Nobel Prize winner pursues clean-tech leadership with thinning wallet

There's something about Energy Secretary Steven Chu's laugh, something that may hint at what -- he hopes -- a scientist can achieve in the age of deficits.

It is a kind of self-effacing chuckle that doesn't condescend, though his credentials would back that. Nor is it wistful, even though the new Congress has assaulted his energy agenda and the climate science behind it.

Perhaps it reflects the magnitude of what he is trying to accomplish: the evolution of an aging energy infrastructure into one that can make the United States a leader in a vital global industry. In an interview with ClimateWire, he said he'll have to do it by using DOE's thinning wallet as a catalyst for the technology breakthroughs that only the private sector can pull off.

Gone are the days of the American Recovery and Reinvestment Act, when DOE had $34 billion to plow into smart grid and clean energy projects that, it was hoped, would give the United States a foothold in world energy markets.

"The Recovery Act spent a lot of time on those things because, for very good reason, these are big projects, and jobs," he said in a recent interview with ClimateWire.

"Now, since the amount of money one is going to have for doing these things is not going to be at Recovery Act scale, but we have a large deficit," he said, "It is very important we work towards reducing this deficit. So where's the best dollars and how could they be most highly leveraged?"

Over the past year and a half, Chu said, he's begun gearing DOE's machinery -- some parts smoothly, some parts with more resistance -- toward a new strategy.

As he summarizes it: "It's taking a more business approach to what is really happening."

Trying to push costs down, scale up

When DOE meets with key clean-energy industries, such as photovoltaics and batteries for electric cars, he wants to start with these questions: What do they see ahead? What's the price trend for their technologies? How do they see market conditions and their ability to make a profit?

"Then you say, OK, how can we accelerate that?" he said. "If we weren't here, they think this will happen anyway. So what can we do to actually increase that? It's a very different approach. It actually helps sharpen what we're doing, rather than saying, 'Oh yeah, that looks kind of good; a little group will do a little thing here, and another group will do something here.'"

Need an example? The secretary supplies one: his SunShot Initiative, a goal of cutting the total cost of solar energy systems by 75 percent.

The private sector already sees costs falling by about 50 percent, thanks to experience, better technologies and scale. DOE wants to push the cuts by another quarter, using its research base and partnerships with cities and companies. "Somewhere between a 50 percent drop and a 75 percent drop, the thing explodes," Chu said.

Fueling that explosion would be this number: 6 cents per kilowatt-hour, on a levelized-cost basis. That is the aspirational number at which solar could fairly go up against natural gas power, the option that most power companies currently consider their best.

Or consider DOE's energy efficiency programs: Chu believes the agency shouldn't give a man a fish; it should teach a man to fish.

Rather than offer more tax breaks and free retrofits, as the Recovery Act did, he wants DOE to design "creative" business models that encourage efficiency to spread on its own.

"This is in part because the amount of funds we expect going forward on some of these deployment things just won't be there," he said. "But fundamentally, it may not even be necessary if you get the right business models."

How to get fresh ideas in cramped labs

Some of Chu's signature programs trace back to his roots. In the fall of 1978, Chu was mulling an assistant professorship at the University of California, Berkeley. He had studied there as a graduate student and stayed on as a postdoctoral researcher, so the school also offered him a brief sabbatical to get some fresh ideas.

Chu signed up at Bell Laboratories in Murray Hill, N.J. There, he met "two dozen brash, young scientists" who felt "no obligation to do anything except the research we loved best," as he put it in his Nobel Prize autobiography.

The lab offered funding and protection from "extraneous bureaucracy." Chu wrote, "The cramped labs and office cubicles forced us to interact with each other and follow each others' progress."

Today, the old Bell Labs is not only fondly remembered as a renaissance period in scientific research but also held up as an example of how far U.S. industry's commitment to basic research has slipped. Critics point to research and development budgets that have been slashed for decades. They say companies have given up doing the high-risk, high-reward research they used to. Part of Chu's strategy is using DOE's national laboratories to do some of what Bell Labs did -- to help fill that gap.

But some critics feel that simply is not enough to face the colossal energy challenge. One such critic, Bob Metcalfe, sees DOE as wasting most of its resources on bureaucracy and thus producing very little of the innovation needed to attack the energy problem.

Metcalfe is an Internet pioneer and venture capitalist who is now a professor of innovation at the University of Texas, Austin. He sits on the boards of two energy startups that received funding from the one DOE program he openly applauds: the Advanced Research Projects Agency-Energy, or ARPA-E.

A critic thinks DOE's effort is too broad

"All I can say is that DOE should severely prune its research labs and allocate a much greater fraction of its research dollars to the most promising projects proposed by professors at research universities," Metcalfe said in an email.

Short of that, Chu has cast several key initiatives in the spirit of Bell Labs. DOE selected three energy "hubs," research centers that will each convene scientists in one place, around a single energy challenge, for five years.

ARPA-E has earned wide praise for setting high technical goals and then selecting the private-sector researchers best positioned to meet them. The highest praise, perhaps, is that House Republicans had the opportunity to defund it, but they didn't. In a recent appropriations bill, the House narrowly voted to keep ARPA-E's funding at $180 million for fiscal 2012 -- well below what President Obama had requested, and well above what some fiscal conservatives wanted.

If Chu's new initiatives have some wind in their sails, it is less clear what will become of the rest of his agency. The Recovery Act built real battery factories, wind towers and clean-coal plants. But as the act has petered out, Congress has lost its appetite for following up.

Now, many of these technologies -- and the DOE offices that support them -- return to a rickety base where tax policies shift, research breakthroughs are rare and gasoline prices could dive at any moment.

Phil Sharp, president of Resources for the Future, said it's the nature of "on again, off again" energy policy.

"I don't think anybody should have expected that we would have been able to sustain the Recovery Act expenditures under any scenario," he said. "That was going to be a one-time scenario; it was a new level that was not sustainable, in my view."

Sharp approved of Chu's new "business plan" orientation, but he said DOE has a spotty history of commercializing new technologies. It has had more success in basic scientific research, he said, and that happens to be a topic far less partisan than clean energy. By Sharp's reckoning, Chu should use his stature as a scientist to guard basic science budgets.

Sen. Lisa Murkowski (R-Alaska) also had thoughts about how DOE can contribute in a cash-strapped era.

Prompted by Chu's remarks about business plans, she wrote in an email that "I haven't seen the details of what the Secretary is proposing, but if industry wants to voluntarily work with DOE to ensure we're making the most efficient use of our limited research dollars in these tough economic times, I think that's an approach that has merit."

Learning the equations of markets

Chu, with a Nobel Prize on his résumé, is described by former Defense Secretary William Perry as the best to hold DOE's top job. "I've known every secretary of Energy," Perry said at a recent meeting of Chu's outside advisory panel. "Some of them were pretty good. Some were pretty bad. ... Steve will go down as the best of the lot."

Sitting alertly on a couch in his Independence Avenue office, Chu occasionally seems as much a student as a scholar. Beside him hangs a schematic of the Mark 1 reactor like the ones that melted down at the Fukushima Daiichi plant in Japan. It's stylized and colorful, less of a technical memo than a memento of lessons past.

When a BP PLC oil rig exploded last April, hemorrhaging crude into the waters of the Gulf of Mexico, Chu's agency wasn't the lead authority. Quietly, his team of scientists and BP engineers zeroed in on the technical challenge of plugging the hole. "We played a different role," he said. "We helped stop the leak" (ClimateWire, July 26).

Today, as the congressional ax hangs over DOE's budget, Chu shifts easily from polycrystalline solar materials to interest rates and ROIs, business-speak for "return on investment."

He supports a "green bank," for instance, that would help clean-energy projects that are ready to walk the "valley of death" but cannot get commercial banks to bite.

In a recent bill passed by a Senate committee, the bank might start at DOE, then gradually move outside the agency. Chu approved of that approach, saying this would give it greater political independence.

The bigger deal, of course, is that the bank could deliver on a scale that DOE no longer can.

"You might think, why wouldn't a bank invest in something where you have a power purchase agreement to a very reliable utility, a big company with a lot of assets?" he said.

"It's a safe technology, like wind or existing solar. Why wouldn't you take 12 percent return on capital? Surprisingly, well, the banks were making more before ... ." The thought tapers into a chuckle.

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