Reimagining the Pathway to Market for New Energy Technologies [Part 2 of 2]

July 31, 2017

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In my prior blog post, I looked at how the pathway to market is flawed for new energy technologies, and why. Fundamental breakdowns along the route often prevent even the most promising solutions from having an impact.

The Tech-to-Market team within the U.S. Department of Energy (DOE) takes aim at those underlying breakdowns. Rather than fund individual technologies along a broken pathway, we work to create a better pathway in the first place. We believe three things are needed to do so:

  1. Better ways for industry to provide market signals to early-stage innovators.
  2. Better models for providing capital at early innovation stages.
  3. Ways to leverage existing lab and testing facilities for cost-effective technology development.

Today we are a step closer to delivering on those three goals. DOE has announced a set of eleven projects—collectively known as Innovative Pathways—that dramatically improve the pathway to market. Each project addresses a unique challenge, with the goal of changing how new energy technologies reach the market. Ultimately, these projects stand to unlock significant private sector support for new energy technologies in a way that simply doesn’t happen today.

Here's how the eleven DOE-funded projects could transform the way energy technologies reach the market:

Creating Better Ways for Industry to Provide Early Market Signals

  • Activation Energy will develop a simple, standardized partnership agreement that reduces the time and complexity of forming partnerships between large industry corporations and early-stage technology developers. If successful, the agreement can be adopted industry-wide, increasing the rate of early-stage strategic partnerships.
  • ADL Ventures will access the untapped potential of mid-cap corporations, who can be nimble commercialization partners for disruptive energy technologies, and will develop a method to overcome the barriers that prevent these partnerships currently. If successful, the method could integrate disruptive technologies into the established energy sector much more rapidly than occurs today.
  • Rho AI will build and test a matching engine using artificial intelligence to mimic recommendations from a highly-networked expert. The matching engine stands to greatly reduce the time and effort needed for technology developers to successfully identify partners, investors, and other resources.
  • Powerhouse Accelerator will develop a more effective workshop model to help establish partnerships between early-stage innovators and end users, minimizing the burden of identifying product-market fit for all parties.

Building Better Models for Providing Capital at Early Stages

  • PRIME Coalition will create a first-of-its-kind fund designed for charitable investors, which will mobilize grant, recoverable grant and program-related investment capital to de-risk early-stage, high-impact companies. By addressing the unique needs of charitable investors, the fund would enable philanthropists to fill the critical capital gap at the earliest stages of company formation.
  • Alpha Impact Investment Management (AiiM) Partners will develop and test a method that forecasts optimal capital blends for individual early-stage companies based on their risk, potential impact, and development milestones. If successful, the method would make investments more efficient overall, encouraging philanthropic and institutional capital to invest in energy innovation.
  • Clean Energy Trust will create a new fund structure that uses philanthropic support for operational expenses so that investment dollars can have greater impact. The new structure intends to make early-stage energy investing more attractive for funders who would not otherwise invest.
  • Case Western Reserve University will design a tranched investment structure, then test whether it can satisfy the requirements of several distinct investor types in terms of their individual risk, return, and payout needs. If successful, the new structure would relax the constraints of the one-size-fits-all venture capital model, enabling other investor types to provide the long-term capital needed to finance energy hardware companies.
  • The Los Angeles Cleantech Incubator (LACI) will develop a scalable method to make low-cost microloans to early-stage hardware companies. The new method, to be developed in partnership with private lenders, would open up critical working capital to companies that are positioned for growth but do not have access to traditional loans.

Leveraging Existing Resources for Cost-effective Technology Development

  • Activation Energy will build a fund that provides early investors with technology testing data rather than company equity. By using shared lab resources to reduce technical risk efficiently, the new fund seeks to provide valuable insight to early funders without overly constraining the commercialization pathway of emerging companies.
  • Pecan Street will develop a program that links third-party validation of emerging technologies with subsequent investment decisions. This model would streamline the process of obtaining investment based on technology validation, and provide potential funders with concrete data on which to base investment decisions.

DOE's Innovative Pathways projects present an exciting vision for energy innovation in the United States.

We see significant opportunity for learning and collaboration across this portfolio of Innovative Pathways projects. For instance, better connections between industry and early-stage innovators will provide stronger market signals to investors, which will, in turn, encourage investor participation in the new financial models. Projects that make use of existing labs and testbeds can make investment capital go further, while also providing new ways for industry partners to work with early-stage innovators. Collectively, the projects present an exciting vision for energy innovation in the United States, and the U.S. Department of Energy is honored to partner with these organizations to transform how energy technologies reach the market.

In the coming months, we will launch an Innovative Pathways blog series where we highlight the goals, progress, and impact of each project. We’ll look at why each project has the potential to alter the landscape of energy technology commercialization, what the teams seek to accomplish over the coming two years, and how we’ll evaluate success. Be sure to visit our blog for updates on the Innovative Pathways projects and Tech-to-Market's efforts to reimagine the pathway to market for new energy technologies!

Authored by Dr. Johanna Wolfson, Director of the Tech-to-Market Program within DOE’s Office of Energy Efficiency and Renewable Energy (EERE). Tech-to-Market strengthens the U.S. innovation ecosystem by eliminating common barriers that prevent market exploration of new energy technologies.

The Pecan Street, Powerhouse Accelerator, Clean Energy Trust, and Activation Energy’s First Look Fund projects are funded by EERE’s SunShot Initiative. The remaining projects are funded by EERE’s Technology-to-Market Program.