1.) The four criteria are the  Impact of the proposed technology relative to the state of the art. Most of these award winners did not explain  why investors were not willing to fund proposed work. This letter provided additional third-party support  for the funding information in the application. Officials from the National  Institute of Standards and Technology’s (NIST) Technology Innovation  Program told us they request that applicants provide letters from private  investors to document why applicants’ projects could not be privately  funded. Private venture capital firms told us that,  among other considerations, they generally do not invest in projects that  cannot be commercialized in less than 3 years. First, venture capital firms generally do not fund projects that rely on  unproven technological concepts or lack working prototypes  demonstrating the technology. Data from ARPA-E on award winners show  that 91 out of 121 ARPA-E projects from the first three funding rounds  had technological concepts that had not yet been demonstrated in a   According to a recent report from the American  laboratory setting.Energy Innovation Council, private investors consider these projects too  high risk for investment, even for concepts with promising technological  potential. However, we found that nearly all of the ARPA-E award winners  and most contingently selected applicants we spoke with estimated that  their projects were 3 or more years away from potential  commercialization. For  example, ARPA-E’s data indicate that 18 out of 121 ARPA-E award  winners from ARPA-E’s first three rounds of funding had received private  sector funding totaling $318 million after receiving ARPA-E funding. ARPA-E Officials Have Taken Steps to Coordinate with Other Department of Energy Offices in Advance of Awarding Funds

According to ARPA-E officials and documents, agency officials have  taken steps to coordinate with other DOE offices in advance of awarding  ARPA-E funds to help avoid duplication of efforts. ARPA-E has also used  application reviewers from other federal agencies, such as the  Department of Defense. Where applicants  provided little information, ARPA-E’s program directors spent time and  resources to determine the extent of such funding for projects related to  or similar to the applicants’ proposed ARPA-E projects. This approach was used by one ARPA-E award winner, who included a  letter from the company’s venture capital investors to explain why the  investors were not willing to fund the project proposed to ARPA-E. Also,  ARPA-E officials said that they have not used venture capital data to  identify applicants with prior private investors and to check information  applicants provide to them, but that they have considered doing so. Examining such data allowed us to quickly cross-check applicants’ self- reported prior private funding. Recommendations for Executive Action

To ensure that ARPA-E uses a more complete range of methods to  ensure that limited federal funds are targeted appropriately, we  recommend that the Secretary of Energy consider taking the following  three actions: provide guidance with a sample response to assist applicants in  providing information on sources of private funding for proposed  ARPA-E projects,  require that applicants provide letters or other forms of documentation  from private investors that explain why investors are not willing to fund  the projects proposed to ARPA-E, and use venture capital funding databases to help identify applicants with  prior private investors and to help check information applicants  provide on their applications. ARPA-E concurred with key findings and our recommendations  in its written comments, which are reproduced in appendix IV. GAO staff who made major contributions to this report  are listed in appendix V.

Appendix I: Scope and Methodology

To examine the Advanced Research Projects Agency-Energy’s (ARPA-E)  use of criteria and other considerations for making awards and the extent  to which applicants identify and explain other private funding information,  we reviewed 20 applications drawn from a nonprobability sample of the  4,788 applicants ARPA-E received during its first three funding rounds. To analyze the extent to which ARPA-E projects could have been funded  through the private sector, we conducted three sets of interviews with  ARPA-E applicants and award winners. We also conducted interviews with a variety of companies and individuals  knowledgeable about research associated with ARPA-E-type projects,  including six venture capital firms and the National Venture Capital  Association (NVCA), a trade association, to determine the availability of  private capital for ARPA-E-type projects and the criteria venture capital  firms apply in making their investment decisions; two additional public  companies that were awarded ARPA-E funding to discuss the ability of a  public company to internally fund research; and three economists to  discuss the role and effectiveness of government-funded research and  development of technology. To examine the extent to which ARPA-E coordinates with other DOE  programs to avoid duplicating efforts, we spoke with the ARPA-E program  directors as well as officials from other DOE program offices including the  Office for Energy Efficiency and Renewable Energy (EERE) and the  Office of Science.
Why GAO Did This Study

The Department of Energys (DOE) Advanced Research Projects Agency-Energy's (ARPA-E) purpose is to overcome long-term and high-risk technological barriers in the development of energy technologies. Since 2009, ARPA-E has awarded $521.7 million to universities, public and private companies, and national laboratories to fund energy research projects.
GAO was asked to examine (1) ARPA-Es use of criteria and other considerations for making awards and the extent to which applicants identify and explain other private funding information, (2) the extent to which ARPA-E-type projects could have been funded through the private sector, and (3) the extent to which ARPA-E coordinates with other DOE program offices to avoid duplicating efforts. GAO interviewed ARPA-E program directors, award winners, and nonwinners with characteristics similar to those of award winners. GAO also analyzed private venture capital funding data and spoke with venture capital firms.

What GAO Found

ARPA-E uses four selection criteria, such as the potential impact of the proposed technology relative to the state of the art, and other considerations in awarding funds. Other considerations include balancing a variety of technology approaches and the likelihood the technology would be brought to market. GAO identified 18 out of 121 award winners through ARPA-Es first three funding rounds that had received some prior private sector investment, and ARPA-E took steps to identify and understand how this funding was related to proposed projects. Beginning with the third funding round, ARPA-E began requiring that applicants explain why private investors were not willing to fund proposed projects. However, ARPA-E did not provide applicants with guidance, such as a sample response, to assist them in completing this requirement, and responses were generally limited. Some applicants provided general information about prior research but did not specifically explain why private investors would not support their projects. When applicants provided little prior funding information, ARPA-Es program directors spent time and resources to determine the extent of such funding for proposed ARPA-E projects. One applicant included a letter from its venture capital investor to explain why the investor was not willing to fund the work proposed to ARPA-E, an approach the National Institute of Standards and Technology uses as a check in its funding applications for advanced research but that ARPA-E currently does not use. Also, ARPA-E officials said that they have considered but have not used venture capital data to identify applicants with prior private investors. Examining such data allowed GAO to quickly cross-check applicants prior private funding.
GAOs review suggests that most ARPA-E projects could not have been funded solely by private investors. Private venture capital firms told GAO that, among other considerations, they generally do not fund projects that rely on unproven technologies and tend to invest in projects that can be commercialized in less than 3 years. Data from ARPA-E on award winners show that 91 out of 121 ARPA-E projects from the first three funding rounds had technological concepts that had not yet been proven in a laboratory setting. Also, nearly all of the ARPA-E award winners and applicants GAO spoke with estimated that their projects were at least 3 years away from potential commercialization. In addition, GAO found that few eligible applicants that were not selected for an award later secured private funding.
ARPA-E officials have taken steps to coordinate with other DOE offices to avoid duplication. For example, ARPA-E program directors told GAO they engage in outreach with officials from related DOE offices in advance of funding announcements to identify funding gaps in research. In addition, program directors have recruited officials from other DOE offices and the Department of Defense (DOD) to review ARPA-E applications. This cross-agency interaction may also reduce the potential for overlap in funding.

What GAO Recommends

GAO recommends that ARPA-E consider providing applicants guidance with a sample response explaining prior sources of funding, requiring applicants to provide letters from investors explaining why they are not willing to fund proposed projects, and using third-party venture capital data to identify applicants' prior funding. ARPA-E commented on a draft of this report and concurred with key findings and recommendations.