Energy innovation depends on the ability of entrepreneurs to develop and successfully bring technology solutions to market. For early-stage cleantech hardware companies, spanning the traditional gap in funding between government research and development and private venture capital is no easy task.
The urgency to meet environmental targets collides with the stark reality that to invent new technologies, bring them to market, and deploy them at scale takes time. A new materials technology, for instance, typically takes about 20 years to go from the science lab to scaled energy market penetration.
To help ensure that promising technologies aren’t withering on the vine, a new generation of technology incubators, which aid the development of new business ventures, is helping cleantech startups become more attractive to traditional venture capital and other sources of financing.
These organizations utilize a variety of mechanisms, from providing substantial—and oftentimes non-dilutive—early-stage, risk-tolerant capital to enabling access to expensive and scarce resources. These resources are used to develop, test, validate, and demonstrate prototypes. The organizations also work to facilitate early customer and industry engagement, introductions to investors and preparations for market deployment.
In a new study published by the Joint Institute for Strategic Energy Analysis, researchers from the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) have studied a dozen of the country’s top technology-focused cleantech incubator and investor models to see how these efforts can help companies avoid the proverbial valley of death.
Each of the next-generation incubators, which differ from traditional business incubators in their focus—specifically on hard tech development and demonstration—represent promising approaches to improve the path from invention to marketplace adoption.
According to the NREL researchers, adding new generation from renewables (wind and solar) is now in line with the marginal cost of running existing fossil fuel assets in certain markets, offering both tremendous potential and disruption. Electricity generation, however, represents just one aspect of the energy transformation.
Several technologies have similar learning curves. From energy storage to advanced materials, the cleantech landscape is accelerating, and incumbent players (oil majors and financial institutions), as well as traditional sources of innovation (national labs and universities), are helping to bridge the gap from lab innovations into transformational market products.
There are several key lessons highlighted in the study.
First, technology-focused innovation organizations show early signs of success in aiding startups. Second, the success of energy technology innovation depends on a multitude of support approaches. And finally, success begets success.
The study found that many of these programs expanded on earlier programs or were directly inspired by them.
For example, the Lawrence Berkeley National Laboratory’s (LBNL) Cyclotron Road program offers very early hard science entrepreneurs a fellowship to develop prototypes and hone their business leadership skills. The results: roughly 30 companies have been created while exposing the scientists and engineers at LBNL to the vibrancy and energy of the startup community. This success motivated the Department of Energy to expand the fellowship model to Argonne and Oak Ridge National Labs.
Another variation, The Engine by the Massachusetts Institute of Technology, runs a venture capital fund with an incubator attached. MIT recognized that its innovations in ‘tough tech’ struggled to translate to prosperous companies, despite their promise. The Engine was created to bridge that divide and create a stepping stone for its moonshots to reach society.
Along with an 18-year, $200-million venture fund that doesn’t shy away from technical risk, The Engine provides access to technology development facilities as well as business development services. So far, 16 companies have received investments from The Engine, spanning technologies from nuclear fusion to an emissions-free steel production method.
And at NREL, the Wells Fargo Foundation co-developed the Wells Fargo Innovation Incubator (IN2), a $30-million, multi-year program that utilizes the intellectual and physical resources of NREL to help commercial building technology startups gain market traction through validation and demonstration.
This effort has resulted in a 20-times capital multiplier from IN2 dollars to follow-on investment dollars. This program not only helps the startups, but also helps Wells Fargo, as a parent company, stay at the forefront of this rapidly evolving space.
Another inspiring program, GCxN, is a partnership with Shell GameChanger and NREL which focuses on long-duration storage and the grid of the future. As a major energy company, Shell is looking for technologies that could transform the industry and understands the key role that collaboration plays..
These programs represent just a slice of the evolving landscape of energy innovation. The future is fast approaching.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Richard Adams is the director of the Innovation and Entrepreneurship Center at the National Renewable Energy Laboratory (NREL). David Garfield is a post-doctoral fellow at NREL. Kate Moore is the assistant director of NREL’s Innovation and Entrepreneurship Center.