Kristina M. JohnsonUnder Secretary of Energy

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April 16, 2010

Staying Power:Unlocking Small Business Innovation

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President’s Budget Invests in Clean Energy

Build a competitive, low-carbon economy to secure America’s energy future through

Energy Efficiency and Renewable Energy$2.4B

Nuclear Energy$0.9B

Fossil Energy$0.8B

Grid $0.2B

R&D, Demonstration and Deployment:

Solar energy: 22% increaseWind energy: 53% increaseGeothermal energy: 25% increaseNuclear Energy: Loan Guarantees tripled to $54 bn

ARRA Funding:

Carbon Capture & Storage: $3.4bn Smart Grid: $4.5bnEnergy Efficiency: $12.5bn (includes $5bn for weatherization)EV Batteries/Components: $2.4bn

Applied Program Innovation Enterprises

3application

long

er t

erm

Loan Guarantees

EFRCs Hubs

discovery

Program R&D

Pilots & Demos

SBIR

Applied Energy National Labs•NREL•NETL•INL•SRS

ARPA-E

FY 2009 Energy and Science Budget

$16.6 Billion

American Recovery and Reinvestment Act

$36.7 Billion

*Includes DOE Program Funds for Energy Technologies, Science, ARPA-E, and LGPO.**R&D and related Capital investments as defined by OSTP. **, Environmental Cleanup, and other DOE program management funds.Source: FY 2011 DOE Budget Request and R&D crosscut.

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Other$6.7(42%)

Deployment$2.8(18%)

R&D$6.5(41%)

R&D$3.0(8%)

Other$6.2(17%)

Deployment$27.5(75%)

Recovery Act Spending

The Importance of Small Business Innovation

Between 1993 and 2008, small businesses created 64% of all net new jobs, totaling 14.5 million new jobs—or more than 2,600 jobs per day.

Small businesses renew the US economy by introducing new products and lower cost ways of doing things. SBIR-nurtured firms consistently account for a 25% of all US R&D 100 Award winners.

Small businesses employ nearly 40% of the US science and engineering workforce, create 13 times more patents per employee than large firms.

Small businesses create more than half of US gross domestic product and export an average of $375 billion/yr.

InnovationInnovation

TalentTalent

JobsJobs

WealthWealth

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DOE Current 3-Phase SBIR/STTR Program

• Early-stage concept validation• One solicitation per year• $100K/6 - 9 month award

• Prototype Development and Demonstration• Must finish Phase I to submit Phase II• $750K/24 month award• $250K Phase II Supplemental/12 month award• Technical Assistance Program

• Commercialization Stage• Use of non-SBIR/STTR Funds• Direct funding, sole source

PHASE IPHASE I

PHASE IIIPHASE III

PHASE IIPHASE II

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Topic Examples

Nanotechnology Applications for Energy Efficiency and Renewable Energy Hydrogen Production and Delivery Technologies Related to Hybrid Electric Vehicles with Special Emphasis on Plug-in Hybrids Technology to Support National Scientific User Facilities Research to Support Proliferation DetectionMaterials for Advanced Nuclear Energy Systems

Advanced Technologies and Materials for Fusion Energy Systems

High Energy Physics Data Acquisition and Processing

Nuclear Particle Physics and Radiation Detection Systems, Instrumentation and Techniques

Power Electronics and Advanced Materials for Energy Storage 7

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Success Story: A123 Systems

ü Started with Phase I SBIR in 2001

ü Phase II in 2003 to develop process to produce lithium cathode materials for hybrid electric car batteries

ü Raised $20M in a subsequent financing round

ü Grew to $70M in revenue and 1700 employees by 2008

ü Raised $437M through 2009 IPO

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Success Story: SBM Atlantia

o DOE SBIR helped fund shift in R&D focus to deep-water platforms

o New platform technology attracted a strategic partner in British Borneo

o Went from10 employees and $10M in revenue before the DOE SBIR grant, to 600 employees and $300M in revenue

Available Program Funding FY 2009

Sources ($M) Uses ($M)SC $104.9 $75.0EERE $21.7 $41.3FE $13.2 $17.0NN $7.5 $7.5NE $3.9 $6.2OE $2.4 $5.1EM $0.9 $ 0.9Tech Asst $0.0 $1.5

_____________________________

Total $154.5 $154.5

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EIA Projections Show Potential Across the Portfolio

efficiencyefficiency

fuels

• nuclear

• CCS

• renewables

• offsets

FY 2009 Phase I and Phase II Awards

PHASE I

• 1,669 Phase I Applications Received • 1,421 Applications Sent Out for Review• 356 awarded(319 SBIR, 37 STTR)

PHASE II

• 298 Phase II Applications Received• 169 awarded(144 SBIR/20 STTR)• 161 Continuations (2nd year of funding from FY 2008)• 12 Supplementals (10 SBIR/2 STTR)

NRC Report: From 1992-2005, 3,286 Phase I awards totaling $250M. 1,213 Phase II awards totaling $825M.

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2009 ARRA SBIR Solicitation

SUBSTANTIVE CHANGES

• Raised award amounts: $100K to $150k; $750K to $1M

• Increased weighting of the commercialization criterion from 33% to 50%

• Expanded Commercialization Plan requirements for Phase II applicants

• $1M to support companies working with the National Alliance of Clean Energy Business Incubators and NREL Industry Growth Forum

ADMINISTRATIVE CHANGES

• Decreased Phase I cycle-time from 9 months to 6 months

• Added business and finance expertise to Merit Review Panels

• Broadened technical topics

• Internal SBIR evaluation through case studies

• Running two SBIR cycles with non-overlapping topics

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Case Study: Amonix

ü Company formed in 1989 to tackle problem of solar cell degradation

ü DOE SBIR funding helped Amonix redesign the PV cell unit, reduce the system cost below $3/watt and achieve AC system efficiency of +25%

ü With 70% of the CPV market, Amonix has more CPV technology installed in the world than any other company

ü Amonix has grown from 15 employees in 2006 to 44 in 2009

ü Company anticipates $500M in domestic sales in 2010

2009 ARRA SBIR Solicitation (cont’d)

PHASE I AWARDS

• 947 Phase I Applications Received• 260 Applications Sent Out for Review (due to lack of resources)• 122 Selected for Award (112 SBIR, 10 STTR) for $18 million

PHASE II AWARDS

• 122 Phase II Applications• 61 to be Selected for Award for $67 million

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Small Businesses Need Staying Power

Durations of various innovation financing mechanisms

Combinations of financing types possibly applicable to companies pursuing

fundamental innovation

“Staying Power” – Company Y

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ATP funding

company founded: credit card round

industrial partnership acquisition

ATP award

VC

movie premier

Company YCompany Y

‘75 ‘80 ‘85 ‘90 ‘95 ‘00 ‘05 ‘10

materials discovery

effect discovery

device invention

key patentissued

angelround

university laboratory

FY 2011 Budget Submission

"We came all this way to explore the moonand the most important thing is that we discovered the Earth.”

Bill Anders, Apollo 8 Astronaut, December 1968

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Energy Efficiency and Renewable

Energy$2.4B

BACKUP SLIDES

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Linking Science and Technology

Linear, feedforward Linear, feedforward Vannevar Bush

Use-inspired:Use-inspired:

(Source: Adapted from Pasteur’s Quadrant by Donald Stokes)

Pasteur Turing

Bohr

Edison

Shannon Carnot

Curie

mor

e fu

ndam

enta

l

more applied

SBIR

Administration Energy & Environment Goals

Reduce GHG Emissions 83% by 2050

Secure Our Energy Future

Grow the Clean Energy Economy

Regain Global Science & Engineering Leadership

Clean Up Cold War Legacy Waste by 2015

Revitalize the Manufacturing Sector

Engineering: “Design Under Constraint1”

Cost

Speed

Scale

DOE research budget for S&E: $10 billionCost of a Supercollider: $10 billionCost of new nuclear reactor: $6 - $8 billion

2 °C increase in global mean temperature above 1990 levels poses “significant risks”for ecosystems

Decades-old electric grid, increase in oil dependence, decline of US manufacturing, energy workforce, small business financing

1William Wulf, Past-President of NAE

SBIR funding

“Staying Power” – Company X

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materials discovery

effect discovery

company founded

ATP award

seed round

angel

manufacturing partnership

institutional investors

1,000,000t

h unit sold acquisition

‘75 ‘80 ‘85 ‘90 ‘95 ‘00 ‘05 ‘10

university laboratoryCompany XCompany X

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Small Businesses = Job Creators

Avg job creation (establishment entry) by firm age/size: 1987-2005

Entry

Firm ageFirm size

Haltiwanger et al., (US Census & U. Maryland)