships and e

change inormation, growing innovation networks and moving

development toward demonstration and perhaps commercializ

Technology Innovation Program

The Technology Innovation Program, or TIP, which was created

America COMPETES Act o 2007 and is housed within the Depa

o Commerce’s National Institute o Standards and Technology,

vides support or innovative high-risk, high-reward research in

that address key national priorities, such as energy, manuactu

and civil inrastructure. The program is now hosting its second

competition to und and acilitate network ormation between

searchers and producers with up to $9 million over three years

can nd private nanciers who will provide a 50-50 match.

All o these programs, however, are extremely limited in their le

unding and scope, and their already modest resources are divi

across many elds besides energy. Requirements that compani

successully shit rom laboratory to market in just two or three

puts an arbitrary and at times uneasible time constraint on the

innovation process. Both SBIR and STTR programs explicitly sta

that nance or actual commercialization ater the two-year un

window must come exclusively rom private sources. Because n

technologies can meet this requirement, many promising inno

stall or die during this lapse in government support. Furthermo

an apparent lack o coordination among these related program

within the Department o Commerce limits what they can achi

A bridge too far

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Finance: Demonsraion is he rs ime when exremely limied proo-o-concep

unding by he governmen—via Small Business Innovaion Research, or SBIR 

grans, and Small Business echnology ranser, or STR grans (see box on page

13)—is replaced by privae sources o capial, which begin o nance a signican

porion o innovaion aciviies in he hopes ha he new echnology will generae

revenues and evenually pros. A his sage, venure capialiss begin o ake noeo new echnologies as producers o he echnology seek “ollow-on” rounds o 

venure capial or, less commonly, deb nance. Demonsraion projecs are rarely 

proable in isolaion, bu hey are inended o show ha he echnology can be

easibly abricaed, and ha he produc can be insalled and operaed in a way 

ha creaes a revenue sream.

e abiliy o demonsrae no only echnical easibiliy bu also economic easi-

biliy hrough reliable revenue sreams is a criical goal o demonsraion projecs,

since he invesmen communiy will no inves unil a echnology is demonsra-

bly proable. is revenue sream originaes wih he sale o elecriciy, savingson energy bills, or eciency improvemens o exising energy echnologies,

manuacuring processes, or inrasrucure. Wihou he assurance o his revenue

source, uiliies, merchan power generaors, and building owners will no be

willing o purchase he new echnology and equipmen rom manuacurers, and

invesors likewise will no be willing o nance projecs or young companies.

A successul bid o complee a demonsraion projec usually indicaes o poenial

privae-secor nanciers ha a commercial produc is nearly ready, and fows o 

equiy and deb nancing rom he privae equiy and venure capial communiy 

become more viable. Bu hese invesmens are sill considered very risky, and

paricularly in our curren economic downurn, public nancial backing in he

orm o grans, direc loans, and loan guaranees can be necessary o help ech-

nologies secure he privae nance—especially deb nance—hey need o reach

his milesone.

Policy response: Demonsraion is an underunded sage o innovaion in curren

U.S. energy policy. Governmen-unded pilo programs and demonsraion proj-

ecs can serve muliple purposes:

• o es he echnology and aciliae scienic learning abou is perormance• o build relaionships and fows o communicaion and capial among research-

ers, producers, and heir suppliers• o build amiliariy among he privae invesmen communiy 

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Ye in order o credibly esablish all hree o hese goals, governmen demonsra-

ion programs mus be careul o ensure ha he projecs ruly es no only he

echnical easibiliy o he echnology, bu also is economic viabiliy.

e Deparmen o Energy Innovaion Hubs program, and he Energy Regional

Innovaion Cluser iniiaive or energy eciency are wo exising programs haare helping solidiy relaionships among all ve ypes o innovaion paricipans

and cemen innovaion neworks around pre-commercial echnologies. ese wo

relaed programs are essenial because hey help grow he money, inormaion,

and risk fows (ha connecive issue menioned earlier) among privae research-

ers, producers, users, and nanciers, as well as purpose driven organizaions and

numerous agencies wihin he ederal governmen.

ese programs, however, are new, small, and only emporarily unded under he

American Recovery and Reinvesmen Ac. In order o be ruly eecive in caalyz-

ing he ormaion o innovaion neworks rom he botom up, hese programswill need o be more permanenly unded and enshrined wihin he insiuional

inrasrucure o he ederal governmen.

Examples: Iogen Corporaion, wih he help o Canadian governmen and a hos o 

inernaional invesors, has been producing cellulosic ehanol rom whea sraw (a

byproduc o ood producion) in a small demonsraion-sized aciliy since 2004.

As hey scale up producion in ha smaller aciliy, hey are drawing up plans wih

heir parners o build a larger, commercial-scale aciliy in Saskachewan.

en here’s FuureGen, a projec o demonsrae coal power wih carbon cap-

ure-and-sorage echnology in Matoon, Illinois. Alhough he projec has had

a bumpy pah orward since he end o he Bush adminisraion (some chiding

ha here is oo much “uure,” no enough “gen”), boh Presiden Obama and

Secreary o Energy Seven Chu have indicaed ha he projec holds grea prom-

ise. Revived by $1 billion rom he Recovery Ac, he projec has brough ogeher

all ve caegories o innovaion nework players o cooperae, share inormaion,

and devise shared public and privae nancing mechanisms o help build he

world’s rs uiliy-scale zero-emissions coal-burning power plan.

e availabiliy o governmen unding in his case serves as an imporan

anchor aciliaing collaboraion among companies who would no oherwise

be able o work ogeher. Once complee, he projec will have o demonsrae

no only ha he echnology works, bu also ha i could one day be proable

o build and operae.

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The commercialization network

Participants: During commercializaion, small and large manuacuring compa-

nies begin o inves in craing a proable business model o produce many copies

o he echnology and marke i o users. As he new produc goes ino commer-

cial use, producers and early-adoping users begin o collaborae more direcly,which oers an imporan opporuniy or innovaors o ideniy areas o improve-

men and respond o consumer needs. As he users acually begin o insall and

operae he new echnologies, hey begin o noice wha aspecs hey like, and

wha aspecs o he echnology could improve. Fosering his kind o inormaion

sharing beween users and producers is a key ingredien o innovaion nework 

success. In he case o clean energy echnologies, users migh include:

• Public and privaely owned uiliies• Independenly conraced operaion and mainenance companies ha acually 

operae clean energy echnologies• Independen power producing companies ha also may purchase, insall, and

operae energy generaion echnologies• Archiecs, conracors, and building owners who will incorporae new 

eciency echnologies ino heir building designs.

e commercializaion sage is also when compeiion or marke share blooms

among muliple producers o a echnology. Compeiion gives companies an

incenive o drive down coss and ry ou new ideas o nd ever-beter and more

ecien ways o doing hings. Wihou srong compeiion, echnologies usually 

canno move hrough commercializaion and ino mauraion.

A grea example o his would be he our dieren echnologies compeing o

produce low-cos elecriciy rom concenraing solar power:

• Serling engine dish designs• Parabolic rough designs• Fresnel reacor designs• Heliosa “power-ower” designs

All o hese echnologies are aimed a generaing solar baseload power using he

sun o creae hea ha drives a urbine or moor o produce elecriciy, bu each

approaches i dierenly, and he compeiion among hem will help ensure ha

companies explore all he bes ideas.

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I is possible ha cerain versions o he echnology will be beter suied or one kind

o applicaion, while oher versions may be beter suied or anoher applicaion. I is

also possible ha knowledge gained hrough exploraion o one oshoo echnology 

could help advance he aims o anoher compeior (his is a grea example o he

aoremenioned “knowledge spillover”). Compeiion is an imporan ingredien in

driving innovaion hrough commercializaion oward mauraion.

Indusry employmen has he poenial o grow exponenially during commercial-

izaion, as companies hire workers a all levels o raining o build and run acories,

and o manuacure, marke, monior, and mainain he echnology and equipmen.

Bu inheren marke barriers around nancing and marke demand severely resric

he ease wih wich promising echnologies can jump his gap. ere are oday a

plehora o echnically viable clean energy soluions ha currenly canno nd

nancing o achieve he economies o scale o make hem compeiive.

Finance: Commercializaion is he beginning o he process o replacing govern-men grans, seed capial, and venure capial as primary sources o unding or

innovaion aciviies wih more sable orms o nancing and evenually pro-

able revenue sreams rom he sale o he produc. ese more sable orms o 

nancing can include mezzanine capial rom privae equiy rms, equiy capial,

or deb capial (especially i he deb is backed by he governmen in he orm o 

loan guaranees).

Achieving his ransormaion is dicul and is he reason why commercializaion is

a major botleneck in clean energy innovaion policy. e problem lies in a muli-

aceed chicken-and-egg problem ha exiss beween nancing, marke demand,

inrasrucure, and supply capaciy. Since echnologies or which here is no marke

demand are no atracive invesmens or nanciers or poenial manuacurers, ha

in urn keeps hese echnologies rom reaching economies o scale or gaining marke

share, prevening hem rom nding nancing and perpeuaing he sagnaion.

Policy response: e governmen has a hree-par role o play in bridging his

gap by helping boh o spur marke demand, drive invesmen in he physical and

human inrasrucure o mee ha demand, and ensure he availabiliy o aord-

able nancing o make i all happen.

• Markets: Driving marke demand can bes be done by delivering incenives o

poenial users, such as uiliies, o encourage hem o inves in clean energy 

producs and projecs. Exising programs include he producion ax credi, he

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business energy invesmen ax credi, he residenial renewable energy and

energy eciency ax credis, and widespread governmen procuremen o clean

energy echnologies under Presiden Obama’s Execuive Order 13514.

Many saes have enaced a Renewable Energy Sandard ha ensures a cerain

level o demand or commercializing clean energy echnologies, hough no suchpolicy ye exiss on a ederal level. e U.S. Expor-Impor Bank , by helping

o nd overseas markes and expor opporuniies or domesically produced

clean-energy echnologies, also has an imporan role o play in driving demand.

Mos imporan, a price on carbon would help creae demand by making clean

energy opions more compeiive wih convenional energy as uiliies look o

replace aging inrasrucure and respond o naural increases in energy demand.

• Infrastructure: Incenives ha help lure manuacurers o inves in producing

he echnology are currenly delivered hrough he Manuacuring Exension

Parnership program. MEP is a program o he Naional Insiue o Sandardsand echnology ha provides consuling, marke research, and supply chain

coordinaion services o small- and medium-sized manuacurers o help hem

achieve coninuous improvemens, say abreas o he newes echnologies, and

help build domesic supply chains. Because he assembly line is jus as impor-

an o a locaion o innovaion as he lab, hese inormaion services are criical

o knowledge generaion and learning as echnologies progress rom commer-

cializaion and ino mauraion.

• Finance: e ile XVII loan guaranee program is currenly he primary vehicle

or ensuring he availabiliy o aordable privae-secor capial or commercializa-

ion, hough he program is limied in is reach and longeviy. e secion 48(c)

advanced manuacuring invesmen ax credi has also been exremely success-

ul in helping aciliae nancing or invesmens in manuacuring aciliies or

new and innovaive clean energy echnologies. I would be beter, however, or

Congress o creae an independen Clean Energy Deploymen Adminisraion,

also reerred o as a “Green Bank .” A green bank would be able o miigae he

risk perceived by invesors hrough loan guaranees and oher kinds o credi

enhancemens, leveraging large amouns o privae capial a relaively low cos o

he ax payer. Such programs have been used in he pas o grea success. Anoherpossibiliy would be or Congress o creae a public-privae parnership ha could

deploy public and privae equiy invesmen dollars in promising echnologies.

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Examples: Some o he more charismaic and well-known clean energy echnolo-

gies—solar phoovolaic, concenraing solar power, and geohermal—are all

considered o be a various poins along he commercializaion process in ha

here are some proable companies already compeing o produce he producs

and sell hem o global and domesic markes.

Bu overall marke share is sill relaively small, boh globally and in he Unied

Saes because markes are sill oo relian on various governmen incenives and/

or niche marke applicaions (such as o-grid insallaions, or users willing o pay 

a premium above marke raes or he “clean” or “green” atribues o he echnol-

ogy) o operae proably. Alhough some companies may be able o operae

proably during commercializaion, he echnology sill has no reached cos

compeiiveness, or grid pariy, wih convenional ossil uel echnologies.

The maturation network

Participants: By he ime echnologies reach mauraion, he innovaion nework 

has blossomed beyond he ve basic caegories o researchers, producers, users,

nanciers, and regulaors o also include powerul ineres groups such as indusry 

associaions, and sources o public inormaion such as indusry or rade journals.

A his sage innovaion has moved all he way rom he laboraory o he assem-

bly line, as companies expand heir manuacuring operaions and compee or

marke share.

Finance: As economies o scale grow and new clean energy echnologies become

cos compeiive wih incumben diry energy echnologies, producers become

more nancially sel-sucien. By his poin hey can rely on revenue rom he

sale o he echnology as heir primary source o cash fow, raher han coninual

inusions o money rom muliple rounds capial or governmen incenives.

Early-sage nanciers such as angel or venure capial invesors will have exied

heir invesmen hrough an iniial public oering, or hrough being acquired by 

larger companies. o he degree ha he governmen has underwriten any o 

hese invesmens, his process rees up ha public money o recycle back ino he

sysem. Maure companies may rom ime o ime ake ou loans or issue bonds(deb nancing) o nance paricularly capial inensive projecs, bu by and large

hey are sel-relian.

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Policy response: ere are wo major goals o innovaion policy a his sage: sun-

seting obsolee policy incenives and ensuring ongoing process innovaion.

e rs goal is o gradually rollback or “sunse” unnecessary subsidies or maure

echnologies o ensure hey can sand on heir own ee and do no become per-

manenly dependan on ongoing governmen handous. In an ideal world, once aechnology maures and reaches cos pariy wih is incumben compeiors, i is

no longer relian on governmen suppor o grow and develop. Public resources

should be gradually and predicably wihdrawn so ha hey can be redireced

owards younger echnologies wih more need.

In pracice, however, he eecive sunseting o innovaion policy incenives is

oen overlooked due o he poliical sway o powerul maure indusries, or sheer

lack o atenion rom policy makers. CAP’s recen repor “America’s Hidden

Power Bill” explains in deail how many long-ignored ax subsidies o he oil and

gas indusry have helped deepen he enrenchmen o hose very maure indus-ries while wasing axpayers’ money wihou social bene. Eliminaing some o 

hese subsidies could save axpayers $45 billion over he nex decade, bu he oil

and gas indusries have spen millions on lobbying, public oureach, and con-

ribuions o poliical candidaes o ensure ha hese unnecessary and waseul

subsidies coninue o help heir botom lines.

Unair compeiion rom oreign echnology producers in counries wih poor labor

and environmenal sandards, sronger subsidies, and lower coss also complicaes

he heoreically sraighorward process o rolling back unnecessary public nanc-

ing. Case in poin: Because o is low cos o labor, currency manipulaion, and an

aggressive regime o subsidies, China has been able o capure a disproporionae

share o he rapidly growing global expor marke or cerain clean energy echnolo-

gies like solar PV and wind urbines. e hrea o unair oreign compeiion will

make i harder o rollback unnecessary subsidies or clean energy produced in he

Unied Saes as hese echnologies maure. Remedying his will require he Unied

Saes o ge serious abou enorcing rade agreemens, and proacively helping is

own domesic manuacurers coninue o innovae and say compeiive.

I is imporan o noe one imporan excepion o he sunse rule: Policies hacorrec or undamenal marke ailures, such as he exernal cos o global warm-

ing polluion, should never be scaled back. Puting a price on carbon—which

requires polluers o help pay or he damage ha heir emissions do o our

economy and environmen raher han orcing he public o oo he bill—is no a

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direc subsidy o a paricular indusry. Insead, appropriaely priced carbon is rem-

edy o a persising marke ailure—a mechanism or he public o be reimbursed

or damage or which polluers oherwise would no be held unaccounable. is

kind o policy should no be rolled back a all.

e second goal o innovaion policy or maure echnology neworks is ensureha cuting-edge researchers working on ancillary echnologies remain conneced

o he innovaion nework. Ancillary echnologies are new kinds o manuacur-

ing processes, or new kinds o maerials and componens ha are relaed o he

primary echnology and ha could lead o new and useul applicaions, improve-

mens in uncionaliy, or reducions in cos.

Hybrid cars, or example, are now reaching mauriy, and new lihium air bateries 

could in heory revoluionize his indusry by making bateries cheaper, ligher,

more powerul, and longer lasing. Alas, a lihium air batery has never been buil,

so i mus sar a he beginning o he innovaion cycle, even hough he primary echnology o which i relaes is maure. e ailure o he U.S. auomobile indus-

ry o keep up wih innovaions such as hybridizaion, elecric-drive engines, and

uel fexibiliy has been one o he cenral causes claimed or heir recen decline.

ere is much he governmen can do o ensure ha even companies in maure

echnology indusries are innovaing owards socially opimal oucomes.

While maure companies a his sage can and should deermine and und heir

own research prioriies, here is sill a role or ederal policy o ensure ha promis-

ing discovery-phase ancillary echnologies are able o germinae, jus as he original

echnology ha is now maure once did. e Manuacuring Exension Parnership

program and he secion 48(c) advanced energy manuacuring invesmen ax 

credi are key policies ha help o aciliae he fow o inormaion, money, and

risk amongs he researchers, producers, and nanciers o mauring innovaion

neworks. Addiionally, he policies a he discovery, developmen, demonsraion,

and commercializaion phase remain relevan, hough hey are applied a his phase

o new ancillary echnologies, raher han he maure echnology isel.

Examples: Many energy eciency echnologies or buildings, such as roong and

siding insulaion, energy ecien appliances, and modern HVAC (heaing, veni-laion, air condiioning) equipmen are maure, bu sill are no in widespread use

due o marke ailures around consumer decision making, imperec inormaion,

risk aversion by consumers, and spli incenives beween building owners and

enans. ese marke ailures represen an opporuniy or simple and inexpen-

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sive policy changes o open up new markes ha can quickly spur business aciviy,

jobs, and economy growh, especially in places ha need i mos.

Wind energy is also as approaching, and exceeding in some insances, grid pariy 

wih convenional energy. Wind oday accouns or more han 35 gigawats o gen-

eraing capaciy in he Unied Saes, enough o power nearly 10 million American homes, and he indusry currenly suppors some 85,000 jobs and growing.

Helping his echnology by coninuing o provide suppor or incremenal cos

reducions, manuacuring eciency, and mainaining long-erm marke cerainy 

are he main goals o policy a his sage.

Conclusion and policy response

e “nework liecycle” approach oulined in his memo reveals how energy inno-

vaion is no a simple process o hrowing governmen money a R&D aciviies inlabs and hoping we solve climae change. Energy innovaion is a complex cycle o 

inerrelaing aciviies underaken by an ever-evolving nework o paricipans ha

coninues long aer a echnology has le he laboraory and enered he marke.

ese diverse innovaion aciviies include:

• Research and developmen• Financing• Paening• Licensing• Markeing• Manuacuring• Workorce raining• Supply chain managemen• Consrucion• Operaion and mainenance• New incremenal innovaion

Undersanding how all he paricipans in innovaion neworks exchange inorma-

ion, money, and risk a dieren sages o he innovaion liecycle reveals poinso leverage or policymakers o help power he clean energy revoluion.

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ere are a number o exising programs ha could be expanded, conneced, and

leveraged more eecively o aciliae botom-up nework ormaion a every sage

o he innovaion liecycle (see box). ere is no quesion ha governmen unding

or basic and applied research, such as he grans given under he DOE’s Energy 

Fronier Research Cener program and ARPA-E, do much o drive discovery and

developmen processes ha are he bedrock o our naional innovaion sysem.

Building on hese programs, unding hrough programs like he SBIR, STR,

and IP could be more eecively designed o aciliae nework ormaion no

jus among researchers and demonsraion-sage producers, bu also wih henancial communiy and poenial echnology users as well. Because i is such

a young program, he IP is sil l orming is operaing guidelines and is acively 

soliciing ouside commen on how o mos eecively leverage is exising

resources going orward. is provides an excellen opporuniy or policymak-

Discovery: Energy Frontier Research Centers and other grants

rom the Department o Energy help und and coordinate

important discovery phase research in universities and DOE’s

17 national laboratories.

Development: Advanced Research Projects Agency-Energy, Small

Business Innovation Research grants, and Small Business Technology

Transer grants all acilitate small grants o a ew million dollars over

a period o a ew years to companies, universities, labs, and consortia

thereo and are critical in helping orm initial bonds between partici-

pants in nascent energy innovation networks.

Demonstration: Technology Innovation Program provides und-ing between $3 million and $9 million to help nascent innovation

networks come together to solve challenges o critical national

need such as energy, inrastructure, and manuacturing. However,

the program is small and only a portion o the unds will go toward

energy and related technologies specically. Unlike the SBIR and

STTR grants, these unds can only be used to und project imple-

mentation directly.

Commercialization: The DOE’s Energy Innovation Hubs will prov

$122 in unding and programmatic support or complete innova

networks based in regions to invest in inrastructure and orm re

ships crucial to the exchange o money, inormation and risk. How

this program is unded largely by American Recovery and Reinve

ment Act, and needs a longer term vision in order to be successu

Title-XVII loan guarantee program, passed under the Energy Poli

o 2005, as well as production tax credit, investment tax credit, an

manuacturing tax credit, are all helping acilitate cost-eective

ing to producers and users o clean energy, two groups that mus

together during commercialization. The U.S. Export-Import bank

has a role to play in engaging with the clean tech manuacturing

and helping to drive international demand or U.S-produced goo

Maturation: The manuacturing investment tax credit can he

mature technology companies retool and continue to innova

methods o producing clean energy technologies and reducin

costs. The Manuacturing Extension Partnership is also a majo

driver o inormation fow that helps small manuacturers and

dium manuacturers stay integrated with larger networks.

State of Play

The existing patchwork o energy innovation-related policies

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24 Center for American Progress |  How to Power the Energy Innovation Lifecycle

ers o shape he program in a way ha inegraes wih exising and poenial

uure energy innovaion policy.

e Energy Innovaion Hubs and Energy Regional Innovaion Cluser programs

are grea examples o wha a comprehensive approach o energy innovaion ne-

works could look like, bu hese programs oo are brand new and may no have along-erm uure once he simulus bill wears o. e Deparmen o Energy and

he Deparmen o Commerce, where hese programs are housed, could collabo-

rae more o inegrae all o he aoremenioned programs. Including incenives o

drive exchanges o knowledge, money, and risk among researchers, public and pri-

vae nanciers, and companies engaging in early-sage producion and demonsra-

ion would go a long way oward helping build producive innovaion neworks.

o bridge he commercializaion gap requires a hree-pronged approach ha

brings all ve kinds o nework paricipans ogeher by driving demand, susain-

ing growh o supply, and aciliaing nancing or boh.

On he supply side, incenives or producers o clean energy echnology need o

be expanded in scope o ensure ha manuacurers boh large and small as well as

heir componen suppliers are acively engaged innovaion process. Policies ha

aciliae inormaion fows such as hose delivered hrough he MEP and NIS

should be inegraed wih unding opporuniies such as he secion 48c manu-

acuring ax credi, and SBIR, STR, and IP grans o ensure ha companies

receiving unds or advanced clean energy manuacuring are ineracing wih

each oher, wih governmen researchers and regulaors, and wih neworks ha

include oher innovaion paricipans.

On he demand side, policy ools ha make i easier or uiliies o purchase,

insall, and successully operae clean energy echnologies are necessary o ensure

he robus marke demand and predicable long-erm growh ha manuacurers

need o coninue o inves in heir manuacuring processes and creae jobs.

Policies such as he invesmen ax credi or clean energy deploymen, and he

per kilowat producion ax credi or clean elecriciy generaion are all oo oen

ignored by policymakers who believe innovaion is synonymous wih “R&D.”Much o he conrary, 70 percen o privae R&D spending is acually argeed a

he assembly line, and policies like he IC and PC ha engage uiliies in inno-

vaion neworks and drive demand or manuacured goods are crucial o orming

complee innovaion neworks.

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o creae long-erm cerainy needed or companies o make long-erm inves-

mens in innovaion, demand-driving policies such as he IC and PC need

o be srenghened and exended ino he oreseeable uure. e Secion 1603

reasury Gran Program, which under he Recovery Ac empowers he reasury 

Deparmen o issue grans in lieu o a ax credi or some o hese programs,

needs o be exended o broaden he circle o poenial nanciers who can invesin innovaion beyond hose wih an appeie or ax equiy.

A srong ederal renewable elecriciy sandard ha would require uiliies o

inves in generaing a cerain proporion o heir elecriciy rom clean sources

would also help bring larger companies’ long-erm plans in line wih innovaion

neworks. is would go a long way oward ensuring a baseline level o marke

demand ha can help lure privae invesors o innovaion neworks.

On he nance side, a Clean Energy Deploymen Adminisraion or “Green Bank ”

capialized a $10 billion could help drive $50 billion or more in privae secornance each year and creae housands o new innovaion jobs in he clean energy 

economy. Such an insiuion could also ac as a vehicle or coordinaing many o 

he disparae programs lised above, helping o cra a more comprehensive policy 

ramework. Anoher possible program Congress should consider is a public-

privae parnership o arge public and privae equiy invesmens ino innovaive

new echnologies o help bridge he nancing “valley o deah.”

Finally, nding a price or carbon ha nally holds polluers accounable or he

damages hey cause would be he larges and mos imporan long-erm driver o 

privae secor nance or clean energy aciviies. I would signal o he invesmen

communiy ha he clean energy secor is ripe or long-erm growh, and unleash

billions o dollars o in privae, proable invesmen in new businesses, new inra-

srucure, and new jobs.

Sudy aer sudy aer sudy has shown ha hese kinds o policies have big ben-

es or he economy, boh because clean energy invesmens creae wo o hree

imes more jobs per dollar han diry energy, and also because innovaion a every 

sage o is liecycle is an inrinsic driver o economic growh.