1. Introduction - Massachusetts Institute of Technology



Bridging the Innovation Gap in theU.S. Energy SystemHow Cyclotron Road and TechBridge provide models for the “innovation orchards” concept in supporting emerging clean energy technologies468630016616000Nathalie BockeltMassachusetts Institute of Technology Washington OfficeFebruary 2016Table of Contents TOC \o "1-3" \h \z \u 1. Introduction PAGEREF _Toc441523083 \h 12. The Innovation Gap in the U.S. Energy System PAGEREF _Toc441523084 \h 12.1 The problem of capital PAGEREF _Toc441523085 \h 12.2 The problem of time PAGEREF _Toc441523086 \h 42.3 The problem of manufacturing PAGEREF _Toc441523087 \h 42.4 The problem of talent PAGEREF _Toc441523088 \h 53. Cyclotron Road PAGEREF _Toc441523089 \h 63.1 Background PAGEREF _Toc441523090 \h 63.2 Innovation gaps CR aims to address PAGEREF _Toc441523091 \h 63.3 Case Study: OPUS 12 PAGEREF _Toc441523092 \h 93.3.1 Key Challenges PAGEREF _Toc441523093 \h 93.3.2 Technology Overview PAGEREF _Toc441523094 \h 103.3.3 The Role of Cyclotron Road PAGEREF _Toc441523095 \h 124. TechBridge PAGEREF _Toc441523096 \h 124.1 Background PAGEREF _Toc441523097 \h 124.2 Innovation gaps TechBridge aims to address PAGEREF _Toc441523098 \h 144.3 Case Study: First Fuel PAGEREF _Toc441523099 \h 164.3.1 Key challenges PAGEREF _Toc441523100 \h 164.3.2 Technology Overview PAGEREF _Toc441523101 \h 174.3.3 The Role of TechBridge: Technical Validation PAGEREF _Toc441523102 \h 184.4 Cooperation with Greentown Labs: The PROPEL Program PAGEREF _Toc441523103 \h 204.4.1 Program Overview PAGEREF _Toc441523104 \h 214.4.2 The Role of TechBridge PAGEREF _Toc441523105 \h 235. Conclusion PAGEREF _Toc441523106 \h 241. IntroductionIn the 2015 edition of Energy Technology Perspectives, the International Energy Agency examines innovation in the energy technology sector, seeking to lay out a pathway to a sustainable energy future. The report states that energy technology innovation plays a central role in “meeting climate mitigation goals while also supporting economic and energy security objectives.” In fact, it argues that the energy system can only be transformed by implementing proven, cost-effective technologies.However, many of these technologies are stuck on their journey from lab to market, argues MIT President L. Rafael Reif in a recent Washington Post op-ed, “A better way to deliver innovation to the world.” He notes that the current structure of the U.S. innovation system is not suited “to support complex, slower-growing concepts that could end up being hugely significant,” including disruptive new-science technologies emerging in the energy sector. One potential solution to mitigate this gap is to accelerate the process from “idea to investment” by establishing coalitions of “funders from the public, for-profit, and not for-profit sectors” which Reif names “innovation orchards.” These communities would provide innovators with the resources, facilities, and mentorship they need to successfully de-risk and commercialize their technology.Thus, the aim of this report is to describe the work of two emerging “innovation orchards” possible models, Cyclotron Road and TechBridge, which begin at different stages of the innovation process, but are united in their objective to help new technologies make it to the market.2. The Innovation Gap in the U.S. Energy System2.1 The problem of capitalEnergy industry research and development (R&D) funding in the United States has been at a very low level as a percent of annual revenues of the energy sector for decades. Both the federal government and private industry significantly reduced their R&D investment from a high point in 1980, although experts have argued that factors such as environmental concerns and economic competitiveness require a higher degree of innovation in this sector than ever before. Still, the sector continues to underinvest in R&D, “compared not only to other sectors that are actively implementing new advances in technology, but compared to industry rates overall.” Government funding of research in all energy fields has been largely stagnant in recent years, hovering at around $12B (in constant 2015 dollars) between 2010 and 2016, adversely affected by the budget “sequestration” (cuts) imposed by Congress starting in 2013. Furthermore, as the figure below suggests, U.S. private sector energy R&D is about 0.3 percent of annual sales, far below the levels in innovating sectors such as semiconductors or bio-pharma. In fact, U.S. companies invested 50 percent less in energy R&D between 1991 and 2003. According to data from the United Nations Environment Programme (UNEP), the United States invested $788 million in renewable energy R&D in 2014, compared to $1.4 billion in Europe. When combining private and public expenditures, U.S. energy R&D is still less that one percent of annual revenues of the energy sector.Source: Dr. Henry Kelly, Guest Speaker, Class “Policy to Drive Energy Innovation”, School of Advanced International Studies, Johns Hopkins University, September 30, 2015, based on NSF and AEIC data.While still in their early stages of development, innovative companies in the U.S. especially in the IT sector have often been able to raise significant amounts of risk capital, typically from traditional venture capitalists. By definition, venture capital focuses on young, high-growth companies, with investors taking higher risks in exchange for the potential of rapid growth. This seemed to be a valuable alternative for companies in the “cleantech” industry, which constituted the fastest-growing area of venture capital investment in 2010. As the chart above shows, while the percentage of total global venture capital investment in “cleantech” increased from just 3 percent in 2003 to 17 percent in the first half of 2010, it has fallen near-continuously ever since. In the first quarter of 2015, the percentage decreased by around 80 percent to $129.2 million in “cleantech” funding, compared to the first quarter of 2014.The figure below illustrates this shift in venture capital funding in the energy sector, as it shows that “cleantech” funding is almost exclusively concentrated on later, less risky stages of innovation. Venture capitalists are unprepared to tackle the longer-term, high-risk earlier research stages, focusing on later stage development, waiting until firms are close to commercialization.Source: PwC (2015), “Cleantech MoneyTreeTM Report: Q1 2015”However, there is a second problem. As startup energy companies advance to the demonstration, testing and pilot production phases of their technology, they often struggle to obtain the necessary new influx of capital to successfully go into commercial production of their technologies. Because they have limited resources for funding production of larger-scale, capital-type goods, venture capitalists usually do not invest in the stage where an energy firm is starting to scale up toward actual production, which can require additional funding of $15 to $40 million or more. Thus, current venture capital funding resembles commercialization funding rather than “true R&D investment”, and continues to represent only a small portion of the funding companies need for production and implementation. This forces clean energy startups to seek other sources of financial support, which are limited and difficult to obtain for this kind of development.2.2 The problem of timeL. Rafael Reif, President of the Massachusetts Institute of Technology (MIT), observes “it takes time for new-science technologies to make the journey from lab to market”, which particularly pertains to the “cleantech” sector. The innovation cycle in energy is 10 years or more, compared to five to seven years in other areas such as IT, which is where result-oriented venture capital funds tend to invest. Clean energy startups do not fit into this “highly optimized, venture-capital-driven innovation system”, despite the fact that their complex ideas and technologies may “lead to disruptive solutions to existential challenges in sustainable energy, water and food security, and health.” Thus, once energy startups moved on to the pilot and demonstration phases, their supply of venture capital shrank dramatically, rendering it difficult to support the scaling up of their technologies.2.3 The problem of manufacturingAfer World War II, U.S. innovation, following the Vannevar Bush “pipeline” or linear model of innovation, tended to become front-end loaded, focusing on early stage research (although the more connected defense sector needs to be exempted from this observation). Because of the gap this focus creates between research and later stage development, this kind of innovation system tends to be more suitable for innovations based on existing technologies, which require less effort to commercialize and bring them to the market. The gap in this system, then, tends to put new-science technologies at a disadvantage, which are “characterized by their complexity, in terms of basic science involved, the longer proof of concept and proof of product processes, and often the advanced manufacturing capabilities required to scale them.”Thus, these technologies require much innovation at the production stage, as “moving from prototype to product can take years.” Among others, the process requires solving engineering design problems, creating an efficient production system, and “actually scaling up production to fit evolving market conditions.” These stages take place in the back-end of the innovation system, and are critical in generating disruptive technology innovation. They enable what the MIT Industrial Performance Center’s Elizabeth Reynolds calls “learning by building.” While the U.S. operates under the assumption that its innovation system both innovates and commercializes, a gap, then, has emerged between the front end and the back end. This proves problematic for a variety of sectors, including energy, which require a “close connection between research, design, and production.”2.4 The problem of talentIn her award-winning article “The Real Science Gap”, Beryl Lieff Benderly points out that while there is no shortage of brilliant young scientists in America, there clearly is a lack of challenging, reasonably-paid job opportunities that encourage young innovators to work on cutting-edge technologies. This notion combined with the declining investment in the cleantech sector discourages an increasing number of talented scientists from pursuing innovative, potentially impactful energy technologies, industry experts argue.Thus, “lack of financing quickly turns into a human capital problem”, says Sebastien Lounis, Ph.D., co-founder at Cyclotron Road. Instead, young scientists typically start a career in academia or industrial R&D. While both are essential institutions to achieve to foster innovation, neither can provide technology innovators with the necessary support to “make rapid progress on the science-to-product gap.” Therefore, entrepreneurial startups will be key in the “cleantech” sector, as the established fossil fuel firms currently dominating the market are unlikely to invest in truly disruptive innovation. By supporting young innovators with the necessary funding, expertise, and resources, Cyclotron Road and TechBridge, two new models explored below, aim to fill this gap and encourage the entry of new talent and startups into the field of clean energy technology.3. Cyclotron Road3.1 BackgroundThe Lawrence Berkeley National Laboratory (Berkeley Lab), a federal laboratory managed by University of California, founded Cyclotron Road (CR) in July 2014, a new form of technology accelerator originally called “M37.” The program was renamed in November 2014, and is described as a “new early-stage energy technology incubation program.” The U.S. Department of Energy E.E.R.E. Advanced Manufacturing Office joined with Berkeley Lab to fund CR as a pilot program in the fall of 2014.The program is managed by Ilan Gur, who had previously worked as a Program Director at the Advanced Research Projects Agency-Energy (ARPA-E), where he funded and managed a $50 million portfolio of advanced R&D projects in the areas of energy storage, solar energy, and advanced materials. CR describes itself as “a home for top entrepreneurial researchers?to advance technologies until they can succeed beyond the research labs.” 3.2 Innovation gaps CR aims to addressCyclotron Road (CR) works under the assumption that both academia and corporate R&D are constrained in their ability to develop and deploy lengthy, risky research to the market. This has resulted in a gap in energy technology innovation over the past decade. L. Rafael Reif argued that closing this gap will require “a coalition… from the public, for-profit, and non-profit sectors” working together to create “innovation orchards.” Although its funding to date has been from Berkeley Lab and the Department of Energy, CR does seem to fit this new label, as it aims to bridge the gap between emerging energy technology ideas and the market place by providing entrepreneurial researchers with the resources they need to successfully commercialize their technologies. Source: “Mission”, Cyclotron Road, follows a five-element approach to find and develop the most promising energy technology ideas; these are not strictly linear, and can proceed in parallel and in varied sequences:,Recruitment of highly talented innovators:CR is committed to hiring the “best and most-driven innovators” and work closely with them in developing and nurturing their ideas. These entrepreneurial researchers typically come out of university research labs or smaller businesses. This stage aims at emerging technologies at the pre-financing phase. The first cohort consists of six teams selected from a pool of 150 applicants. Thus, CR at its initial phase is more talent than technology oriented, reaching researchers before or just as they create companies. Selection of scalable technology solutions:Similar to ARPA-E, CR singles out those technological inventions that can be commercialized and scaled to ensure that they have a significant impact when implemented in the energy market. CR encourages entrepreneurs to identify potential markets and align their technologies to them. Since CR is an entrepreneur-driven model, it provides support all throughout the process. Technology solutions that CR focuses on include:Cheap, safe, and scalable energy storage for grid and mobility applicationsCheap, safe, and scalable nuclear power generationDisruptively economic, next-gen renewable power generationTechnologies to capture, sequester, and utilize atmospheric greenhouse gasesTechnologies to radically increase the efficiency of current power systems and production processesSustainably produced fuels and chemicalsLeverage R&D possibilities of national labs:By bringing project leaders together with Berkeley Lab experts, CR aims to make use of existing R&D technology, equipment and “know how” assets. This rich access to technology is a key distinction between CR and most technology incubators. The scientists receive access to the lab’s excellent research infrastructure within weeks, which allows them to promptly begin de-risking their technology as well as save a significant amount of time and money in developing advanced prototypes. Furthermore, the lab is known for its emphasis on teamwork, which enables project leaders to benefit from lab researchers with various fields of expertise.Support system for innovators: Throughout the two-year program, CR connects innovators with potential collaborators, mentors, and development partners, and provides networking opportunities and education to help them in developing their technologies.Funding: Project leaders are paid a living stipend with benefits through a personal fellowship from the U.S. Department of Energy for up to two years. In addition, CR can allocate a small amount of funding (<$100,000 per project) toward initial R&D projects aimed at exploring collaborations with staff scientists at Berkeley Lab. Project leads are expected to raise additional R&D funds from private investors as well as federal research grants, for instance from EERE, ARPA-E, DARPA and various SBIR programs, as well as state funding, for instance from the California Energy Commission (CEC). Mentorship: the program recruits entrepreneurs, R&D executives, investors and government researchers to give project leaders technical and business guidance. Teams also participate in bi-weekly project reviews with the program team. Networking: Innovators get a chance to participate at a number of events and conferences, thought-leader roadshows, entrepreneurship workshops. Networking is also important within the cohort community.Connect innovators with commercial partners:Throughout the program, CR works to connect innovators with the most appropriate commercial partners and investors, including:Corporations for possible joint development projects, minority equity investment or outright acquisition.Venture firms, which can provide funding for early stage technologies, but also serve as leverage for non-dilutive grantsThe growing area of “family offices”, which can offer equity and debt financingPossible non-profit supporters3.3 Case Study: OPUS 12The first cohort at Cyclotron Road started their work at the end of 2014 (a second cohort of nine new firms and entities was named in February 2016). The first cohort consists of six projects:Mosaic Materials, which aims to reduce the cost and emissions impact of chemical separations;Visolis, which focuses on the bio-based production of carbon-negative, high-performance polymers;Spark Thermionics, which works on directly converting heat to electricity using thermionic energy converters;CalWave, which aims to convert ocean waves into electricity and freshwater;PolySpectra, which works on a patterning platform for multifunctional materials; andOPUS 12.The first cohort has attracted over $5m in follow-on funding through competitive grants and private investments, which amounts to significant leverage for the initial federal support to these firms. OPUS 12 aims to recycle carbon dioxide into chemicals and fuels using an electrochemical process. Based in Berkeley, California, the company was founded by Etosha Cave, Ph.D. (Mechanical Engineering, Stanford), Kendra Kuhl, Ph.D. (Chemistry, Stanford), and Nicholas Flanders (MBA/Masters in Environment and Resources, Stanford). 3.3.1 Key ChallengesIn 2013, global CO2 emissions from fossil fuel combustion and industrial processes, such as cement and metal production, increased to 35.3 billion tons, although emissions growth has slowed down since 2003. The United States produced 5.3 billion tons, or around 15 percent. Furthermore, U.S. industries throw away 2.5 billion tons of CO2 every year because they have no other use for it.OPUS 12 aims to leverage this potential by developing a reactor that converts CO2 through electrocatalysis, “a process in which CO2 and water are electrocuted in presence of a metal catalyst, which causes breaking down of the molecules into smaller parts.” Depending on the amount of electricity and the efficiency of the catalyst, these parts regroup and form new compounds. The technology faces three main challenges:Metal catalyst of high efficiency and selectivity: To ensure an energy efficient electro catalysis, the ideal metal catalyst would need to be usable at (near) room temperature and atmospheric pressure. It would also have to ensure strong chemical reactions, which proves difficult as CO2 has a weak reactivity.Reactor design: While finding the optimal metal catalyst is the first important step in the process, matching it with the right reactor is necessary to ensure high efficiency of conversion and the price competitiveness of the technology.Electrical energy intensity: High amounts of electrical energy would be required to recycle the amount of CO2 released into the atmosphere every year through electrocatalysis. OPUS 12 would have to mainly rely on renewable energy for this, “as using electricity generated from carbon sources would defeat the purpose of the technology.”3.3.2 Technology OverviewCO2 can be converted using three different methods: biological, thermochemical, and electrochemical. Through the electrochemical process of electrocatalysis, the OPUS 12 technology would enable an artificial/industrial carbon cycle, in which carbon dioxide would be either sequestered in the form of commodity chemicals or converted into carbon neutral fuels.Source: “OPUS 12.” Cyclotron Road. OPUS 12 team is currently focusing on understanding the carbon dioxide conversion catalysis. They are also working on the design of the reactor – the result of which is a palm size polymer electrolyte membrane reactor with “gas diffusion layer in order to increase the concentration of CO2 at the catalyst surface, which will lead to high reaction rates that are stable over time.” The reactor has been proven to be suitable for CO2, but only using an existing commercial catalyst and carbon monoxide (CO). Thus, integrating catalysts into a traditional electrolyzer reactor remains a difficult challenge.Initially, OPUS 12 intended to focus on producing CO, which they regard as the first step towards liquid fuels production, before moving on to the production of ethanol, propanol or methanol. CO remains the only product the team is testing at the moment, since commercial catalysts suitable for CO are readily available. However, the team has moved beyond the sole focus on CO production and is currently working on launching the production of ethanol at the oil and gas production sites first. Since the Renewable Fuel Standard (RFS) requires fuel producers to blend their gasoline with ethanol, OPUS 12’s technology could capture the CO2 emitted during fuel production and convert it into ethanol, which in turn could be mixed with the fuel.The potential of OPUS 12’s technology is significant, as “converting all U.S. stationary CO2 emissions into liquid fuels could replace twice the nation’s gasoline demand with carbon-neutral fuels.” Furthermore, as electrochemical CO2 reduction turns electrical energy into chemical energy, renewable energies like solar and wind could be stored more easily and at a larger scale. This would also facilitate the use of electricity generated from renewable sources for the electrocatalysis process in the reactor (as briefly discussed in 3.3.1).3.3.3 The Role of Cyclotron RoadOPUS 12 has greatly benefited from the technical possibilities Cyclotron Road offers through the partnership with Berkeley Lab. The team is receiving advice from five of the Lab’s leading researchers on the design of a reactor prototype, and has also benefited from a technical review. Furthermore, each team at Cyclotron Road is allocated a lab space and access to equipment. OPUS 12 has already run tests at fuel-cell testing stations, on an electron microscope and at the Molecular Foundry, which is crucial to the current phase of developing the right catalyst. Due to the initial progress of OPUS 12 and the other teams, Cyclotron Road aims to further align the work of its scientists with Lab researchers.Cyclotron Road was also designed to connect innovators with investors and industry partners across the energy technology ecosystem, highlighting that the program should be of interest to the private sector. Thus, while they support innovators such as OPUS 12 in commercializing their clean energy technologies, they also encourage them to do a techno-economic assessment to determine early-on whether the technology can prove to be profitable. This way, Cyclotron Road “provides an environment in which the thinking about economics of the technology is informed by and can be adjusted to the needs of the market.” In this context, economic credibility is another benefit Cyclotron Road can provide the teams with, particularly when they are trying to secure follow-on grant funding and support.4. TechBridge4.1 BackgroundThe TechBridge program was founded in 2010 by the Fraunhofer Center for Sustainable Energy Systems (CSE), which is a non-profit applied research and development laboratory based in Boston, MA. Since 2013, the TechBridge program has been managed by Johanna Wolfson, Ph.D., who "sets strategic direction for the program, heads its business development efforts, oversees execution of the technology projects, and advises on the integration of technology development resources into innovation ecosystems.” Before joining Fraunhofer, she obtained her Ph.D. in Physical Chemistry from MIT, where she conducted research on photo-induced material dynamics far from equilibrium. Furthermore, she obtained broad experience on the nexus of energy, innovation, and policy through her leadership at MIT of the graduate student Science Policy Initiative program, advocating for innovation policies.Fraunhofer CSE aims to advance economic development through the commercialization of clean energy technologies. Research areas include energy generation, efficiency, and distribution technologies, with a specific focus on building energy efficiency, distribution grid technologies and solar photovoltaics. Since its foundation in 2008, Fraunhofer CSE has “filed and licensed several patents in photovoltaic and building energy technologies, and created over 170 direct job years and hundreds of indirect jobs in the clean energy technology center.”TechBridge leverages the extensive resources of Fraunhofer CSE and the greater Fraunhofer network, including the Fraunhofer Energy Alliance. Fraunhofer is one of the world’s leading organizations for applied research and development with a professional engineering staff of 23,000 in over 67 institutes and research units in Germany and worldwide. Fraunhofer’s annual research budget is over 2 billion dollars, and is mainly used for the development and demonstration of innovative technologies in various industrial sectors. The organization obtains most of its funding through contract work for industry and the public sector.Contrary to initial expectations, venture support turned out to be a major problem for TechBridge after it was first launched, as venture capital investors proved hesitant to focus on its proposed de-risking of technologies; a rigid investing framework tended to create barriers to spending money on such de-risking. TechBridge, however, gained traction from an award from the Department of Energy (DOE) in 2010, which provided $1 million in funding over three years. The investment helped TechBridge test out and refine its business concept and prove that it had the potential to succeed. In August 2015, Fraunhofer TechBridge also emerged as one of eighty winners of the 2015 Growth Accelerator Fund Competition, which was hosted by the U.S. Small Business Administration (SBA). Executive officials highlighted the importance of the “inclusive work they do in support of innovative and high-growth small businesses.” The program was selected from more than 400 applications and 180 semi-finalists. The SBA Award provided TechBridge with additional capital to “expand its reach across the U.S. and connect with more innovative startups in new technology areas.”Still, Johanna Wolfson notes “there is a certain attitude in government that once your project is successful, the government should no longer fund it.” Fraunhofer CSE has developed a successful pathway to fund the project with money from the private sector, largely through major corporations acting as sponsors. In the future, TechBridge aims to work more closely with a consortium of companies that rely on its ability to identify potentially successful startups and get their ideas industry-ready, allowing investors to fund them at a lower risk.4.2 Innovation gaps TechBridge aims to addressTechBridge’s objective is to prove the potential of early-stage clean technology startups to future investors and partners. The program seeks to eliminate one of the potential and yet most decisive obstacles for energy entrepreneurs, the industry readiness barrier. While many good ideas emerge at startups and universities, “in many cases the technology is not taken seriously in the industry context yet,” says Johanna Wolfson. This is in part caused by the fact that scientists develop prototypes under lab conditions without knowing how their technologies would fare once implemented in a company or a operating facility such as a power plant.TechBridge supports energy technologies in multiple ways to mitigate this gap in the innovation pipeline. First and most importantly, Fraunhofer scientists perform customized validation work for the participating startups to showcase the viability of technologies to potential investors. This access to technology validation and the technical equipment and “know how” to perform it is a key feature. In addition, TechBridge supports startups in their fundraising efforts and connects innovators with CSE’s network of investors and partners. This approach “significantly accelerates the commercial entry of many early-stage technologies across a wide set of domains, from water treatment and smart grid control to manufacturing, photovoltaics, and beyond. Among TechBridge’s target audiences are industry partners, government organizations, philanthropic organizations, and investors.Fraunhofer TechBridge follows a four-step approach to carry out the validation work for emerging clean energy technologies, “paving the way for groundbreaking energy companies to attract funding, partnerships, and customers.”,Define: TechBridge works with program sponsors (i.e., private companies, which are generally large corporations) to determine the scope and goals of each program, focusing either on innovation in a particular region (through a government sponsor) or a topic of strategic interest (through an industry/investor sponsor). This step is key to TechBridge’s approach: identifying a sponsor’s concrete innovation need first, then working, in the next step, to tie a developing technology to the need. Identify: TechBridge then executes a comprehensive startup search and selection process, taking into account expert technical and business expertise.Design: Fraunhofer scientists design a customized validation or demonstration project that aligns the goals of the program sponsor with those of the selected startup(s). In the process, TechBridge tries to strike a balance between the feasible project and the ideal project, which could otherwise take years to complete and require more financial resources than available. Thus, a valuable project design needs to be useful, correspond with the client’s needs, help startups in achieving their objectives, and respect potential budget-timeline constraints.Execute: The technical projects are executed at Fraunhofer research facilities and in real-world settings. Projects include optimizing and testing prototypes, conducting field demonstrations in real-world conditions, performing system integration work, and evaluating manufacturability. Practical concerns, such as the cost of maintenance and the feasibility and ease of operating the technology, also need to be considered. This process typically takes about four months. By carrying out these projects, Fraunhofer takes on the role of an independent third party, preparing the startup(s) for partnership and providing industry sponsors with viable information on the relevant area of innovation.While CR tends to work bottom-up, focusing on entrepreneurial researchers with ideas, providing them access to technology, then linking them to possible funding support, TechBridge tends to work the other way around, top-down. It finds significant supporters (typically larger firms) in need of innovations, then seeks to link them to startups with the capability to purse these innovation challenges, while providing technical support and validation. 4.3 Case Study: First FuelIn the past, TechBridge has worked with a variety of clean-energy startups by performing technical validation work or joint projects. One of the earliest companies it worked with was FirstFuel, which has developed software to carry out “virtual energy audits”. These audits combine energy meter data with additional data such as weather information and the building’s shape, making it possible to identify specific energy savings opportunities. Based in Lexington, Massachusetts, the company was founded in 2010 by a Swapnil Shah, a software entrepreneur and FirstFuel’s current CEO, Ken Kolkebeck, a building energy expert, Robert Kaufmann, and Nalin Kulatilaka, two data science professors from Boston University. The company’s name FirstFuel reflects the growing importance of efficiency in the energy market; the term itself was coined by the International Energy Agency (IEA). Until 2014, the organization had referred to energy efficiency as the ‘fifth fuel’, listing it after oil, gas, coal, and electricity.4.3.1 Key challengesIn 2014, the global efficiency market was worth at least $310 billion a year and growing, prompting the IEA to call it “the invisible powerhouse in IEA countries and beyond.” In fact, researchers have found that energy efficiency is establishing its position in the market, as new innovative technologies and standards inspire stability and confidence. Cutting back on energy waste is on the rise due to a variety of reasons, including mitigating climate change, enhancing security or increasing economic incentives. Experts, politicians, and the public alike seem to ascribe to the recognition that efficiency could play a crucial role in meeting global energy needs in the future.Buildings are a key focus in this change of mind. According to the U.S Energy Information Administration (EIA), there are more than five million commercial and industrial facilities in the U.S, which are currently responsible for 32 percent in total final energy consumption. When looking at primary energy consumption, buildings represent up to 40 percent in most IEA countries. Commercial buildings alone account for 20 percent of energy waste due to lights being left on or heat and cooling being run simultaneously. This is a costly problem, as commercial buildings in the U.S. face a combined annual energy cost of more than $200 billion.Thus, the IEA recommends that the deep renovation of buildings, which refers to a refurbishment that reduces energy consumption by 75 percent and limits energy consumption for heating, cooling, ventilation, hot water and lighting to 60 kWh/m2/year, should take on a higher priority. This kind of renovation particularly needs to be advanced in continental northern hemisphere countries, which will retain between 75 and 90 percent of their building stock until 2050.4.3.2 Technology OverviewFirstFuel’s audits combine the data gathered by their meters with “proprietary blend of third-party data, building information, and our building engineering staff’s expertise,” such as the age and the location of the building. The company then determines factors such as the hourly local temperature, the building’s shape and its position relative to the sun (using satellite imagery), which all carry a significant impact on the energy consumption of a building. The software typically produces results within a couple of hours, allowing FirstFuel to analyze around half a dozen buildings per day.Aiming to provide a solution for each client’s individual energy management needs, the FirstFuel customer intelligence platform is the core of the software. It consists of two parts:FirstAdvisor, which uses the meter data collected in buildings to enable fast customer acquisition and energy optimization. It also provides specific energy savings recommendations based on “trusted remote audits.” In addition, FirstAdvisor includes ongoing energy and customer management.FirstEngage, which maintains and expands customer relationships to increase continuing engagement, performance satisfaction, and product commitment and loyalty. FirstEngage allows business customers to directly access their individual energy use information through the use of no-touch program access, promotion and multi-channel delivery.Using its fully differentiated data, the software shows how electricity is consumed in a building across nine categories, including cooling, lighting, electric heating, pumps, and plug usage. FirstFuel’s advance combines analytical software, building expertise, and smart electricity meters that are installed in buildings, for a kind of “big data”/analytics approach. These interval meters update every 15 minutes, collecting tens of thousands of data points each year, whereas the old, monthly-read meters capture merely 12. FirstFuel CEO Swapnil Shah highlights that the data collected this way enables his company to make very specific recommendations to clients: “We don’t just say you need more energy-efficient lights. We can tell the building manager he needs to replace five lights on the 14th floor.” While FirstFuel and similar software are unlikely to replace physical audits anytime soon, its analyses can be a valuable resource to companies seeking to single out and solve energy efficiency problems quickly.4.3.3 The Role of TechBridge: Technical ValidationIn 2011, Fraunhofer CSE conducted a study on how accurately FirstFuel could disaggregate energy consumption in buildings in order to validate their technology. In cooperation with National Grid, a multinational electricity and gas utility company, TechBridge tested the capabilities of FirstFuel’s non-invasive “virtual energy audit” software by comparing the disaggregation data obtained by FirstFuel with data measured by Fraunhofer scientists on-site. The project obtained funding through a U-Launch award from the U.S. Department of Energy in Spring 2011.Fraunhofer scientists carried out the testing at the National Grid headquarters in Waltham, Massachusetts. The 312,000 ft2 office building was constructed in 2009. More than 50 submeters measuring electricity were installed inside. Additional data necessary for testing purposes, such as lighting circuits or the ventilation system, were gathered based on electrical drawings and best-available information from the facilities managers. FirstFuel was then given a deadline to conduct their own analysis using the same data as well as weather information and satellite images of the building.Source: “Project Results: Remote Building Analysis”, Fraunhofer CSE, August 2011.The figure above compares the collected submeter data broken down by major categories with FirstFuel’s disaggregated data. It shows that the results generated by FirstFuel’s software are very similar to the data collected by actual submeters in the three broad categories described. Thus, Fraunhofer scientists concluded that FirstFuel “has the potential to be a valuable engine for large scale benchmarking of buildings and to identify energy-saving opportunities without on-site audits.”These findings should not be regarded as an endorsement, cautions Kurt Roth, Director of Building Energy Technology at Fraunhofer CSE. Instead, Fraunhofer takes on the role of an independent third party that provides rigor and expertise to the analysis. As a respected research organization, Fraunhofer is experienced in designing and carrying out experiments, which helps to make validation studies more generalizable. In addition, independently proving the viability of a new technology usually turns out to be the decisive asset that potential investors are looking for, according to Roth. Even if a technical validation study does not deliver the startup’s desired outcome, “it can help them in refining their product and improving their technology”, notes Roth.In this case, Fraunhofer’s testing was able to help validate the startup’s technology; FirstFuel successfully used Fraunhofer’s report as well as other technical validation studies to expand their reach and obtain additional funding from investors. Most recently, FirstFuel raised $23 million in venture capital in April 2015, partly to help the company’s expansion to Europe.4.4 Cooperation with Greentown Labs: The PROPEL ProgramIn March 2015, TechBridge announced it was teaming up with Greentown Labs to create the PROPEL program, “a 6-month prototype development and partnership-readiness program to develop and refine high-quality technologies for potential adoption by corporate strategic partners.” Greentown Labs is the largest cleantech incubator in the nation, providing more than 40 member startups and organizations with the space, resources, and funding they need “to solve today’s biggest energy and environmental problems.” This includes incubation and prototyping space, free access to modeling and design software, up to $10,000 in non-dilutive funding, and training workshops focused on strategic partnerships and investment. Greentown has also been working recently with Massachusetts’ Manufacturing Extension Program to link MassMEP’s regional network of participating small and medium sized manufacturing firms with Greentown’s startups. The MEP firms have been providing their extensive regional manufacturing expertise to help move new energy technologies developed by the startups into pilot and actual production. The lab also hosts a variety of events and program for the cleantech community every year.The PROPEL program is sponsored by TechBridge’s long-term partner Shell GameChanger, and is designed to connect industry partners with emerging new technology startups. It will help to accelerate technology development as well as prepare startups in bringing their technologies to the market, for instance through strategic partnerships or additional funding. Most of the technologies supported by the PROPEL program enable “distributed, self-powered sensing and control for large-scale industrial applications.”4.4.1 Program OverviewDesigned to accelerate the prototype development process of startups, PROPEL particularly focuses on innovations in self-powered Wireless Sensor-Actuator Networks (WSANs), encouraging startups to develop “integrated solutions and viable business models that can radically change how we interact with our environment.”Companies that have passed the proof-of-concept stage and previously built at least one prototype, but who still need additional assistance in prototype development and/or system integration for customer validation are eligible. The PROPEL program prefers companies that have already raised some amount of seed funding for early-stage prototype development, although this is not a strict requirement for program participation. Four companies were chosen to participate in the first round:Gridorder, which offers a cyber security platform for the Industrial Internet ofThings (IIoT), “helping secure smart machines and sensors to enable energy and operational efficiency for industrial applications.”Tagup, which provides industrial equipment manufacturers with a cloud-based solution to track products’ sensor, location, and static data in real-time, enabling them to improve service contracts and to generate new sales opportunities.Gusali Labs, which “uses a proprietary low power sensor system to enable large scale, high density, wireless monitoring of bridge, building, pipeline, and storage tank structural health”, using advanced analytical techniques.MultiSensor Scientific, which is working on a multispectral infrared (non-thermal) camera system to visualize and quantify methane leaks from natural gas infrastructure in real-time.Startups participating in the PROPEL program receive technical guidance through TechBridge, as well as incubation space and business guidance through Greentown Labs. This way, the program aims to address some of obstacles that emerging startups have to overcome in developing and scaling up their technologies.The PROPEL program provides startups with five crucial benefits that can help them to get their technologies off the ground:? Industry-informed prototype: Startups develop their prototypes based on market needs. In the process, they receive regular feedback from experienced professionals working at Greentown Labs’ strategic industry partners. Furthermore, Fraunhofer TechBridge will provide companies with industry-oriented technical guidance.Partnership pitch: The PROPEL program teaches companies how to collaborate with potential partners to successfully adapt their product to market needs. This includes detailed advice on adapting investor pitches to present the values of a company to potential future business partners. At the Final Showcase, which is planned for March 2016, companies will present their final pitch to the network of investors and strategic partners from TechBridge and Greentown Labs.Relationship-building: The PROPEL program aims to help participating startups in forging long-term business relationships by regularly hosting meetings with industry professionals and potential investors. They also work to frequently connect teams with more experienced startups that are “solving some of the toughest challenges in energy, environment, and resource efficiency.”Lab resources and expertise to run the business: The collaboration between TechBridge and Greentown Labs provides participating companies with a variety of benefits. TechBridge provides structured technical consulting from domain experts for prototype development and system integration. Greentown Labs provide startups with free lab and office space at their headquarters in Somerville, MA, access to free software and hardware resources, as well as value-added services such as legal, PR and HR advice. Furthermore, startups can obtain up to $10,000 in non-dilutive funding. Lastly, the PROPEL program enables companies to obtain regular industry feedback and business mentorship from the lab’s network of partners, as well as training workshops focused on strategic partnerships and investment.4.4.2 The Role of TechBridgeAs part of the PROPEL program, TechBridge continues to work on its main objective, which is to help early-stage companies de-risk their technologies and to prove their viability to potential investors. While TechBridge usually focuses on performing technical validation work for its clients, the PROPEL program allows the Fraunhofer CSE scientists to combine their industry expertise with Greentown Labs’ incubation services, all while fostering ties between the startups and Boston’s growing innovation community.In a typical project, TechBridge’s key role was to run the initial search and selection process of participants and provide contract R&D services. In PROPEL, the TechBridge engagement instead takes the form of Fraunhofer scientists meeting with the startup teams every other week, to identify technical challenges and to provide advice on prototype development, system integration, and product validation during the incubation period. For instance, as the founders of Gridorder are building the prototype for their cyber security platform, they’ve found that they require more expertise on electrical engineering – an area where Fraunhofer scientists can help the team make progress. According to TechBridge’s Johanna Wolfson, the PROPEL program has proven to be an interesting challenge to TechBridge, as it does not correspond with the program’s usual model of contract research and development. She notes that there is “a lot of interest in rethinking how we engage”, in particular to develop new ways to use Fraunhofer’s expertise to promote energy R&D. Still, Wolfson highlights that merely providing technical mentorship does not perfectly align with Fraunhofer’s business model, which depends on higher-cost projects to cover the cost of operating their labs. According to Wolfson, it will be interesting to see whether Fraunhofer can operate in a mostly-consulting capacity, “whereas to really maintain our reputation as a R&D organization, we would need to do contract research.”5. ConclusionIn summary, the past decade has shown that innovation in the energy technology sector is crucial in mitigating the consequences of climate change while fostering economic growth and energy security. However, as L. Rafael Reif observes, the current U.S. innovation system still tends to favor market-ready innovations, which leaves many disruptive, new-science technologies in the energy sector behind. To bridge this structural gap, Cyclotron Road and TechBridge begin at different stages of the continuum of innovation, allowing the projects to support a wide variety of emerging energy technologies, which they provide with the technological and business mentorship, financial resources, and external validation that innovators need to move their ideas forward. The initial apparent success of these two different but interesting new programs indicates that an “innovation orchard” model based on a “coalition of funders from the public, for-profit and not-for-profit sectors” represents a viable way to help emerging energy technologies advance from lab to market. ................
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