A prominent and fast-growing U.S. Department of Energy program that doles out grants for cutting-edge energy research could do more to figure out whether the projects could be handled by the private sector, according to a new watchdog report.

But while the Advanced Research Projects Agency-Energy, or ARPA-E, might want to bolster its method of reviewing applications, most of the projects judged as needing government support could not have been done with private funding alone, the Government Accountability Office concluded.

"Companies told us that internal investments had to meet minimum investment return thresholds, and that ARPA-E-type projects were not able to meet these thresholds," the report says, based on interviews with officials from two public companies that received grants despite having their own research budgets.

It sparked a debate at a House Science, Space and Technology Committee hearing yesterday on ARPA-E, which bills itself as funding high-risk, high-reward research that could someday reduce U.S. dependence on foreign fuels, cut emissions and help the United States make thriftier use of energy.

Chairman Ralph Hall (R-Texas) and Oversight Subcommittee Chairman Paul Broun (R-Ga.) requested the report released yesterday at the hearing. They said that ARPA-E has given money to speed along some research projects that might have been viable without government money, something they described as picking winners and losers.

It fits into a broader debate on Capitol Hill over the best way to balance government research spending for fossil fuels, nuclear energy and newer technologies, including wind, solar and biofuels.

ARPA-E has a current budget of $275 million within the $4.5 billion budget for the Office of Science. Other projects are larger, including a nuclear reactor research program that received exactly twice as much funding for fiscal 2012.

Republicans suggested yesterday that ARPA-E is crowding out other spending, noting that Office of Science funding grew by 0.6 percent for the current fiscal year and fell by 6 percent the previous year, while funding for ARPA-E grew by 260 percent and then another 53 percent.

"Apparently, our concern was very well-founded," Broun said.

Rep. Paul Tonko of New York, the ranking Democrat on the oversight panel, said the law that created ARPA-E was designed to speed along projects in that way. He said the United States should act quickly to avoid falling behind other countries on energy technology.

"Time is innovation here," Tonko said. "Time will determine who comes to the market first, and who can transform the market, assuming that's what we all wanted ARPA-E to do. And the statute is very clear."

Arun Majumdar, the director of the program and President Obama's nominee for undersecretary of Energy, said the program has worked carefully to find "white spaces" where a new technology would be valuable, but it is still too far from the market to garner money from private investors.

Starting with its third round of funding, ARPA-E began requiring its applicants to show that private investors would not finance their projects, the GAO report says. The agency did not set any guidelines, but in one instance, an applicant sent in a letter from a venture capitalist explaining why the project was ill-suited for the private sector.

Frank Rusco, director of energy and science issues at GAO, said it appears the agency has taken steps to carry out its mission.

"We did not find anything that to us looked like the agency was in violation of statute, or we would have reported that," Rusco said.