The wee town of Startup, Snohomish County, Washington State
If you have a little cash, an entrepreneurial drive and an interest in energy, but you lack the innovative idea of your new start-up, shop around at the Department of Energy. This week, our Secretary of Energy Steve Chu announced a new program, part of the Startup America Initiative, called “America’s Next Top Energy Innovator“. OK, cute play on America’s Next Top Model, although perhaps not as appealing to the general public. Here’s the deal: for a little money ($1000) you can obtain an option agreement to license a patent held by one of our 17 national laboratories. In the past, this would have cost anywhere between $10,000 and $50,000. So, the new deal is a bargain. There is more though: filing is made much easier with a streamlined online process, and DoE will even help you promote your new business idea to potential investors at the 3rd Annual ARPA-E Energy Innovation Summit in 2012, as well as give you access (at some costs for some time) to national research laboratories. The announcement boasts that there are 15,000 unlicensed patents and patent applications on the books to choose from. That sounds like a nice well-stocked ideas stop. The Department hopes that through this simpler and much cheaper process, more startups will be formed based on innovative ideas developed using federal support. In fact, its goal is to double the number of new startups.
It all sounds terrific at first. I’m all for stimulating market innovation. We are in danger of loosing the battle with other countries in this area and, like many others, I’m concerned about our industrial competitiveness in renewable energy, energy efficiency and carbon emission reduction schemes. Without stimulus, we may become dependent on other countries, such as Japan and China that are investing very strongly and at increasing rate, for our clean energy innovations. Patent applications are telling. Globally around 20,000 new patents are filed per year in the energy area. US patents account for around 4-5% of total, which is less than the annually than patents filed by countries like China and Japan. Applicants from Japan accounted for the largest number of applications in the fields of solar energy and fuel cells. In the last decade, Japan filed over 40% of the patents in this area, with China 13%, the US 12% and Germany 6%, approximately. Germany and Japan were the top two countries of patent origin for wind energy technologies in that same time period. Of course it is not only the number of patents that counts, but also the quality of them. And it is (still) true that the number of citations, a measure of the innovation level of a patent application, is much higher for US patents at this moment than for Chinese patents, say, but this advantage is also shrinking over time.
So, it seems like a great idea, this ANTEI (aye, bad acronym) program. But, can we expect it, though announced with a lot of trumpeting, to achieve much? It’s hard to gauge. First of all, how many startups are formed now? I could not find the statistics. The Department does mention that at the moment only 10% of all available patents are licensed. I take it those are the good ones. Would there still be pearls amongst the remaining unlicensed patents, and was it really the higher fee and more arduous application process that kept savvy entrepreneurs away? If so, these changes are certainly welcome. But more importantly, how many of these startups formed are actually successful in bringing innovation to the marketplace? And would the program really make a difference in this successrate, which is what really matters?
If you’ve ever tried to launch a successful startup, you know that strength of the underlying innovation is only one factor deciding your successrate. Especially in energy. Market penetration is particularly difficult because of large established players. Margins are relatively small. Competition is fierce, also international competition. And, moreover, the market is highly dependent on economic policies that are not always steady.
It seems to me that we need much, much more than this Next Top EI (hey, that’s funny, “ei” in Dutch means “egg” – Next Top Egg program!) to successfully launch more US startups in energy innovation. We need to help create the market. A carbon tax, or consistent and clear carbon trading, would help. Clear consistent policies on tax credits as well as loan guarantees would help. And of course, if we are wanting to tap more into clever ideas generated through governmental research support, we should keep supporting that kind of research, rather than constantly reduce its level of funding.