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EPA-Venture Capital Community Summit:
Exploring Programs to Commercialize
Environmental Technolog1
November 1 2 2008
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June 2009
United States
Environmental Protection
Agency
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Disclaimer
The information in this report has been reviewed by the EPA and Venture Capital Com-
munity participants in the Summit. It also has undergone EPA administrative and general
counsel review. It does not necessarily reflect the views of the Agency, however, and no
official endorsement should be inferred.
EPA/600/R-09/023
U.S. Environmental Protection Agency
Office of Research and Development
http://www.epa.gov/ncer
June 2009
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This report was prepared by
The Scientific Consulting Group, Inc., Gaithersburg, Maryland,
under EPA Contract EP-C-05-015, Work Assignment 3-4,
Paul Shapiro was the EPA Work Assignment Manager.
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Report of the EPA-Venture Capital Community Summit:
Exploring Programs to Commercialize Environmental Technology
Table of Contents
Introduction 1
Agenda of the EPA-Venture Capital Community Summit 3
Summary of the EPA-Venture Capital Community Summit 5
Welcome 5
Introduction to Venture Capital and Growth 6
Introduction to How EPA Operates 9
Discussion of the Venture Capital Report Recommendations, Especially Related to
Beginning and Sustaining Communications 12
Working Lunch - Overview of the New Department of Energy Technology
Commercialization Programs 16
Discussion of Alternative Financing Instruments: Loan Guarantees, Loans,
Venture Capital Funds, Grants, etc 21
Public Comments 26
EPA and Venture Capital Roles and Next Steps 27
Appendices 33
A. EPA-Venture Capital Community Summit: Potential EPA Follow-Up Activities 35
B. List of Summit Attendees 36
C. Summit Presentations 39
1. Venture Capital Overview 39
2. U.S. EPA: The Context for Promoting New Environmental Technology 42
3. DOE Commercialization: Energy Efficiency and Renewable Energy 45
D. Stages of Investment 48
E. Federal Register Notice for the EPA-Venture Capital Community Summit 49
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The EPA-Venture
C Capital Community
Summit: Exploring
f*£v;m!S to Commercial-
ize Environmental lecrmolog) was convened
by EPA as part of the Agency's response to the
recommendations in the EPA National Advisory
Council for Environmental Policy and Technol-
ogy (NACEPT) report titled, EPA and the Venture
Capital Community: Building Bridges to Commer-
cialize Technology. This Venture Capital Report
was submitted to EPAs Administrator in April
2008.
NACEPT operates under the Federal Advisory
Committee Act (FACA), which permits it to make
consensus recommendations to EPA. NACEPT is
one of the few EPA FACA groups that provides
advice directly to the Administrator. The Sum-
mit, in contrast, was an EPA meeting that was not
convened under FACA and the group was not
asked to reach a consensus or provide recommen-
dations. Ideas put forth by individuals were noted,
however, and are described in the Summary in this
report.
The Summit was a public meeting designed to
address two recommendations in the Venture
Capital Report: (1) EPA should forge and sustain
communications with the early-stage investment
community and (2) EPA should strengthen
financial support (e.g., loan guarantees, grants,
revolving loan funds) for environmental technology
commercialization. The meeting was announced
in a Federal Register notice (see Appendix E) and
the agenda included Public Comment time.
EPA created a Web site (unvw.epa.gciv/ncer/
venturecapitat) for the event that includes the
Venture Capital Report and two prior NACEPT
reports on how to better coordinate EPAs
technology programs and to work with partners in
the marketplace.
This report contains summaries of the comments
made by participants during the EPA-Venture
Capital Community Summit. The report also
includes three presentations that were made at
the Summit to provide background information
for the participants. These presentations were:
"Venture Capital Overview," by Emily Baker of the
National Venture Capital Association; "U.S. EPA:
The Context for Promoting New Environmental
Technology," by Walter Kovalick of EPA Region 5
(Chicago); and "Department of Energy Technology
Commercialization: Energy Efficiency and Renew-
able Energy," by Drew Bond of the Department of
Energy's Office of Energy Efficiency and Renew-
able Energy.
Importantly, the report also includes a list of
potential follow-up items developed by EPA to
encourage environmental technology investment
and commer-cialization. This list is provided as
an appendix because it was developed after the
Summit (see Appendix A).
If you have any questions, comments, or interest
in pursuing these ideas with EPA, please contact
Paul Shapiro at shapiro.paul@epa.gov. »
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2 Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Agenda of the EPA-Venture Capital
Community Summit g!:±I
to
12,
AGENDA
Co-Chairs: Rob Brenner, U.S. Environmental Protection Agency (EPA)
Hank Habicht, SAIL Venture Partners
Purpose: To put forward and discuss a set of potential EPA and venture capital community actions to
catalyze the commercialization of environmental technologies.
Background: This Summit is a followup to the recommendations in the EPA National Advisory Council
for Environmental Policy and Technology (NACEPT) report, EPA and the Venture Capital Community:
Building Bridges to Commercialize Technology (April 2008), which is available at www.epa.gov/ncer/ventu-
recapital.
9:30 a.m. - 10:00 a.m. Registration
10:00 a.m. - 10:05 a.m.
10:05 a.m. - 10:25 a.m.
10:25 a.m. - 10:45 a.m.
10:45 a.m. - 12:00 p.m.
12:00 p.m. - 12:30 p.m.
Welcome
Rob Brenner, Director, Office of Policy Analysis and Review, Office of Air
and Radiation, EPA, and Hank Habicht, Managing Partner, SAIL Venture
Partners
Introduction to Venture Capital and Growth
Emily Baker, Director, Federal Policy and Political Advocacy, National Ven-
ture Capital Association
Introduction to How EPA Operates
Walt Kovalick, Assistant Regional Administrator for Resources Management,
Region 5, EPA
Discussion of the Venture Capital Report Recommendations, Especially
Related to Beginning and Sustaining Communication
« Desired Outcome: Develop an initial list of actions that individuals
believe would enhance communication over the long term
Working Lunch - Overview of the New Department of Energy (DOE)
Technology Commercialization Programs
Dreuf Bond, Director for Commercialization and Deployment, Office of
Energy Efficiency and Renewable Energy, DOE
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12:30 p.m. - 2:30 p.m.
2:30 p.m. - 2:45 p.m.
2:45 p.m. - 3:00 p.m.
3:00 p.m. - 4:30 p.m.
» Desired Outcome: Begin discussion of DOE's commercialization
programs and how individuals believe similar programs at EPA could
advance the Agency's mission
Discussion of Alternative Financing Instruments: Loan Guarantees, Loans,
Venture Gapital Funds, Grants, etc.
» Desired Outcome: Develop an initial list of actions that individuals
believe would be helpful in exploring new EPA financial programs
Break
Public Comment
KPA and Venture Capital Roles and Next Steps
« Desired Outcome: Discuss the morning and afternoon lists and ask
individuals to put forward potential actions they consider most impor-
tant for EPA and the venture capital community to pursue to catalyze
the commercialization of environmental technologies
4:30 p.m.
Adjournment
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Rob Brenner, Office of Policy Analysis and Rewew, Office of Air and
Radiation, EPA; Hank Habicht, Managing Partner, SAIL Venture Partners
Rob Brenner opened the meeting by welcom-
ing everyone to the Summit. He explained that
he and Hank Habicht were the co-chairs of the
Summit. Mr. Brenner then asked everyone to
introduce themselves. He then introduced Paul
Shapiro and thanked him for planning and orga-
nizing the Summit.
Mr. Brenner described why the Summit was
of great importance to the U.S. Environmental
Protection Agency (EPA). Traditionally the avail-
ability of commercially available technologies, such
as flue gas desulphurization devices for power
plants and catalytic converters on cars, has assisted
the Agency in the development of standards and
regulatory policy. More recently, some states such
as California and Massachusetts have enacted pro-
gressive energy and environmental legislation and
become regional centers for venture capital (VC)
investments and emerging environmental technol-
ogy development. Potentially, EPA could learn
from these state models and determine how the
Agency could structure programs and regulatory
policy to encourage the development of emerg-
ing technologies that can enhance environmental
protection. Rather than waiting for commercial
technologies to become available, EPA may be able
to become more proactive and influence environ-
mentally beneficial technology development and
adoption.
Mr. Brenner explained that rising energy costs and
impending climate change impacts also are driving
the Agency to more aggressively investigate new
energy technologies that offer beneficial environ-
mental results. The VC community is closely
attuned to emerging technology development so it
is very timely for the Agency to initiate communi-
cations with this community.
As a former EPA Deputy Administrator, Mr. Habicht
expressed his appreciation for the Agency senior
managers who were participating in the Summit.
He complimented these managers for their abili-
ties to promote environmental protection and their
openness to consider new ideas and approaches for
raising environmental performance. Mr. Habicht
mentioned the book, The Prophet, by Kahlil Gibran,
which was popular in the 1960s. That book includ-
ed a statement that went something like "I wasn't
put in this world to make you happy and you were
not put in this world to make me happy; each of us
has to do our own thing, but if in the end we find
each other then it's beautiful." Concerning today's
meeting, Mr. Habicht explained that the VC com-
munity is not in business to make EPA successful
and vice versa but he hoped that at the meeting
today each party will have found each other and
that at the end of the day each of us will say it is
"beautiful."
Clean technology is not a passing fad or a "flash
in the pan." Mr. Habicht suggested that there is
a convergence of issues and challenges that has
not existed before. Rising energy prices have
affected supply and demand. Global energy use
is expected to increase three-fold in the next 30
years; in the past 20 years, energy demand has
doubled. Seventy percent of this new demand
is coming from the less developed world, with
China contributing nearly 30 percent of this new
demand. Another factor affecting clean tech-
nology growth is the amount of "main stream"
financial capital being committed to this sector.
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Every private-sector financial institution—from
international banks to VC firms—is committing
resources to clean technology. The key issue is to
put resources behind clean technology "winners"
so that both investors and the environment will
benefit. Mr. Habicht explained that a reason-
able goal for today's meeting is for EPA and the
VC community to gain a better understanding of
each other as well as a better appreciation of the
driving forces and constraints affecting each other.
He hopes that this will form the foundation for
establishing a process for ongoing communication.
Mr. Habicht asked Mr. Shapiro to explain the
ground rules for the Summit. Mr. Shapiro said
that the Summit is not a Federal Advisory Com-
mittee Act (FACA) meeting; however, it is a
public meeting and there are some rules that
apply. The venture capitalists participating in the
Summit cannot make recommendations to EPA
nor can they reach consensus on group delibera-
tions. The meeting is designed to seek individual
rather than group or collective advice. Mr. Shapiro
cautioned that the group cannot reach agreements
on issues and that participants should strive to
direct their comments to EPA and not to each
other. In summary Mr. Brenner explained that
the group can offer specific comments to the
Agency but cannot offer recommendations to EPA
that were derived through consensus voting. He
stressed that today's meeting is an informal session
but mentioned that a more formal FACA process
may follow. Mr. Brenner suggested that, in the
future, EPA may consider forming a VC advisory
subcommittee as part of the National Advisory
Council for Environmental Policy and Technology
(NACEPT) or some other existing FACA commit-
tee.
Based on the Summit agenda, Mr. Shapiro
explained that the "Desired Outcome" from each
session will be determined by EPA officials who
will summarize the discussion from each session
and identify items for future consideration. He
also mentioned that notice of the meeting was
published in the Federal Register and that there is
time set-aside on the agenda between the after-
noon sessions for public comments.
Mr. Habicht suggested that the transition team
for the new administration may be interested in
the results of today's deliberations. Although the
Summit participants know many of the transition
team officials, he emphasized that the focus of
the Summit should not be on providing advice
to the transition team; rather, the focus should
be on what communication mechanisms can be
established between government and VC officials
to develop a better clean technology policy.
Mr. Habicht explained that the purpose of the
first two presentations is to establish a common
basis for both EPA and the VC community. The
first presentation by Emily Baker of the National
Venture Capital Association (NVCA) will describe
the VC community, and the second presentation
by Walt Kovalick will describe EPA. When intro-
ducing Ms. Baker, Mr. Habicht indicated that she
is the director of the NVCA Clean Technology
Advisory Council. •
Introduction to Venture Capital and Growth
Emily Baker, National Venture Capital Association
(Slide presentation is provided in Appendix C)
Ms. Baker explained that the NVCA Clean
Technology Advisory Council was established
2 years ago based on the growing interest and
investment opportunity in this sector. Over the
past 18 months, NVCA has developed a clean
technology public policy agenda and is currently
lobbying Congress to recognize the significance
of this sector. Part of the NVCA efforts has
included establishing a close relationship with the
U.S. Department of Energy (DOE) in its energy
efficiency and renewable energy activities. Ms. Baker
expressed her hope that the Summit would pro-
vide an opportunity for the NVCA to establish
better communications with EPA about clean
technology issues.
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Ms. Baker described the history and focus of the
NVCA as a trade association. Initially, the NVCA
was created to foster communications among
VC professionals but the association has evolved
into a public policy and advocacy organization
for the VC community. The NVCA lobbies all
congressional committees including those deal-
ing with tax and trade policies, as well as energy,
environment, and small business committees.
VC firms are small businesses, so the NVCA is
proactive for small business. The NVCA sup-
ports basic research because federal laboratory
developments—whether from the DOE National
Laboratories, EPA, or any other agency—can be a
source of new product and technology ideas for
venture firms.
Ms. Baker noted that the research data collected
by the NVCA on venture investments is provided
in the MoneyTree Report. These data are shared
publicly and are available online. She commented
that NVCAs members are responsible for nearly
90 percent of the VC currently under manage-
ment.
In defining VC, Ms. Baker provided an overview
of the VC life cycle. The process starts with
VC funds being raised from various institutional
investors; once sufficient funds are collected, the
VC firms look for portfolio companies in which
to make investments. VC firms screen hundreds
and potentially thousands of companies annually
to identify 8 to 10 companies that will comprise
their fund portfolio.
Both financial and management expertise is pro-
vided to portfolio companies by venture firms.
Ultimately, venture firms want to build a portfolio
company to the point where it can be a public
entity or be acquired by a larger entity. VC
firms do not invest in public markets or security
derivates. They do not leverage or charge fees to
portfolio companies; nor do these firms take hedge
or short positions in companies. This is the major
distinction between VC firms and hedge funds or
private equity investments.
Ms. Baker identified some of the characteristics of
VC investments. VC investments are long; some-
times as long as 15 years in the life sciences sector.
The investments focus on innovation and usually
are high risk and high reward. Forty percent of
venture-backed companies fail, forty percent break
even or make minimal gains, and only 20 percent
make significant gains. In addition, VC builds
value in companies and the economy. The invest-
ment stays in the company and is used for growth
and venture capitalists bring operational and
scientific knowledge to bear to catalyze growth by
involving themselves in the day-to-day operations.
Although venture investments accounted for just
0.02% of invested capital (about $230 billion
compared to the nearly $1.5 trillion invested by
hedge funds), companies that got their start with
VC accounted for 10.4 million jobs and $2.3
trillion of revenues in the United States in 2006,
which was 18% of the Gross Domestic Product.
Some companies that were originally funded by
VC include Genentech, Microsoft, Apple, Google,
FedEx, and Starbucks. Venture-backed companies
usually outperform their non-venture counterparts
and current venture-backed companies account for
more than 400,000 U.S. jobs. Innovations funded
by VC include the pacemaker, Herceptin (cancer),
and Integrilin (heart disease). Venture capital-
ists increasingly are focusing on clean technology
(solar, wind, carbon capture, and energy efficiency).
The Global Insight Report prepared by the NVCA
offers more details on the economic impact of VC.
Ms. Baker noted that venture capitalists are
welcomed by congressional members because
they bring jobs and economic growth to their
districts and states. For every VC dollar invested
in 1970-2001, there was $7.90 in U.S. revenue
during 2006. For every $28,463 of VC invested
in 1970-2001, there was one job in the year 2006.
The tangible benefits of venture investments are
substantial and long term.
Ms. Baker identified the top 10 states for VC
investment in 2007, noting that California, Mas-
sachusetts, and Texas are the top three among the
states with more than $19 billion of VC invested.
Beyond the top 10 states, there have been a lot of
clean technology venture investments in Colorado
and New Mexico, probably because of the DOE
National Laboratories in these states. California,
Texas, Washington, and Massachusetts lead the
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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top 10 states for VC-backed U.S. revenues in 2006.
California, Texas, Pennsylvania, and Massachusetts top
the list for VC-backed U.S. jobs in 2006, employing
more than 4.8 million workers. Ms. Baker noted
that one in ten Americans works for a venture-
backed company.
In 2000, venture-backed U.S. revenues were
$1.5 trillion; they grew to $1.7 trillion in 2003
and then $2.3 trillion in 2006. The VC-backed
growth rate of 11.8% from 2003-2006 outpaced
the 6.5% of total U.S. sales growth. In 2000, there
were 8.7 million VC-backed U.S. jobs; this number
grew to 9.4 million in 2003 and to 10.4 million
in 2005. The VC-backed U.S. job growth rate of
3.6% outpaced the 1.7% job growth rate of the
private sector from 2003-2006.
Ms. Baker compared Internet-specific investments
(dollars invested and number of deals) with clean
tech investments from January 2005 to March
2008, indicating that there has been a much
greater increase in clean tech investments since
2006. Ms. Baker provided data on the investment
activity in the top five industries—biotechnology,
software, medical devices and equipment, industri-
al/energy and semiconductors—from early 2007 to
early 2008. There was an increase in investment
activity in medical devices and equipment and
semiconductors in early 2008 compared to 2007.
The other industries experienced no increase in
investment or a decrease in early 2008.
Ms. Baker identified six federal policy initiatives
that are needed to drive clean tech: (1) Renew-
able Portfolio Standard, (2) Renewable Fuel
Standard, (3) investment tax credits, (4) strength-
ened CAFE standards, (5) more robust federal
R&D for energy, and (6) the Federal Government
as an early adopter and user of clean energy
technologies.
In closing, Ms. Baker stated that the NVCA is
looking forward to working more closely with
EPA to facilitate new partnerships. She provided
her e-mail address (ebaker@nvca.org) and encour-
aged participants to contact her if they wanted
more information. Ms. Baker thanked the Sum-
mit participants for the opportunity to make her
presentation and asked if there were any questions.
Ira Leighton asked Ms. Baker to identify the
two most important factors that attract venture
investments to certain states. Ms. Baker replied
that the high concentration of university research
in the top 10 states is one factor and another
is the spin-outs of innovations from the DOE
National Laboratories, particularly in states such
as New Mexico. Historically, another factor that
has encouraged venture investments is the close
proximity of portfolio companies to the VC firm's
offices. Most venture capitalists wanted to avoid
getting on a plane to visit their investment compa-
nies. Ms. Baker admitted, however, that this factor
is becoming less important, particularly with clean
tech investments.
Dr. Kovalick asked how cost center-based
technology investments, like environmental
technologies, might differ from energy efficiency
investment technologies, like solar and wind
farms that may save industry resources if they are
installed. Ms. Baker replied that solar and wind
technologies are attracting investments because
venture capitalists see a high market potential and
high return on their investments in these industry
subsectors. Conversely, some venture investments
are made in environmental technologies because
investors believe they can "do well by doing good."
Eric McAfee explained his company's venture
investments are not based on cost-center or incre-
mental revenue issues, but on the scalability of
the business model. Venture capitalists tend to
be most interested in a rapidly growing revenue
stream from their portfolio investments. Gross
profit margins are important to venture invest-
ments. Key questions include: What is the
potential revenue? What are the growth profit
margins? What will it cost to get there and how
quickly can it be done? Rosemary Ripley added
that EPA needs to think about how to show
industry that it can make money on environmental
technology investments. She offered that cap
and trade technology approaches may be a useful
example; industry is interested in reducing carbon
dioxide in the atmosphere and if it can be demon-
strated that industry could actually make money
using these technologies, then the market for them
would grow rapidly.
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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In the early 1990s when the Clean Air Act Amend-
ments (CAAA) were being negotiated, Mr. Brenner
explained that EPA asked Smith Barney to conduct
a study for the Agency on business opportunities
in the proposed CAAA. Following completion of
the study EPA hosted a conference on the clean air
marketplace that sought to explain that the CAAA
could offer some significant investment opportuni-
ties. Although the compliance technology costs
associated with some provisions of the CAAA were
estimated to be very high, these Amendments did
create some of the initial cap and trade programs
endorsed by the Agency.
John Preston added that the potential profit center
for primary energy generation is much greater
than waste avoidance considerations in most clean
technology investments. He noted that, in the
early 1990s, there were more than 60 publicly
traded, hazardous waste cleanup companies; today,
there are only four companies still in business and
two of those four are in Chapter 11 bankruptcy
proceedings. Nevertheless, primary energy genera-
tion does create environmental problems, so the
key is to determine how to generate more energy
but create fewer environmental problems. A good
example of an industry where productivity has
increased while discharges have decreased is the
chemical industry; during the past 10 years, the
productivity of the chemical industry rose but its
generation of hazardous materials decreased. •
te EPA
Walt Kovalick, Jr., Assistant Regional Administrator, Region 5, EPA
(Slide presentation is provided in Appendix C)
Dr. Kovalick explained that his presentation
would cover EPAs mission and budget, provide a
context for how EPA operates and implements its
mission, and conclude with some of his personal
observations about the nexus of EPAs work and
environmental technology.
EPA is one of more than 20 independent
regulatory agencies in the Federal Government.
Although EPA is not a Cabinet department, it has
Cabinet status. The Agency's mission is to protect
public health and the environment. There are
more than 20 statutes that provide mandates for
the Agency, including: Clean Water Act (CWA);
Clean Air Act (CAA); Safe Drinking Water Act
(SDWA); Resource Conservation and Recovery Act
(RCRA); Comprehensive Environmental Response,
Compensation, and Liability Act (Superfund);
Federal Insecticide, Fungicide, and Rodenticide Act
(FIFRA); Toxic Substances Control Act (TSCA);
and others. Beyond environmental media like air,
water, and land, EPA also has regulatory respon-
sibility for regulating products under FIFRA and
TSCA. Under TSCA, for example, EPA regulates
existing and new chemicals. Another statute that
was not on the slide is the National Environmental
Policy Act (NEPA), which impacts many efforts
including some energy development projects.
EPAs Fiscal Year (FY) 2008 budget was $7,472
million. Since the passage of the 1995 Government
Performance and Results Act, EPA like all federal
agencies must prepare a 5-year strategic plan.
Currently, EPA is operating under the 2006-2011
Strategic Plan (on the Web at www.epa.gov/ocjo/
plan/2006/entire_report.pdf), which identifies five
goals: (1) Goal 1—Clean Air and Global Climate
Change, (2) Goal 2—Clean and Safe Water, (3)
Goal 3—Land Preservation and Restoration, (4)
Goal 4—Healthy Communities and Ecosystems,
and (5) Goal 5—Compliance and Environmental
Stewardship. Goal 1 accounts for 13.1% of EPAs
budget and 2,609 full-time equivalents (FTEs).
Goal 2 accounts for the largest portion of the
EPA budget, 36.1% and 2,901 FTEs; most of the
resources associated with this goal are distributed
to states for their local water responsibilities. Goal
3 accounts for 23.6% of the budget and 4,574
FTEs, Goal 4 for 16.7% of the budget and 3,736
FTEs, and Goal 5 for 10.5% of the budget and
3,487 FTEs.
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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EPA's $7,472 million budget is divided among
state and tribal assistance grants ($1,222 million),
operations from non-Trust Funds ($3,175 million),
operations from Trust Funds ($1,360 million)
and infrastructure/State and Tribal Grant project
financing ($1,715 million).
Dr. Kovalick presented EPA's organization chart,
which identified the Agency's headquarters and
regional offices. The chart explains how EPA is
organized by environmental media and function.
Dr. Kovalick noted that each EPA region is orga-
nized similar to EPA headquarters with media and
functional offices.
Dr. Kovalick explained that the regulated com-
munity is any business or organization that is
required to comply with EPA statutory or regula-
tory requirements. This community includes more
than 800,000 permitted facilities under CAA,
CWA, and RCRA; more than 20 million small
businesses; 80,000 units of local government; and
millions of regulated facilities under more than 12
major environmental statutes. Dr. Kovalick pointed
out that most permitted and regulated businesses
are regulated by the states, not EPA. For most
statutes, EPA sets national standards and the states
implement them on a local basis. State and local
governments provide most of the environmental
regulation; these agencies issue most of the per-
mits and conduct most of the enforcement cases.
With respect to operations and implementation,
Dr. Kovalick explained that EPA exercises dis-
cretion in balancing the mandate given in each
statute. The different types of traditional regula-
tion used by EPA include technology based (most
stringent or cost effective), health based (set for
environmental conditions), market based (sets
limit for nation/area; facilities get tradable allow-
ances), and use restrictions (exposure restricted
by label directions or product restriction). The
market-based, cap and trade allowances are avail-
able primarily in the Clean Air regulations, and
EPA use restrictions are available only through the
FIFRA and TSCA regulations.
In the 1990s, EPA began to move beyond "com-
mand and control" approaches to environmental
protection. In general, large stationary and point
sources are under control in the United States so
the focus has turned increasingly toward diverse
nonpoint sources of pollution, such as agricultural
runoff and salt runoff from highways and other
sources. For the past 15 years, EPA headquarters
has been working with the regions on compliance
assistance, voluntary partnerships, Performance
Track (beyond compliance), and partnering for
economic gain/development (e.g., Brownfields).
EPA currently has more than 50 voluntary
partnership programs to help businesses and the
public with environmental protection and more
than 500 companies involved in Performance
Track, which is a voluntary beyond compliance
recognition program. EPA also executes more
than 100 cooperative research and development
agreements (CRADAs) with private sector organi-
zations annually.
Dr. Kovalick presented a map that depicted the
10 EPA regions and the states in each region.
He mentioned that these regions are consistent
among federal agencies. Almost one-half of
EPA's 17,000-member workforce is located in the
regional offices because nearly all environmental
programs are deleted to the states and tribes.
The vast majority of inspection, permitting, and
enforcement is at the state/tribal level. The
Agency has approximately 2,400 FTEs dedicated
to science and technology work and most of these
staff members are in the Office of Research and
Development (ORD). Dr. Kovalick noted that
more than a third of the entire EPA workforce is
scientists and engineers. About $440 million of
the Agency's $760 million science and technology
budget is extramural. From a technology
perspective, Dr. Kovalick explained that states do
not routinely accept the same technologies for
control and compliance; therefore, a technology
that might satisfy environmental requirements
in California might not be acceptable in New
York. Reciprocity among states on environmental
technologies for permitting and enforcement
remains an elusive issue.
Dr. Kovalick identified six EPA roles in the envi-
ronmental technology marketplace, including:
(1) funding agent, (2) technology developer,
(3) regulator/enforcer, (4) information broker,
(5) partner in deployment, and (6) user of "first
10 Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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resort." Dr. Kovalick went on to explain that EPA is
best as a regulator/enforcer and as a verification agent
[part of the information broker role). The Agency
is less experienced as a funding agent, technology
developer, or user of "first resort." As verification
agent, EPA has conducted a very aggressive program
with more than 400 technologies verified through
the Agency's Environmental Technology Verification
(ETV) Program in the past 15 years.
Dr. Kovalick presented a diagram that mapped
EPAs environmental technology programs to the
R&D continuum (from research/proof of concept
to diffusion/utilization). He explained that the
majority of EPAs efforts are concentrated in diffu-
sion/utilization. (Each of the programs identified
in the diagram were fully explained in the hand-
out that accompanied Dr. Kovalick's presentation.)
He noted that the EPA technology programs
directed at earlier stages along the continuum are
small compared with those of other federal agen-
cies; for example, EPAs Small Business Innovation
Research (SBIR) Program is approximately $6
million annually, whereas DOE's SBIR Program is
about $500 million annually.
Dr. Kovalick identified a number of intersections
between EPAs work and environmental technolo-
gies. For example, EPAs researchers and program
staff have an in depth understanding of technology
in certain niche areas, such as drinking water treat-
ment, air pollution control, remediation, and diesel
retrofit. He described a recent example wherein
Congress directed that EPA determine the best
technology available for removing arsenic from
drinking water for small communities. Likewise,
EPA has expertise in monitoring and measure-
ment technologies because the Agency specifies
the methods to be used to track environmental
performance for wastewater discharges or air pol-
lution emissions. EPA also has a secondary level
of understanding of industrial processes to set Best
Available Control Technology (BACT) and other
levels. In addition, EPA has an appreciation of
technology aspects of many sectors through part-
nering programs such as Design for Environment,
energy conservation, and others.
Dr. Kovalick stated that, with few exceptions,
EPAs mission is not to be a technology develop-
ment organization. New environmental problems
are viewed first through a statutory/regulatory lens
leading to technology inquiry. A recent example
of this is the use of the Underground Injection
Control (UIC) Program's proposal to sequester
greenhouse gases; the technology did not drive the
inquiry, it was driven by the statutory requirement.
Although EPA has expertise in some niches, the
Agency's mandates do not call for comprehensive
monitoring of technology developments. Dr. Kovalick
also mentioned the Environmental Technology
Council (ETC), which is a forum established by
EPA for joint action across program and regions.
More information on the ETC is available on the
Internet at www.epa.gov/etop.
In closing his presentation, Dr. Kovalick offered
some observations about EPAs role in environ-
mental technology development. Every 6 months,
EPA publishes a regulatory agenda that charts the
subjects and issues to be addressed over a several
year period. This agenda does not provide details
about levels of the proposed regulations; this
information will become available as regulations
are formally proposed in the future. Dr. Kovalick
pointed out that, by their nature, technology-
driven regulations "fix" best technology and
because of limited resources, the Agency is unable
to continuously update the best technology
identified in regulations. EPA is well vested in
technology diffusion activities, especially technol-
ogy verification. The Agency is experienced in
operating SBIR and grant programs but has no
mandates for many other financial vehicles. •
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Discussion of the Venture Capital Report Recommendations, Especially Related to
Beginning and Sustaining Communications iPill
Mr. Brenner suggested that questions for both
Dr. Kovalick and Ms. Baker can be posed as part
of the discussion of the second NACEPT Report
recommendation to "forge and sustain communica-
tions with the early-stage investment community."
He said that former EPA Administrator Bill Reilly
and former EPA Deputy Administrator Hank
Habicht will be remembered for encouraging EPA
officials to "get out more" and interact with states,
environmentalists, and the business community.
Several successful new EPA programs such as
Performance Track and other partnership programs
grew out of these efforts. Mr. Brenner explained
that the NACEPT recommendation to forge com-
munications with the venture capital community
offers a similar opportunity for the Agency. There
were several specific suggestions for the Agency
to consider within this recommendation and he
encouraged Summit participants to keep these
specific suggestions in mind during this discussion.
Mr. Preston complimented Dr. Kovalick and Ms.
Baker on their presentations. He offered four
observations. First, in clean technology develop-
ment, private-sector resources greatly exceed
federal government resources. The clean technol-
ogy investments being made by the California
Public Employees' Retirement System (CalPERS)
is an example of the vast resources available in the
private sector. Three years ago, CalPERS had no
resources invested in energy and environmental
technologies; today, more than 50 percent of its
resources are invested in these technologies.
Second, there is a pending revolution in innova-
tion in energy and environmental technologies.
The dramatic escalation of oil prices in the past 2
years is the principal cause for this revolution. An
example of this revolution is today's announce-
ment by C Change Investments (the venture
capital firm founded by Mr. Preston and former
CalPERS executive Russell Read) to construct the
world's largest, most-efficient synthetic natural gas
production facility. Because of its high efficiency,
operational availability, and production capacity,
the facility is expected to produce natural gas at
less than half the cost of other current gasification
technologies. There will be zero carbon dioxide
(CO2) emissions from the facility because the
CO2 generated will be delivered under pressure to
enhance oil recovery in the Gulf area.
Third, the U.S. Federal Government should consider
how to reduce its carbon footprint. Mr. Preston
explained that C Change Investments is the
co-developer of a first-of-a-kind ecologically
sustainable Medical Science Green City to be
located within Sejong, which is to become the
new administrative capital of Korea. The $200
million project is part of a large effort to build
a highly efficient, near-zero carbon emission
new capital where Korea's national government
office buildings will be relocated. Globally,
office buildings consume nearly 40 percent of
energy requirements and simple innovations like
high efficiency compact fluorescent light (CFL)
bulbs or improved insulation materials can make
a significant difference. He suggested that the
payback for converting to CFL or higher efficient
bulbs in U.S. government office buildings could be
3 years or less. If the Federal Government tried to
develop an even more efficient and less expensive
CFL bulb than currently available, the potential
impact of such a small yet important lighting
device would be enormous. He stressed that the
Federal Government adoption of such small, but
innovative technologies could establish a significant
precedence and have a major market impact.
Mr. Preston suggested that the Federal Govern-
ment consider creating "shoot-offs" to spur
innovative technology development. In 1993,
the Federal Communications Commission (FCC)
sponsored a shoot-off for the design of the high
definition television (HDTV). The FCC was
unable to decide among the four leading designs;
so they contacted the Massachusetts Institute of
Technology (MIT) to identify the best design
features among each of the four finalist systems
and those features were used as the specifications
12 Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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for HDTV. EPA could emulate this approach
to identify the best light bulb or best insulation
technology for retrofits in buildings. Mr. Preston
commented that the U.S. construction industry
is the one of the few sectors that has failed to
innovate or improve productivity over the past
50 years. If EPA could push the development of
some construction-related technologies and the
Federal Government was as an early adopter of
these technologies, the results could be significant.
This approach would encourage the VC commu-
nity to invest in these technologies, which would
also offer a short economic payback in energy
savings for the Federal Government.
Mr. Habicht noted that EPA teamed with utili-
ties and other organizations in the early 1990s to
sponsor the development of advanced residential
technologies, such as the Super Efficient Refrig-
erator. These programs were referred to as the
"Golden Carrot" programs because they were
market-pull partnerships to demonstrate federal
leadership in promoting technology advances.
With very modest resources, EPA and its partners
leveraged a much larger private-sector investment
in energy efficiency and pollution prevention.
Mr. McAfee suggested that the Federal Govern-
ment could make it easy for VCs to fund the
technology advances if the government could help
the VCs know where to look for such advances.
Venture capitalists need insights on markets. He
stressed that the venture community spends a lot
of time trying to determine the biggest market
with the highest margins; anything the Federal
Government can do to identify those markets and
margins would be of great interest to the
VC community.
Mr. McAfee said he is a big fan of setting targets
and then letting the market determine how to
get there. One of the Cagan McAfee portfolio
companies, for example, has developed algae that
consumes CO2 and produces ethanol; the demand
for such a technology might be significant if cap
and trade programs were established for green-
house gas emissions. This type of technology also
should be of interest to EPA because it addresses
two environmental issues—the elimination of
CO2 and the production of biofuel. Mr. McAfee
believes that EPA could signal the establishment
of a huge greenhouse gas reduction market if a
national cap and trade system for these gases
was established. Beyond the VC community,
Mr. McAfee noted that large utilities, such as
Duke Energy, one of the largest U.S. electric
power companies, also would be interested in
technology investment opportunities created by a
cap and trade system.
Mr. Habicht added that large companies such as
Duke Energy make up the primary membership
of EPA voluntary programs, such as Performance
Track, Climate Leaders, and others. These large
companies are the clean technology buyers for
many VC portfolio companies. Mr. Preston agreed
about the value added provided by large compa-
nies and noted that utilities are providing one-half
of the capital requirements for the $3.5 billion
coal gasification project he mentioned earlier.
Ms. Ripley agreed that CO2 emissions reduction
will create a big market and she believes the
world is waiting for the United States to show
leadership on this issue. The new Administration
should step up and make some decisions about
how the United States can address the problem;
then, the VC community can determine the big-
gest opportunities. She suggested that there may
be opportunities to use existing emission control
systems to control CO2 as well. For example, one
of the NGEN portfolio companies, Powerspan
Corporation, offers one of the least expensive
means of capturing CO2 for sequestration. As a
post-combustion technology, its development grew
out of another proprietary Powerspan technology
that offers cost-effective, multi-pollutant (sulfur
dioxide and particular matter) control of coal-fired
power plant emissions.
Mr. Brenner noted that Frank Alix, Chairman
and Chief Executive Officer of Powerspan, has
visited EPA and discussed the company's pioneer-
ing cost-effective technologies for controlling coal
combustion emissions. The interaction the Agency
has had with Powerspan has been valuable in
terms of understanding clean energy technologies.
Mr. Brenner said that these types of interactions
need to be become more common across the
Agency.
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Ms. Ripley supported the earlier proposal for
creating government-sponsored competitions and
suggested one for CO2 reduction technologies.
Such competitions would force the Agency into
dialogues with companies that are developing
advanced technologies.
Larry Starfield asked if the venture capitalists
were aware of some of the regional environmental
problems being addressed by the Agency such as
environmental issues associated with concentrated
animal feed lot operations (CAFOs). He pointed
out that CAFOs are a large environmental prob-
lem created by dairies, poultry operations, and
cattle farms. Some states, like North Carolina
and Arkansas, have supported the development
of animal waste digesters but all of these systems
have to be subsidized because they are not cost
effective. Mr. Starfield explained that there is a
huge market for technologies that would remove
animal waste problems from the watershed and
require no government subsidy.
As stated by Dr. Kovalick earlier, there are nearly
800,000 permitted facilities in the United States
and each of these facilities must provide monthly
reports on permitted operations. The monthly
reporting requirement has created a huge market
for lawyers when citizens file suits every time the
permitted limits are exceeded. Mr. Starfield noted
that real-time monitors would prevent the occa-
sions for these suits because permitted facilities
could be warned when the limits were exceeded
(for various discharge points) and take corrective
action immediately. Self-reported violations by
companies would prevent citizen suits and reduce
EPA enforcement costs tremendously.
Daniel Hullah replied that real-time monitoring
technology probably exists but the reason it has
not been adapted for use by the permitted facili-
ties is because its other application probably has
a larger market. Mr. Hullah also noted that the
businesses may be reticent to adopt technologies
that would increase their cost by taking more
frequent corrective actions. It may be capital
intensive to establish the market for such tech-
nologies.
Mike Shapiro commented that the "monthly
obligation to report" for water discharge permitted
facilities is based on the amount of data EPA can
receive (and review) as well as the data a permit-
ted facility can generate. If data are generated
instantaneously the same violation problems also
may apply so citizen suits could continue and
may even grow. Further, if real-time monitoring
was adopted by permitted facilities then regula-
tions may need to change to react to the type and
amount of data reported.
Outside of water discharge monitoring, Mr. Starfield
pointed out that remote sensing cameras have
been used in the Houston, Texas, area to monitor
air emissions from petroleum refineries. There is
an economic incentive for refineries to identify
and reduce their air emissions because volatilized
emissions means they are losing product out of
their stacks. Currently, EPA does not use these
cameras for emission monitoring and enforcement,
but the industry has adopted their use for eco-
nomic reasons.
Mr. Preston suggested the CAFOs problem may
be addressed by looking at the issues associated
with the conversion of biomass to energy. The
energy density of the animal waste needs to be
understood because transportation costs may be
significant for moving the waste from the field
to the digester. The energy density of petroleum
coke and coal is about 14,000 BTU per pound,
while the energy density of animal waste may be
about 5,000 BTU per pound; thus, the transporta-
tion costs for petroleum coke and coal is three
times less than that for animal waste. Likewise,
corn can produce 200 gallons of biofuel per
acre per year, palm oil can produce 500 gallons
per acre per year, and algae can produce 20,000
gallons per acre per year. Unfortunately, many
investors mistakenly invested in corn because of
the government subsidy and neglected to consider
the economic capability of the technology. In
retrospect, it would have been more beneficial if
the government would have offered a subsidy for
"green fuel" independent of the conversion tech-
nology.
14 Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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For addressing animal waste, Mr. Preston suggested
that small anaerobic digesters may be the solution.
He noted that new $1 billion Bank of America
Tower in Manhattan (New York City) will have a
small anaerobic digester in the basement to treat
all of the waste generated in the building. Initially
Bank of America estimated a 5 to 7 year payback
on their investment; but recently revised its esti-
mate to a 3 year payback on water, waste, and
energy operations and maintenance. Mr. Shapiro
mentioned that the nitrogen and phosphorous
associated with animal waste are not normally
addressed with methane generation technologies.
Both the nutrient and pathogen issues need to be
addressed with these technologies.
Mr. McAfee explained that venture capitalists love
to hear about problems; the bigger the problem,
the more appealing it is to the VC community. If
distributed anaerobic digesters are the solution for
animal waste but cost is an issue, maybe a loan
guarantee program for dairy, poultry, and other
farms may be the solution. He would like to
have input from EPA and other federal agencies
concerning the size of the carbon sequestration
problem. He commented that legislating seques-
tration may not be wise, similar to the corn/
biofuel subsidy. If the goal is energy independence
or cleaner air, then those issues should be legis-
lated rather than the feedstock.
Ira Leighton stated that, in his experience, envi-
ronmental requirements are based on ambient not
technology standards. A new National Pollutant
Discharge Elimination System (NPDES) permit
will be water-quality driven and an opportunity
exists because existing technology will not be
capable of achieving the new standard. This will
create a strong driver for emerging technology.
Unfortunately, it is very challenging for EPA to
issue a performance-based standard. It is difficult
to establish the performance criteria because
the regulated businesses and developers are not
forthcoming about the capability of emerging
technologies. How can the VC community assist
EPA in writing performance-driven requirements?
Ms. Ripley suggested that EPA may want to
consider publishing a Request for Proposals on
performance standards for specific pollutants to
initiate a dialogue on the issues. Mr. Preston
said that "necessity is the mother of invention"
and suggested that rolling reductions with non-
performance consequences may be an alternative
approach. EPA may want to consider a tax on
nitrogen runoff in water or CO2 emissions that
would become effective at some time in the
future and businesses and/or manufacturers would
be taxed if they did not reach those discharge
or emission levels. The cap and trade system
for reducing air emissions works; with such as
approach, utilities would be charged with reducing
CO2 emissions by "x" amount over so many years.
Utilities would make investments to reach these
reduction levels and the levels could be changed
(lowered) periodically. Mr. Preston suggested that
this is the approach the Agency has taken with
the diesel engine emission reductions.
For nitrogen runoff, fertilizer manufacturers could
be contacted about similar requirements to reduce
the runoff into rivers and streams. These manu-
facturers would make investments to determine
how to bind the nitrogen to reduce releases or
pay for their inability to do so. These approaches
would not only create an investment opportunity
for venture capitalists but for the entire private
sector because everyone clearly knows that in "x"
years it will be worth "$y" to eliminate this prob-
lem.
Mr. Brenner commented that EPA conducted a
case study to determine why the Agency's experi-
ence with the diesel rules worked so well. It
turned out that this effort was a good example
of how effective cooperative processes can be; it
included "shuttle diplomacy." EPA talked with
diesel engine manufacturers and pollution control
equipment manufacturers to determine what was
feasible and how hard the Agency could push
without creating impossible regulatory require-
ments.
Based on EPAs experience to date with coop-
erative discussions on more stringent regulatory
requirements, Mr. Brenner suggested that EPA
could identify "grand challenges" (e.g., CO2 reduc-
tions or animal waste reductions) in the Agency's
Strategic Plan. These grand challenges could be
supplemented with specific problems such as
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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lowering fine participate emission requirements,
expanding diesel retrofit applications, expanding
wood stove emission reductions, or addressing the
pipeline problems associated with ethanol delivery.
Publication of these grand challenges and specific
problems could be followed by EPA-sponsored
conferences with venture capitalists and others
about how to deal with these problems. These
conferences could build on the type of interactions
begun with this Summit and help create an under-
standing on both sides about the issues associated
with these challenges and problems.
Mr. McAfee suggested that scalability is one of the
most important issues to consider. How scalable
are conferences, Web sites, list serves, and other
tools of the trade for use in communicating as
much information as possible about these chal-
lenges and problems to the VC community and
others? There are only a few venture capitalists
involved in this Summit but there are 470 NVCA
members and thousands of firms involved in
private equity. The issue is how can EPA maintain
communications with all of these entities and
inform them about these challenges and problems.
Ms. Baker noted that NVCA would welcome the
opportunity to serve as an avenue for communica-
tions with the VC community.
Mr. Habicht offered three comments to capture
the morning's discussion. First, pre-regulatory
problems such as animal waste control may offer
an opportunity for financial assistance programs
such as grants or cooperative agreements to find
solutions without regulations.
Second, mechanisms need to be created to
determine how performance standards can be
developed without alienating the regulated
industry. Mr. Habicht noted that, in the past, the
Hazardous Waste Treatment Council tried to sug-
gest how the hazardous waste treatment standards
should be lowered and the regulated industry was
offended by this action because it was not part of
the dialogue. Venture capitalists do not want to
be viewed as encouraging more stringent require-
ments that may not be acceptable to the regulated
industry; these companies would be customers for
these emerging technologies and need to be part
of the dialogue about challenges and problems.
Third, publicizing grand challenges to be addressed
by non-regulatory solutions, such as the Golden
Carrot Super Efficient Refrigerator challenge, the
lead phase-down, the chlorofluorocarbon (CFC)
phase out, and others, is an attractive suggestion.
Beyond identifying these challenges and prob-
lems, Mr. Habicht suggested that EPA could be
the source of needed information on unintended
consequences, life-cycle impacts, and other issues
that would be useful in determining how to solve
some of these challenges and problems. »
if tie if
/\.'.':WI"
Drew Bond, Office of Energy Efficiency and Renewable Energy, DOE
(Slide presentation is provided in Appendix C)
Mr. Bond thanked EPA and the VC community
for the opportunity to make a presentation about
DOE's technology commercialization efforts. In
the Federal Government, both legislative authority
and political/management support are important
in creating new initiatives. He noted that DOE
Secretary Sam Bodman and Andy Karsner, former
DOE Assistant Secretary for Energy Efficiency
and Renewable Energy, were the inspiration and
supporters for many of the new DOE technology
commercialization programs. In addition, Mr. Bond
explained there are a number of congressional bills
that will benefit energy efficiency and renewable
energy technologies. He commended EPA for
organizing the Summit and hoped that it might
lead to more and improved cooperation between
EPA and DOE.
National security, environmental, and economic
goals form the basis of a robust National Energy
^omamnity Summit: Exploring Programs to Commercialize Enmronmental Technology
-------
Policy but historical data demonstrate the mag-
nitude and urgency of the challenge. Mr. Bond
pointed out that the United States continues to
use non-U.S. sources for its energy supply and
much of this supply is fossil fuel based. All of
these trends are in the wrong direction. Energy
security requires that the United States diversify
its energy mix and reduce its dependence on
petroleum. Environmental stewardship requires an
energy policy that reduces greenhouse gas emis-
sions and other negative environmental impacts.
Economic competitiveness requires the creation of
a more flexible, more reliable, higher capacity U.S.
energy infrastructure and improvement of energy
productivity.
In describing DOE's organizational structure,
Mr. Bond stated that DOE has three principal
department organizational units—Office of Energy
(energy R&D); Office of Science [basic science
research); and National Nuclear Security Admin-
istration (nuclear security). The Office of Energy,
which includes the Office of Energy Efficiency
and Renewable Energy (EERE), focuses on applied
research issues, trying to move projects from basic
research to the field.
EERE's budget was $1,344 million in FY 2008.
EERE develops a broad range of clean energy
technologies, including fuels and vehicles (vehicles,
hydrogen, biomass), renewable power (solar, wind
and water, geothermal), and energy efficiency
(buildings, industrial). EERE also is responsible for
the Weatherization Intergovernmental Program
(WIP), which works with states on low-income
housing retrofit activities and the Federal Energy
Management Program (FEMP), which works
with counterpart federal agencies on the procure-
ment, use, and management of more efficient
energy resources. Nearly one-half ($622 million)
of EERE's budget is devoted to development of
vehicles and fuels.
EERE spreads the federal R&D funding across
multiple laboratories but works predominantly
with the National Renewable Energy Labora-
tory (NREL). Eleven of the 17 DOE National
Laboratories are supported by EERE, but NREL
in Golden, Colorado, receives nearly 95 percent of
its annual funding from EERE. The DOE National
Laboratories are government owned but contrac-
tor operated. For the new NREL contract that
was announced in October 2008, a cooperative
arrangement was established whereby the two
principal contractors—Midwest Research Institute
and Battelle Memorial Institute—established part-
nerships with three universities—Stanford, Ohio
State, and MIT—and the financial community to
help NREL accelerate the future commercializa-
tion and widespread adoption of sustainable
energy technologies.
Mr. Bond stated that DOE Program Managers
have indicated that the "commercialization valley
of death" has prevented DOE program from being
as effective as the mangers would have liked. The
"commercialization valley of death" refers to the
quantitative challenge of transitioning between
early adopters and mass market penetration. This
valley occurs after technology creation in the
market-focused business and product develop-
ment stage. The typical investors at this stage are
entrepreneurial and seed/angel investors.
Mr. Bond explained that a technological innova-
tion must overcome four challenging transitions
before reaching the market. The first transition is
from basic science to applied science. The second
is from applied science to technology investors.
The third transition is from technology investors
to asset investors, and the fourth is from asset
investors to markets. The EERE Commercializa-
tion Team focuses on building bridges between
the applied scientists and technology investors,
which is the second of the four transitions. Mr.
Bond commented that DOE also is interested in
the issues facing developers at transitions 3 and
4 but these deal with tax and regulatory policies.
He noted that public benefit is only fully realized
when the product is delivered to the market.
EERE's commercialization bridges are designed to
overcome four primary gaps: talent, information,
capital, and strategy. The "talent bridge" involves
DOE attracting and hiring personnel that have
both technical and business skills because both
skill sets are required to commercialize technolo-
gies. The "information bridge" seeks to build
effective communications between DOE staff and
technology investors. Mr. Bond noted that techni-
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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cal language fails to resonate with the business
community. The "capital bridge" is the recognition
that the Federal Government can play a key role
in early stage seed funding. The Federal Govern-
ment may have a higher "risk tolerance" than even
angel investors on technology development issues.
VCs are more likely to fund business plans and
prototypes than research papers and competi-
tion for VC funding is stiff. The "strategy bridge"
tries to cultivate and promote policies that would
impact the development of all FERE technologies.
Best practices have been developed to foster a
culture of innovative.
Built off of a proven VC model, the Entrepreneur
in Residence (FIR) Program forms the primary
plank of EERE's "talent bridge." This is a well
known model that has been used in the VC com-
munity to develop knowledgeable investors and
company managers. A fundable business needs a
technology that works and a market ripe to sell
into, but most importantly it needs an entrepre-
neur who can build the business plan, assemble
a management team, and raise capital. VCs favor
experienced entrepreneurs with a track record of
identifying promising technologies and building
markets.
DOE's FIR Program connects leading scien-
tific and business talent. Through a competitive
solicitation process, three DOE National Laborato-
ries—NREL, Sandia, and Oak Ridge—established
the pilot EIR Program. The National Laboratories
partner with a VC firm to sponsor the EIR. The
VC firm identifies, hires, and mentors the EIR
who is placed in the National Laboratory. The
EIR mines the laboratory intellectual property and
drafts business plans for the commercialization of
technologies developed by the National Labora-
tory. Some of the key criteria DOE used to select
the VC firms included their size and track record
(in the clean technology sector) with commercial-
izing portfolio company technologies, and their
experience with EIRs. EERE provided $100,000
matching-funds and full access to the respective
National Laboratory. The program also includes a
pre-negotiated standard equity share license agree-
ment.
Kleiner and Perkins was selected for the EIR
position at NREL, Foundation Capital for the EIR
position at Sandia, and Arch Ventures (formerly
spun out from the Argonne National Laboratory)
for the EIR position at Oak Ridge. Mr. Bond
expects that the EIR Program will cause a cultural
change within each of the three participating
National Laboratories as well as across the Depart-
ment toward recognition of the value applied
research can offer for technology commercializa-
tion.
The Equity Share License Agreement, which is
tailored for entrepreneurs and small businesses
with tight budgets, forms a primary plank in
the "strategy bridge." Traditionally, the DOE
National Laboratories required an up-front large
cash payment in licensing fees, making traditional
licensing agreements expensive and time consum-
ing to negotiate. Small entrepreneurial companies
often are more willing to give up equity rather
than offer cash to license emerging technolo-
gies. Built off the Stanford University license,
the Equity Share License has been pre-negotiated
with VC general counsels, National Laboratory
general counsels, and DOE general counsel. DOE
adopted the Equity Share License Agreement as a
replacement for traditional licenses to attract more
entrepreneurial interest in National Laboratory-
developed technologies.
Designed to introduce investors to technology
opportunities, the Technology Commercialization
Showcase forms the primary plank of the "infor-
mation bridge." Many EERE funded technologies
stall in the "commercialization valley of death"
simply because the innovation has not been clearly
communicated to the business community. DOE
challenged the EERE Program Managers to iden-
tify 8 to 10 of the most promising technologies
in their portfolios. DOE created simple, layman's
descriptions of the innovation opportunities,
and then invited prominent investors to a 2-day
conference showcasing the technologies. EERE
started these Commercialization Showcases in
2007. Twenty-four venture capitalists participated
that first year and the number increased to 80
venture capitalists in 2008.
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To illustrate how the technologies are described
in simple layman's terms, Mr. Bond described the
case study of low-cost carbon fiber technology
as a lightweight replacement for structural steel.
The problem is that carbon fiber currently is too
expensive for broad application ($12-30/lb vs.
$5-8/lb). The Oak Ridge National Laboratory
has developed technologies to reduce the cost
of carbon fiber production by utilizing low cost
feedstocks (low-cost textiles and renewable lignin)
and advance processing methods (thermo-chemical
stabilization, rapid oxidation, and microwave-
assisted plasma carbonization). Low-cost carbon
fiber reduces vehicle mass by up to 40 percent,
which increases fuel economy up to 25 percent.
Three patents have been issued on the technology
and five patents and seven invention disclosures
have been filed.
Four of the processes have been reduced to
practice (microwave-assisted plasma carboniza-
tion, textile-based precursors, thermo-chemical
stabilization, and plasma oxidation). The time to
availability is 3 to 5 years, and the capital needs
include a 2-4 MM Ib/year carbon fiber plant that
is expected to cost $18-22 million.
The Technology Commercialization Fund, designed
to fill the gap between R&D and VC funding,
forms the primary plank for the "capital bridge."
Because innovations struggle to find financing fol-
lowing completion of the research and prior to VC
funding, the Technology Commercialization Fund
offers financing for National Laboratory technolo-
gies that are not yet proven at the bench scale.
The Fund requires 50-50 DOE-industry matched
funds. The funds are restricted to prototype devel-
opment, demonstration, and deployment, and they
cannot be used for further scientific research. The
Fund is designed to complement angel investment
or early stage corporate product development.
Eight of the 13 National Laboratories received
financing from the Technology Commercializa-
tion Fund in 2008. The funding decisions are
based on the potential for market opportunity, the
likelihood of commercial success, the management
team, DOE priorities, and private-sector partners.
The Fund is a "carrot" to attract private-sector
partners to examine the National Laboratories'
intellectual property portfolios. Resources for
these funds was established through Section 1001
of the 2005 Energy Policy Act, wherein DOE was
tasked with setting aside 0.9 percent of its annual
budget for applied research to be used to provide
matching funds with private partners to promote
promising energy technologies for commercial
purposes.
The EERE Commercialization Team pursues an
aggressive schedule to accelerate the deployment
of advanced energy technologies. Mr. Bonds
presented a timeline that identified the many
activities undertaken by EERE to support each of
the four bridges described earlier. For the "talent
bridge" the activities included EIRs working in
the laboratories, Senior Executive Service (SES)
Advisors on board, Summer Associates at DOE,
and Commercialization Fellows at NREL. Mr. Bond
explained that the SES advisors are 3-year SES
appointments that were created to bring into
DOE business and finance executives to help
EERE with its technology commercialization
efforts. Mr. Bond stated that he holds one of the
three current appointments in these positions.
The Summer Associates at DOE are second-year
Stanford University students seeking a Master
of Business Administration (MBA) degree who
work at DOE as interns on various energy-related
projects. EERE expects to reach out to Ohio
State University and MIT MBA Programs in the
future for interns, given their partnership with
NREL. The Commercialization Fellows at NREL
are business-minded individuals (up to three
business persons annually) selected to help NREL
push intellectual property development at the
laboratory.
In addition to its efforts to facilitate the second
transition from applied science and technology
investors, the EERE Commercialization Team
advises many of DOE's public-private initiatives
that address the subsequent transitions. Mr. Bond
described a few examples. In January 2008,
EERE signed an agreement with the Governor of
Hawaii creating the Hawaii Clean Energy Partner-
ship. This bipartisan agreement was created to
help Hawaii implement its Renewable Portfolio
Standard (RPS). The Hawaii RPS is to reach 20
percent use of eligible energy efficient and renew-
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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able energy technologies by 2020. Hawaii has
one of the highest electricity rates in the United
States—27 cents a kilowatt hour in Oahu and 49
cents a kilowatt hour in Kauai. Ninety-five per-
cent of Hawaii's energy is from oil and 99 percent
comes from non-U.S. sources. The goal for the
Partnership Program is for Hawaii to achieve 70
percent of its energy from renewable sources by
2030.
The DOE Loan Guarantee Program was created
as a result of the Energy Policy Act of 2005.
DOE received appropriations (up to $4 billion)
to offer loan guarantees in 2006. More than 140
companies responded to the initial DOE loan
guarantee solicitation, and in 2007, 16 companies
were selected from the solicitation and asked to
submit full proposals. In 2008, DOE received
up to $38.5 billion in additional loan guarantee
appropriations. These additional appropriations
were provided for nuclear energy, fossil energy, and
energy efficiency and renewable energy technology
development; $10 billion was slated for energy
efficiency and renewable energy technologies.
The current solicitation for energy efficiency and
renewable energy technologies has been extended
from December 31, 2008 to February 26, 2009.
This solicitation focuses on three issues: (1) building
a better "widget" (e.g., an advanced technology);
(2) building the widget domestically (e.g., manu-
facturing capabilities in the United States); and
(3) putting together the widgets in a way that
they have not been put together before. Regard-
ing this third issue, Mr. Bond explained that DOE
is interested in proposals that offer the integrated
deployment of energy efficiency and renewable
energy technologies. The issue of concern is how
to deploy technologies that are scalable? How can
wind energy, for example, be matched with energy
storage (e.g., battery operated vehicles)?
Mr. Bond cautioned that DOE and other federal
agencies cannot operate at the speed of business.
This is clearly seen in implementation of the DOE
Loan Guarantee Program, which is 3 years old and
DOE has not yet issued the first loan guarantee.
DOE is thinking about ways to make the Loan
Guarantee Program more "small business friendly."
Most energy efficiency and renewable energy
technology development companies that have
expressed an interest in loan guarantees are large
(e.g., $100 million revenues); DOE is interested
in attracting smaller companies (e.g., $25 million
revenues or less) for loan guarantees as well.
DOE will be establishing a Finance and Invest-
ment federal advisory committee to assist the
Department with its Loan Guarantee Program
and other technology commercialization and
deployment efforts. According to Mr. Bond, the
establishment of this federal advisory committee
was mandated either by the Energy Policy Act of
2005 or the America COMPETES Act.
In closing his presentation, Mr. Bond provided
e-mail addresses for the SES Advisors of the EERE
Commercialization Team, which in addition to
himself includes Carol Battershell and Wendolyn
Holland. Mr. Bond thanked everyone for their
attention and asked if there were any questions.
Mr. Preston complimented Mr. Bond on his pre-
sentation but expressed his concern that DOE had
yet to issue a single loan guarantee. He cautioned
that failure to move quickly is the "kiss of death"
for developers and investors. Mr. Preston said he
helped developed the "fast track" option for the
Department of Defense's (DOD) SBIR Program
and he would be glad to offer suggestions from
this experience to DOE. Mr. Bond responded that
David Frantz, Director of the DOE Loan Guar-
antee Program, is seeking advice and would be
interested in hearing any suggestions to improve
his program.
Ms. Ripley asked if the Loan Guarantee Program
would make loans to small companies that are
pre-revenue or if the Program was directed only
to post-revenue companies. Mr. Bond replied that
the Loan Guarantee Program favors companies
that are post-revenue. The Program has to be self-
sustaining and there has to be a high probability
of repayment of the loans. In addition, there are
four substantial fees associated with the Program
that make it more favorable for post-revenue
companies. The application fee alone ranges from
$75,000 to $125,000, depending on the size of
the project. The credit subsidy fee also is sub-
stantial. This fee is the government's estimate of
the risk level associated with each project. The
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amount of this fee has not been publicly release
yet; the Office of Management and Budget (OMB)
and DOE are still working on this issue. Even
with these fees, the unpredictably of when a loan
guarantee will be offered continues to hamper the
Program.
Mr. Leighton asked about capital versus operating
costs for energy efficiency and renewable energy
projects. In New England, he explained, a lot of
effort is expended to maintain communications
with state energy regulators regarding local energy
policy. There is more than $400 million in "sys-
tem benefit charges" in New England. He asked
if DOE is connected with state energy regulators
to determine how the use of energy efficiency and
renewable energy technologies will affect state rate
payers and other local energy generation policies.
Mr. Bond replied that, in general, his office does
have responsibility for these issues. He explained
that if consumers can overcome the higher capital
costs for renewable energy sources, then the
operating costs work to their advantage because
they often are negligible. Mr. Bond noted that
to achieve its 70 percent RPS goal by 2030,
Hawaiian officials will have to work with their
state energy regulators and state utilities. This
also will require Hawaii to look at energy policy
mechanisms in other states and potentially other
countries to determine what it can adopt. About
a month ago, a voluntary agreement was signed
with the state utility to determine how it can
become a partner in Hawaii's RPS program.
Issues that are being investigated include feed-in
tariffs, smart metering, and other utility programs.
Mr. Bond also noted that the DOE FEMP
responsibilities include understanding state energy
regulatory issues.
Mr. Preston noted that, for investors, the up-front
capital costs are the biggest barrier to most energy
efficiency and renewable energy technology deals
in the clean technology sector.
Mr. Habicht commented that, in the past in New
England, air regulators have met with utility regu-
lators. At the federal level, both EPA and DOE
should establish communications with the Federal
Energy Regulatory Commission (FERC) because
utilities are very sensitive to energy regulatory
policies. •
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Mr. Habicht stated that the DOE presentation
offered some useful insights into how current
federal programs work and this can provide the
basis for the discussion of alternative financing
instruments.
Mr. McAfee noted that DOE has developed a
useful roadmap for financial instruments for large
companies that have good credit ratings from
Moody's or Standard and Poor's. Unfortunately,
venture capitalists do not work with companies
of this size and revenue status. Mr. McAfee
suggested that DOE and other federal programs
have to extend their financial assistance programs
beyond Fortune 50 companies. His opinion is that
the DOE Loan Guarantee Program needs to be
amended. If EPA is considering a loan guarantee
program, the Agency should examine the programs
of the U.S. Department of Agriculture (USDA).
Mr. McAfee explained that one of the Cagan
McAfee portfolio companies is at USDA today
securing a loan guarantee approval. The applica-
tion was submitted just 30 days ago, and it is
being approved today. The funding will be avail-
able in 30 days. The USDA has a good template
for effectively executing loan guarantees and other
federal agencies should learn from that experience.
Mr. McAfee stressed that the DOE Loan Guaran-
tee Program can be an important accelerator for
the clean technology sector but the Department's
inability to process a loan is hurting the Program
and the industry. Given the status of the current
credit markets, Mr. McAfee suggested that DOE
is now the "perfect partner" to assist the clean
technology sector. He encouraged EPA to offer
Report of the EPA—Vesture Capital Community Summit: Exploring Programs to Commerciatite Emnranmental Technology
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DOE its respected scientific expertise to help the
Department more effectively execute its financial
assistance programs for clean technology.
Mr. Preston noted that DOE is a much needed
industry partner for scale up of energy projects.
DOE is filling a gap in energy project financing
and has to concentrate on eliminating the time
delay in processing loan guarantees. Mr. McAfee
stressed that DOE needs scientific help in execut-
ing its financial assistance programs, adding that
the only internal scientific resource the Depart-
ment has is NREL. He pointed out that clean
technology investments are capital intensive, longer
term investments unlike Internet investments
that were less expensive and had short-term exit
strategies. DOE has a good team, but Mr. McAfee
emphasized that the Department needs external
assistance to help speed up the execution of its
Loan Guarantee Program.
Mr. Brenner mentioned that NREL has sought to
establish better working relationships with EPA,
but acknowledged that the Agency has to be more
proactive in collaborating with NREL. He asked if
specific mechanisms and/or scientific issues could
be identified that should be pursued between the
organizations.
Mr. McAfee noted that there is a leadership
transition underway at DOE because the Assistant
Secretary for Energy Efficiency and Renewable
Energy will not be nominated for several months.
He suggested that EPA should use this time to
discuss internally the issues that should be taken
up with DOE so when the new Assistant Sec-
retary is confirmed, EPA is prepared to meet to
discuss potential collaborations. In the interim,
Mr. McAfee encouraged EPA officials to meet with
DOE's current senior management to offer the
Agency's assistance.
Mr. McAfee encouraged DOE to have a rolling
solicitation process for its Loan Guarantee Pro-
gram. Rather than having an annual or biannual
solicitation process, DOE should seek proposals
monthly or quarterly. He suggested that DOE
treat its Loan Guarantee Program as a bank that
can offer loans routinely to technology developers.
Mr. McAfee asked if the DOE Loan Guarantee
Program had an equity component. Mr. Bond
replied that technology developers need to provide
20 percent equity in their proposed energy proj-
ects. Of the remaining 80 percent project cost,
100 percent is guaranteed.
Mr. McAfee noted that the source of the 20
percent equity is key for the investment returns
to venture capitalists. In the State of Oregon, for
example, up to $18 million in grants are available
from the state for ethanol plants. Therefore, to
receive a $180 million DOE loan guarantee for an
Oregon ethanol plant, venture capitalists only have
to provide $18 million in equity. Mr. McAfee
pointed out that if DOE requires the 20 percent
equity to be solely provided by investors, the
potential returns are greatly reduced and investors
are less likely to participate in such projects.
Mr. McAfee noted that DOE should expand its
commitment to energy independence and treat the
issue like a "war for energy independence."
With regard to financing technology projects,
Mr. Habicht explained that some of the critical
elements are: the probability of success of the
project, a proven track record of the project spon-
sors, and the overall financial plan for the project.
He noted that loan guarantees require sufficient
coverage for cash flows and debt to protect against
defaults. Although many loan guarantees and even
some grant programs favor large companies, most
federal grant programs are oriented toward small
companies where the probability of success may
be the same but the stage and level of investment
are smaller. A better set of metrics for success
may need to be developed for small business grant
programs to illustrate how useful these programs
are in technology development. With its techni-
cal expertise, EPA can be a resource for investors
through its technology validation and verifica-
tion programs. These programs can help address
effectiveness and cost issues for investors and
technology customers as well.
Because of the large size of the projects (e.g.,
$100 million plus) being considered under the
DOE Loan Guarantee Program, some studies
have been conducted on the credit-to-risk ratios
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anticipated for these projects. The conclusion is
that the size of these ratios is much higher than
current USDA loan guarantees and it is unknown
how significant these ratios will be in determining
who will receive a DOE loan guarantee.
Mr. Leighton cited the EPA New England (Region
1) experiment with the EPA SBIR Program as a
possible model for other regions to emulate to
spur environmental technology development. The
region worked with ORD to develop the first tar-
geted EPA SBIR solicitation focused on a regional
environmental problem. One of the regional
needs was for a device to assess the level of lead
in soil. X-Ray Fluorescence (XRF) portable
detectors were identified as appropriate devices
for this application. Because most environmental
regulations are methods-driven, EPA New England
had to work with the Office of Pollution, Pesti-
cides, and Toxic Substances (OPPTS) to verify the
reliability of these detectors for lead soil analysis.
It took Region 118 months to convince OPPTS
about the efficacy of this technology because it
required a change in the lead detection methods
to allow its use.
Mr. Starfield offered another example of method-
driven requirements. He explained that the
current method for detecting leaks from petro-
leum refineries is a sniffer leak detector. EPA
Region 6 wanted to use infrared cameras for leak
detection rather than sniffers but was stymied
because of the Method 21 requirements for
volatile organic compound emissions, which were
based on sniffer technology exclusively. Petroleum
refiners are using infrared cameras but get no
credit for doing so because Method 21 has not yet
been modified. When Method 21 ultimately is
changed to allow the use of both technologies, it is
expected companies will have the choice to select
either technology for their compliance assurance.
At the EPA Science Forum in May 2008, Mr.
McAfee noted that there was some discussion
about how the Agency can communicate its find-
ings about technologies. He explained that EPA
is in a unique position to offer its opinion about
what adds value to a technology. These opinions
should not be recommendations but objective
findings that can be widely communicated.
Another suggestion offered by Mr. McAfee was
the X PRIZE. He explained that, in 2004, the
X PRIZE Foundation awarded its largest prize in
history for a spacecraft capable of carrying three
people into space, twice within 2 weeks. Even
though EPA may not be able to offer a $10
million prize, the Agency could announce a com-
petition for the best form of carbon sequestration
or some other environmental challenge and select
the best proposal for possible technology applica-
tion by industry, venture investors, and others.
Ms. Baker commented that one issue that needs to
be addressed is the ineligibility of venture-backed
companies for participation in the SBIR Program.
This has become an issue with the National Insti-
tutes of Health SBIR Program and more recently
with the DOE SBIR Program. Ms. Baker noted
that the NVCA is lobbying Congress to clarify the
Small Business Administration's (SBA) affiliation
rules and ownership definitions for venture-backed
businesses. Currently, if more than 51 percent of
a company is owned by a venture capitalist then
that company is ineligible for SBIR consideration.
April Richards, one of the EPA SBIR Program
Managers, noted that EPA has not experienced
this problem with its SBIR applicants; probably
because the program is small in comparison to
those of other federal agencies. Mr. Leighton
noted, however, that there are reciprocity issues
between federal agencies with respect to SBIR
Programs. He noted that the recipient of an EPA
Phase I SBIR award for development of the XRF
detection technology could not seek Phase II fund-
ing through the DOD SBIR Program because of
differences between the two programs.
Mr. Preston commented that MIT was contacted
by DOD more than 10 years ago to help rethink
the Department's SBIR Program. MIT helped
DOD create a "Fast Track" component for its
SBIR Program wherein the award time between
Phase I and Phase II could be reduced and other
considerations given to the company if the Phase
I recipient could attract outside (private sector)
investors who will match the SBIR Phase II fund-
ing. DOD SBIR projects that obtain such outside
investments and qualify for the Fast Track can
receive interim funding of $30,000 to $50,000
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between Phases I and II and be evaluated for
Phase II award under a separate, expedited pro-
cess. Ms. Richards pointed out that DOD has
a $1 billion SBIR Program, while EPA has a $4
million SBIR Program. She noted, however, that
EPA does offer an incentive for Phase I recipients
to seek third-party investments but the size of the
incentive is small compared to those offered by
DOD and some other federal agencies.
Jeff Heimerman noted that Ms. Richards and other
EPA SBIR Program staff members are working
with other federal agency SBIR Programs to iden-
tify opportunities for technology developers in the
clean technology sector. Mr. Heimerman said EPA
is working to make these other sources of capital
more transparent to everyone.
Dr. Kovalick asked if the list of SBIR companies
from EPA and other federal SBIR Programs would
be useful to venture capitalists. Mr. Preston
replied that receipt of SBIR funding is not as
important to venture capitalists as the company's
management team. If a company receives mul-
tiple SBIR awards, it often is viewed by venture
capitalists as a "professional SBIR recipient." Ven-
ture capitalists care more about the substance than
the hype. Mr. Preston added that the EPA New
England XRF technology example was a huge
success story; the company recently was purchased
by a large organization that will market the tech-
nology nationally.
Mr. Habicht agreed that small businesses that
market their ability to receive multiple SBIR
grants is a "turn-off" for venture capitalists because
such companies think the government is their
client rather than the marketplace. Dr. Kovalick
suggested that EPA could provide information
about its SBIR recipients at future meetings with
the venture capital community to allow investors
an opportunity to determine their interests, if any.
It was pointed out that some technologies may
only be suitable for design applications and scal-
ing up a technology beyond its design capacity
may not be possible. An energy technology
designed for 50 megawatt capacity applications,
for example, may not work when it is scaled up
to 200 megawatt requirements. Sometimes small
businesses are seeking information, rather than
funding, from the government about permitting
issues or quality assurance metrics to verify that
their technology can be replicated. In some cases,
venture investing is viewed negatively by small
companies because too much equity and leverage
has to be sacrificed to get venture funding. EPA
needs to examine the value proposition offered
by clean technologies because problems could be
shifted from one environmental media to another.
Historically, EPA has not been a technology financ-
ing agency and Mr. Habicht asked, based on the
discussions so far, if there are financial assistance
instruments that the Agency should consider in
the future. Ms. Ripley replied that EPA should
consider small grant programs for pre-revenue
companies. She suggested that Canada offers a
good model for highly successful applied research
programs. One of the biggest programs is the
$3 billion Scientific Research and Experimental
Development (SR&ED) Program. Basically, this
is a tax credit program for which Canadian com-
panies receive a federal tax credit of up to 35
percent for investments up to $2 million and a
20 percent tax credit for investments larger than
$2 million. The Program has been tremendously
successful in encouraging technology development
across Canada.
Mr. Leighton suggested that perhaps EPA should
hold technology development forums around
the practice areas known best to the Agency.
Recently, EPA New England sponsored a technol-
ogy development forum on waste sites, specifically
Brownfields sites and old landfills. EPA asked
developers and investors involved in cleaning up
these sites to offer their perspectives on what was
done right and wrong, and how EPA could help
others clean up sites in the future. Perhaps, a
similar forum could be planned among EPA, DOE,
and USDA and developers and investors could
offer their perspectives on how the three agencies
might cooperate to solve mutual problems.
Mr. Preston agreed that this could be a very
useful approach for addressing cross-Agency
problems and identifying Agency-specific needs.
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This approach also could circumvent some of the
limitations EPA and others may face in technol-
ogy commercialization such as the lack of new
resources to support technology development and
the inability to pick technology winners. The
sponsorship of such forums by EPA and other
federal agencies could help identify technology
trends, Agency challenges, and federal energy
requirements for light bulbs, insulation, and other
building-related issues.
For the past several years, EPA has made a heavy
investment in technology verification. Mr. Brenner
asked if this should continue to be a strong invest-
ment for the Agency. Mr. Preston confirmed
that technology verification should continue to
be provided by the Agency. Mr. Hullah agreed,
noting that the technology verification provided by
NREL has helped investors evaluate the efficacy of
those technologies.
James Rea, SiteStories, suggested that the
President's Green Chemistry Challenge Award
has provided some important recognition for
sustainable technologies. Although there are no
resources associated with these awards, they have
provided national credit for innovative technolo-
gies. Another program is EPAs People, Prosperity
and the Planet (P3) Student Design Competition
for Sustainability. Although the P3 competition
does not offer much funding, it has resulted in
the creation of several small innovative technology
companies.
Mr. Habicht noted that, to date, EPA has devel-
oped two types of technology programs:
•V- Statutory programs such as Best Available
Control Technology (BACT) required on
major new or modified sources of air pollution
and Lowest Achievable Emission Rate (LAER)
required on major new or modified sources of
air pollution in non-attainment areas, and
The ETV Program that does not have strict
statutory requirements but offers an objective
analysis of several different media-specific
technologies. He noted that ETV is not the
EPA "seal of approval" for a technology.
Mr. Habicht suggested that it might be useful to
discuss how ETV could be better structured and
communicated to satisfy investor needs.
Mr. McAfee cautioned that any technology
verification program needs to offer intellectual
property protection. He explained that some of
his portfolio companies have not used the NREL
verification program because it does not offer
such protection. Mr. Habicht noted that EPAs
pesticides and toxics programs have good Confi-
dential Business Information (CBI) procedures and
requirements that work. Mr. McAfee replied that
if a company's intellectual property is protected
and the Agency can verify the technology, then
this information could be highly useful to DOE in
implementing its financial assistance programs.
Mr. Preston warned that EPA may not be able to
go too far in verifying a technology.
Sarah Bauer, EPA ORD, described the Agency's
Federal Technology Transfer Act (FTTA) Program
that includes protection of intellectual property
rights. EPA is in the process of developing an
Agency-wide position on intellectual property
rights. EPA also has a large number of patents
that are available for review by investors and has
partnered with several businesses through CRA-
DAs. Sally Gutierrez, Director of EPAs National
Risk Management Research Laboratory (NRMRL)
in Cincinnati, Ohio, explained that NRMRL
routinely validates technology performance and
works to understand other technical and economic
issues associated with technology development.
This experience has allowed NRMRL to provide
detailed advice and data to EPA regional offices,
headquarters offices, and states. NRMRL also
has been contacted by venture capitalists about
specific issues concerning technologies and the
laboratory is prepared to continue this service in
the future. Mr. Leighton added that the Agency's
ability to write performance-based objectives rests
on an experienced workforce and the ability to
offer programs like ETV.
Ms. Ripley asked if EPA is writing methods-based
or performance-based rules. Mr. Leighton replied
that EPA historically has written methods-based
rules, which work well for monitoring require-
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ments; however, the Agency needs to write
performance-based rules in the future.
Mr. Shapiro explained that EPA generally tries to
develop numerical, performance-based standards
in Agency regulations. In certain cases, however,
such as storm water management, it has been
difficult to develop meaningful numerical stan-
dards, so the Agency has used Best Management
Practices (BMPs) instead. Mr. Starfield added
that EPA also faces environmental problems for
which multiple standards apply. In Region 6, for
example, hurricanes have created large physical
challenges in the region. EPA has been asked
to determine the best way to demolish 30,000
houses. There are multiple and sometimes con-
flicting regulations to consider, such as the 1973
National Emission Standards for Hazard Air Pol-
lutants (NESHAP) Standard for asbestos removal
as well as water runoff and land remediation issues
and standards. Beyond regulatory requirements,
there are numerable unintended consequences
that have to be considered. Once the houses are
demolished, there are debris issues. Should these
materials go to a landfill or be incinerated? Three
to four years after Hurricane Katrina, EPA is still
trying to figure out how to address a number of
these issues. There are many technical, political,
and environmental factors associated with these
problems.
Mr. Habicht returned to the ETV Program. He
suggested that EPA think about what kind of
verification statement can be made once a tech-
nology is evaluated. Does the technology do what
the company says it does? Beyond describing the
verification results, well developed metrics need
to be established so the evaluated technology can
be compared to the state-of-the art so that inves-
tors and potential users can assess if it is a better
investment. Mr. Habicht agreed that unintended
consequences need to be examined for all types
of technology from nano-scale applications to
energy storage. Investors always are interested in
scaling up technology, but he cautioned investors
to be sensitive to unintended consequences like
those realized with CFC substitutes. Investors do
not want to solve one problem now but create a
bigger problem later.
Mr. Preston said he thought it was useful for
VCs to hear about the national and regional
environmental problems raised in the discus-
sions so far and he offered some perspectives on
how to address them. If industry were in charge
of the hurricane cleanup, for example, requests
would be made to create disaster recovery landfills
with relaxed regulatory requirements to allow
more expeditious disposal of the waste mate-
rial. Restrictions likewise could be waived for
materials separation to allow more rapid recovery
and disposal of waste material. EPA could take
a leadership role in disaster recovery because the
Agency knows the environmental requirements
and how they may be temporally modified to
address pressing environmental problems.
Mr. Starfield replied that states normally imple-
ment most environmental standards so to take
the role suggested by Mr. Preston, EPA would
have to preempt state laws. Following Katrina, it
was decided that the states and not the Federal
Government would lead the clean-up efforts in
response to the disaster. •
Mr. Brenner asked if anyone present would like to
make a public comment. Walter Howes, Verdigris
Capital, suggested that EPA collaborate with DOE
on setting up the Department's Loan Guarantee
Program in a way that it can be operated by a
third party like the Export-Import (Ex-Im) Bank
or Overseas Private Investment Corporation
(OPIC). By joining forces, EPA could complement
DOE with various skill sets and assist the Depart-
ment in establishing the loan guarantee process so
an Ex-Im Bank or OPIC entity could operate it.
Mr. Brenner asked if DOE had any reaction to
Mr. Howes' suggestion. Mr. Bond replied that
several U.S. Senators and the Center for American
Progress have made similar recommendations.
Report of the EPA-Vemture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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He thought it would be helpful if the DOE Loan
Guarantee Program were operated under a struc-
ture like the Ex-Im Bank. Currently, DOE has a
need to quickly review applications from a technol-
ogy evaluation standpoint and provide an objective
response. DOE would welcome EPA participation
in the review process. Beyond proposal reviews,
DOE also is very interested in technology verifica-
tion programs. The NREL program to evaluate
technologies is not sophisticated and needs strength-
ening. Mr. Bond suggested that DOE probably
could learn a great deal from EPA's ETV Program.
Dr. Richard Sustich of the University of Illinois
Center of Advanced Materials for the Purification
of Water with Systems (the WaterCAMPWS)
explained WaterCAMPWS is a National Science
Foundation Science and Technology Center.
Dr. Sustich offered comments about the "valley of
death" at the proof of concept stage of technol-
ogy development. Although this is a higher risk
stage of development, it also is an opportunity for
venture investment. Regarding large environmen-
tal challenges, he suggested that it may be useful
to ask researchers to review these challenges and
prepare a survey of the proof of concepts that
may be used to address these challenges. This
could be useful for Agency managers in identifying
where things might lead in technology develop-
ment. An example of this approach is captured in
a new book entitled "Nanotechnology Applications
for Clean Water," which was published by William
Andrew Publishing.
Mr. Heimerman introduced Norm Birchfield, who
serves as EPAs Senior Environmental Technology
Official (SETO), adding that Norm can direct
investors wishing to discuss technology develop-
ment issues to the appropriate individual within
the Agency.
Ron Mcllwain, Filtersure, described his company's
unsuccessful efforts to secure an EPA SBIR grant.
Although the company could not secure EPA sup-
port, the firm was able to build a plant in Canada
that is effectively treating hog waste.
Raymond Ricci, NanoRemediation Technologies,
said he operates a small nanotechnology company
that deals with water cleanup and other reme-
diation issues. Although a lot of resources have
been offered to large companies, most technology
development research is conducted by university
scientists and engineers who do not have access to
these resources. He stressed that small business
ideas often do not receive much attention at the
DOE National Laboratories or other large govern-
ment organizations. He asked that government
policy makers keep the small business operator
and university researchers in mind as new funding
programs are developed. He noted that one of
the biggest challenges facing small business opera-
tors is getting through the regulatory requirements
that limit new technology applications.
Mr. Brenner thanked everyone for their comments. •
EPA and Venture Capital Roles and Next Steps
Mr. Shapiro identified four items that were sug-
gested during the morning session:
•V- Use the EPA Strategic Plan to identify grand
challenges and develop lists of specific prior-
ity problems at the national and regional
levels within those challenges. EPA could
sponsor conferences with investors and others
to discuss technology solutions to these chal-
lenges and problems (Rob Brenner).
-------
•$• Use grants and cooperative agreements to
address pre-regulatory problems such as
CAFOs and create mechanisms for develop-
ing performance standards without alienating
the regulated industry (Hank Habicht).
Mr. Preston added that the grand challenges
should go beyond well-known problems such
methane emissions from landfills or sulfur and
nitrogen emissions from power plants and focus
on problems "one level down" that are not being
addressed. Missing from the above list is the
notion that EPA can play a significant role in
advising the Federal Government in saving energy
in the built environment. If EPA took on such
as role, developers and investors could identify
options for new building lighting systems with
a 3-year or less playback period. Beyond light-
ing, options also could be suggested for heating,
ventilating, and air conditioning (HVAC) controls;
insulation; and other building construction and
maintenance issues.
Another idea proposed by Mr. Preston concerned
the establishment of performance-based standards.
Venture capitalists may be able to offer some
suggestions to EPA about how "rolling reductions"
could be established within regulatory require-
ments.
Barry Breen agreed that identifying grand chal-
lenges would be useful for the Agency and the VC
community. He suggested that these challenges
focus on issues for which new technology is in the
critical path toward finding a solution. The audi-
ence for these challenges also should be broader
than the capital markets and should include the
Agency and others in the Federal Government.
Mr. Brenner agreed with these suggestions and
explained that the challenges should be useful to
the public, EPA personnel, and anyone else inter-
ested in environmental protection.
Kevin Teichman suggested that the grand challeng-
es include international as well as domestic issues.
In drinking water, for example, NRMRL worked
with the Grainger Challenge Prize to find point-
of-use water treatment for arsenic-contaminated
drinking water in Bangladesh. EPA also worked
on cook stove designs to promote health, the
environment, and economic prosperity in many
developing countries. Mr. Habicht added that EPA
may need more resources to support international
environmental problems.
Mr. Starfield noted that the General Services
Administration (GSA) is the Federal Government
landlord and it would be in the interest of both
EPA and DOE to work with GSA on improving
energy issues within federal buildings. EPA and
DOE could assist GSA and DOD in improving
the energy efficiency of every federal facility.
Mr. Preston suggested that EPA may be able to
embarrass or shame other federal agencies into
doing the right thing with respect to improving
energy efficiency in federal buildings. EPA could
sponsor a "shoot-off" for the best lighting, the best
HVAC, and the best building insulation materials.
Although recognition would be the only award
from such competitions, EPA could use the results
to retrofit its own buildings. EPA would quantify
the energy savings from these retrofits and these
data could be used to convince other federal agen-
cies about the value of these retrofit technologies.
Investors may be willing to fund these retrofits if
they could receive the savings gained because the
paybacks are generally less than 3 years and have a
20 percent or greater internal rate of return.
Mr. Brenner acknowledged that EPA may have an
opportunity in federal building retrofits because the
Agency has a federal leadership responsibility in
the National Green Building Program. Mr. Preston
noted that competitions and prizes develop a
lot of self-sustaining interest. He pointed out
the MIT $100K Entrepreneurship Competition
is the biggest event on campus. It has attracted
enormous media attention and now is bigger than
homecoming and graduation. If EPA sponsored
American innovation competitions, it would attract
enormous attention. This is all positive because
the focus is to reduce energy consumption and
make the environment cleaner. EPA could be on
the "side of the angels" with such competitions.
Mr. Bond added that DOE would be interested
in co-sponsoring prize competitions with EPA on
energy-related issues. Although DOE has several
competitions underway already, the Department
would like to take a more strategic approach with
respect to prize competitions and DOE would
welcome EPA input on this issue.
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Dr. Kovalick stressed that EPA is not a monolith
and each EPA region probably has a different set
of priority environmental problems. In Region
5 (Chicago), for example, EPA is very concerned
about Great Lakes issues, while EPA Region
8 (Denver) probably is more concerned about
the issues associated with biofuels. The top 20
environmental issues thus may differ dramatically
depending on the region in which they are identi-
fied.
Mr. Heimerman suggested that one universal grand
challenge may be the aging national and regional
water infrastructure. Mr. Shapiro agreed, stating
that in the next 30 years the United States prob-
ably will be replacing most water and wastewater
pipes throughout most cities and counties. The
Agency should be considering ideas such as
whether "smart pipes" could be installed to address
the aging infrastructure problem. Could such
smart pipes help address impending environmen-
tal problems more quickly? Could smart pipes
extend the life of water infrastructure? A huge
investment opportunity exists with respect to
replacing deteriorating structural problems and
detecting impending problems more quickly.
Mr. Habicht noted that millions of dollars are
spent annually to treat drinking water in the
United States, but less than 1 percent of the
nationally treated drinking water is actually con-
sumed; likewise, there is a substantial difference
between "peak" and "off-peak" electricity genera-
tion needs and capacity across the country. There
are business opportunities within these areas and
investors as well as the government may be well
served in thinking cooperatively about them.
Beyond counterpart federal agencies, EPA also can
be a resource for states. Each state offers signifi-
cant economic incentives to locate manufacturing
facilities and plants within their jurisdictions
and EPA could assist states on technology issues
regarding their economic development plans.
Ms. Baker agreed that states are encouraging a lot
of economic development. She offered to alert
the NVCA regional chapters about EPA-sponsored
regional meetings. NVCA regional chapters have
established good relationships with local economic
development agencies and they stand ready to
work with EPA and others in addressing local
environmental issues. The NVCA has a successful
track record of working with universities and DOE
National Laboratories on technology develop-
ment issues. The NVCA also has sponsored clean
technology "road trips" to National Laboratories.
In July 2008, for example, more than 35 venture
capitalists visited government laboratories in
Colorado. She asked if EPA would be interested
in such road trips.
Mr. Brenner replied that the EPA National Vehicle
and Fuel Emissions Laboratory in Ann Arbor,
Michigan, might be interested in hosting a visit
by venture capitalists. EPAs clean automotive
technology research is focused on hydraulic hybrid
drive train vehicles and clean engines. Ms. Gutier-
rez added that NRMRL also has been trying to
attract the interest of companies, not just venture
capitalists, in water technology development issues.
She explained that in September 2007, NRMRL
sponsored a Clean Water Partnership Summit
that was highly successful and attracted numerous
small companies and some venture capitalists. In
May 2008, EPA sponsored the Science Forum that
included a technology showcase of advances in air,
water, and soil monitoring technologies and other
new emerging technologies.
Ms. Ripley asked how EPA prioritizes its research
projects. Ms. Gutierrez replied that the prioritize
process starts with the goals of the EPA Strategic
Plan, which are translated into specific research
program plans and objectives. In water infra-
structure, for example, NRMRL is conducting a
gap analysis to identify potential state-of-the-art
technology solutions to this problem. NRMRL
also is investigating the environmental implica-
tions of the wide-spread production and use of
biofuels. Ms. Ripley asked if NRMRL looks at the
size of the end market in determining its priorities.
Ms. Gutierrez replied that the laboratory does not
look at the market size. Dr. Teichman pointed
out that EPAs mission is to protect human health
and provide environmental protection and this
responsibility, rather than market size, drives the
Agency's research priorities. He explained that
EPA also conducts a lot of risk assessment research
on technology issues. Regarding the communica-
tion of successful technologies and trends, EPA
conducts an annual National Sustainability Design
Expo on the National Mall. This Design Expo
is based on the P3 Program, mentioned earlier,
and showcases innovative designs across a range
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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of issues including alternative energy technolo-
gies, water purification, and new technologies for
green buildings. The three "Ps" represent the three
"legs" of sustainability—People, Prosperity, and the
Planet. Dr. Teichman noted that P3 not only has
resulted in several very innovative designs for new
technologies but also is training the next genera-
tion of environmental scientists and engineers.
If the U.S. economy is moving toward a recession
or depression, Mr. Preston predicted that higher
unemployment will occur and suggested that EPA
may be in a unique position to offer suggestions
for job creation opportunities in rebuilding the
national water infrastructure. If large national
environmental problems can be identified then
the VC community may be able to offer sug-
gestions for technology solutions. Recently, for
example, a fiber-reinforced composite technology
was announced that is capable of building bridges
in 2 days rather than the conventional approach
that takes weeks or months. It was demonstrated
that the military could drive tanks over these
new bridges in 1 week. Such a technology may
have application in repairing the U.S. water infra-
structure system. Sometimes, the VC community
sees technologies that may have with diverse
applications that may not be known to the Federal
Government.
Mr. Bond asked if there are any opportunities
to fast track siting and permitting for these new
commercial scale energy technologies. Section
932 of the Energy Policy Act of 2005 requires
DOE to demonstrate the commercial application
of cellulosic feedstock biorefineries. There will be
significant NEPA implications regarding the sit-
ing of these biorefineries. Are there ways to fast
track the Environmental Impact Statement (EIS)
requirements for these facilities?
Dr. Kovalick noted that EPAs behavior regarding
permitting has been a perennial flower. In 1995,
environmental permitting was raised as a signifi-
cant issue in the White House Conference on
Environmental Technologies and it has bloomed
regularly since then. NEPA is a federal not a
state responsibility so EPA can deal with it, but
the problem may be a matter of prioritizing this
function. Normally, there are a limited number
of EPA personnel designated for the NEPA review
process. State permitting, however, is a significant
problem because of reciprocity. Sister states
normally do not recognize each other's permits.
Although cross-state permitting is difficult,
Mr. Brenner acknowledged that EPA has helped
states in the past permit "first time" technology
demonstration projects. As more states seek to
host new energy efficiency and renewable energy
technology sites, the potential for EPA to assist
an individual state in the permitting process may
become more apparent.
Ms. Gutierrez noted that some states already
have added the requirement to use only "verified"
technologies [by EPA or others) in their project
development plans. So the value of the ETV
verifications has been recognized. In the past,
the involvement of EPA researchers in technology
demonstration projects also raised the "comfort
level" of some state officials and garnered their
acceptance to host a project within their jurisdic-
tion.
Mr. Habicht commented that there are some
major new thrusts in technology as a result
of environmental regulation. Some of these
thrusts include CO2 sequestration, nanomaterials,
advanced biofuels, vehicle-to-grid technologies,
large solar arrays, large wind arrays, and others.
EPA needs to position itself to be involved in the
design and evolution of these technologies. EPA
involvement is important to assess unintended
consequences as well as to be an integral part of
the infrastructures that are built up around these
technologies. Biofuels is an example of a new
energy technology that may have some unintended
consequences. EPA and NREL collaboration on
the impacts of these technologies is a model that
should be expanded in the future. Disruptive
technologies will have infrastructure impacts and
the earlier EPA and DOE can collaborate on their
assessments the better.
Mr. Habicht reiterated that EPA needs to commu-
nicate its biggest environmental challenges. Once
these challenges are identified, there needs to be
a "give and take" about them with the business
community and others. Through this process,
the challenges can be sharpened into a potential
technology and investment opportunity.
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Mr. Leighton explained that some "building blocks"
already are in place for communication on these
issues. From 1995 to 2000, when John DeVillars
was EPA Administrator in Region 1 (Boston), VC
forums were being conducted in New England.
These forums focused on the identification of
innovative technologies that may offer solutions to
priority regional problems. Maggie Theroux, who
is now with EPAs ETV Program, was a key player
in conducting these technology forums. From
these forums, Region 1 learned about the need
to frame problems with as much specificity as
possible to facilitate the development of effective
solutions. This effort helped establish the current
dialogue between EPA regions and the EPAs ORD
on defining priority problems. Last year, a science
symposium, attended by the EPA Deputy Regional
Administrators and the senior ORD program
managers, was conducted to exchange ideas on
problems and potential solutions. A common
format was used to define regional problems that
included a lot of specificity. Based on this sympo-
sium, data are now available to allow problems to
be defined on a regional, media, or national basis.
Dr. Teichman added that, for the symposium, each
EPA region was asked to identify its three high
priority problems and 40 problems were identified.
Obviously, more problems were identified than
expected and not all of these problems involve
technology in their critical path. Nonetheless,
this exercise may be one source for identifying
problems with potential technology solutions.
What would you do with the research results if
you received them was a frequent question raised
during the symposium.
Mr. Preston suggested that it might be useful to
translate these problems into a cost value; if this
problem were solved how much would that be
worth. The VC community could really focus on
a problem if there is some estimate about its value
proposition.
Dr. Teichman cautioned that value propositions
may be easier to estimate in the health area than
in ecosystems. ORD currently is working on
how to value ecosystem services but agreed upon
metrics have not yet been established. Mr. Preston
acknowledged that a value cannot be put on
human life and made a business proposition, but a
value can be placed on the loss of tourism because
of polluted waters.
Mr. Starfield agreed that it would be useful for
EPA and VCs to discuss regional environmental
problems because of the unique differences among
regions that were mentioned earlier. Water has a
tremendous value in the South and Southwestern
United States but is not as critical an issue in
other parts of the country. He suggested that
"smart meters" to gauge electricity usage within
individual homes is a great idea but it is not being
widely used in EPA Region 6 (Dallas). Likewise,
water meters to gauge water usage would be
equally valuable.
Mr. Brenner agreed that there are regional as well
as national issues facing the Agency. He suggested
that future meetings could focus on regional
issues, national issues, or potentially only two or
three issues; there are a variety of ways to address
these problem sets. Are there preferences for any
single approach?
Ms. Ripley replied that meetings are helpful but
more use should be made of Web communica-
tions. The NVCA also may be a good way to
communicate with the VC community. She
admitted that today's meeting has given her a
renewed appreciation for the challenges EPA faces;
nonetheless, she would like the Agency be more
of a catalyst for adoption of innovative technolo-
gies. EPA is uniquely positioned to do so. Does
the identification of grand challenges depend on
the new EPA Administrator? What does it take
for EPA to be a catalyst for adoption of innovative
technologies?
Mr. Brenner responded that more federal agency
collaboration (e.g., EPA collaborating with DOE,
USDA, and others) is inevitable. The degree to
which this collaboration occurs may hinge on
the new Administrator's priorities but the value
in more collaboration is recognized. Mr. Brenner
expects EPA to be much more involved in a
technology-driven environmental process than it
has been in the recent past.
Mr. Habicht agreed that personalities always make
a big difference. He mentioned that the Presi-
dent's Council on Environmental Quality also will
be important.
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Dan Watts said that he would be presenting the
results of today's Summit at the NACEPT meeting
tomorrow because today's meeting was conducted
as a follow-up to the NACEPT Report on ven-
ture capital. He asked if there are there some
actions from the Summit that can be reported to
NACEPT. Is there more work for NACEPT to do
on this topic?
Mr. Brenner thanked NACEPT for its work to
date. He thought the general response to the
NACEPT Report was that it was well done and
will be valuable to the Agency. He admitted that
there are many in the Agency who will want to
review the Report further before specific next
steps can be determined. Given the range of the
Report's findings and recommendations, EPA may
want to create another NACEPT Subcommittee to
further advise the Agency but it would be prema-
ture to make such a decision at this time.
Dr. Kovalick proposed that, in the interim, the
Agency could move forward by scheduling region-
al meetings with the VC community and others
to discuss challenges and problems of concern to
the regions. Mr. Brenner agreed and suggested
this may be good point at which to conclude the
meeting. He thanked everyone for their partici-
pation in what he thought was a very valuable
meeting to EPA. He expects to see the results of
today's Summit reflected in the Agency's efforts
over the next several years and looks forward to
working with the VC community on these issues
in the future.
Mr. Habicht explained that perhaps the best way
to summarize today's meeting is that "we have
found each other and it is beautiful." This Sum-
mit has assembled some of the most talented
and hard working people around and very useful
discussions have resulted. Based on his experience
at EPA, he understands that the Agency staff often
feels isolated because of institutional constraints.
He hoped that today's meeting will be the initial
step toward offering officials a channel to commu-
nicate about issues of common interest with other
problem solvers.
Mr. Preston suggested that there is an opportunity
at EPA for bold leadership in the Federal Govern-
ment on technology issues. He believes there is a
lot of interest within the Agency for bold leader-
ship and such leadership makes it unlikely that
such an initiative will fail.
Mr. Brenner agreed that there are numerous
examples of where EPA has taken a leadership
role in the past on technology issues. He offered
the Diesel Retrofit Program as a recent example
where EPA worked to find and develop a technol-
ogy solution early on and the result is that nearly
$1 billion worth of diesel retrofits are being made
annually. This is just one example; there are
many others in the water and solid waste media
where similar advances have been made through
technology-driven approaches. EPA gets it. Now,
there is an opportunity for the Agency to push
hard on these approaches and EPA plans to take
advantage of it.
Mr. Leighton explained that even in the "Big Dig"
in Boston, the Agency was able to drive diesel
retrofit use in the excavation and construction
process. This opportunity was created because
government officials used the "bully pulpit" to
push for it and the "court of public opinion"
asked "why not?" He expressed hope that NEPA
can be a very important driver for public policy
and opinion for regional and national energy and
environmental problems.
Mr. Habicht agreed, explaining there are and will
be unique opportunities for collaboration between
EPA and DOE on energy and environmental
issues. Hearing no more comments, Mr. Habicht
and Mr. Brenner adjourned the meeting. •
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Appendices
A. EPA-Venture Capital Community Summit: Potential EPA
Follow-Up Activities
B. List of Summit Attendees
C. Summit Presentations
1. Venture Capital Overview
2. U.S. EPA: The Context for Promoting New Environmental
Technology
3. Department of Energy Technology Commercialization: Energy
Efficiency and Renewable Energy
D. Stages of Investment
E. Federal Register Notice for EPA-Venture Capital Community
Summit
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Appendix A: EPA-Venture Capital Community Summit: Potential EPA Follow-Up Activities
The following is a list of potential follow-up activities developed by EPA subsequent to the Summit to
help further environmental technology investment and commercialization. Some of the activities have
been initiated.
I. Collaborating With Other Agencies
A. Develop partnerships with DOE, USDA, and other agencies to learn from their technology com-
mercialization efforts
B. Seek to use Stimulus and venture capital funds to support environmental technology development
and deployment
C. Explore cooperating with other federal agencies to encourage wide-scale government purchas-
ing of innovative environmental technologies (e.g.; energy efficient and greenhouse gas reduction
technologies)
D. Develop a strategy for collaborating with state, tribal, and city economic development organiza-
tions to create green jobs
II. Fostering Interaction With the Venture Capital Community
A. Communicate EPAs "Grand Challenges" for which technology might provide solutions
B. Organize regional follow-up meetings with the venture capital community
C. Develop with venture capital associations mechanisms to facilitate communication and coopera-
tion
D. Create a framework to inform EPA on how to work with the venture capital community
III. Considering New Programs and Activities
A. Create prize programs for technological solutions to major challenges confronting the Agency
B. Assess the need for grant and loan guarantee programs that would encourage investment in envi-
ronmental technology commercialization
C. Assess whether the Agency's Green Building Strategy should be revised to add technology com-
mercialization
D. Discuss the need for a FACA group focusing on venture capital investment in environmental
technology and/or related themes (e.g., other finance and investment actions catalyzing environ-
mental technology development and deployment)
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Appendix B: List of Summit Attendees
EPA
Barry Breen
Deputy Assistant Administrator
Office of Solid Waste and Emergency Response
Rob Brenner, Co-Chair
Director
Office of Policy Analysis and Review
Office of Air and Radiation
Walter Kovalick, Jr.
Assistant Regional Administrator for Resources
Management
Region 5 (Chicago)
Ira Leighton
Deputy Regional Administrator
Region 1 (Boston)
Mike Shapiro
Deputy Assistant Administrator
Office of Water
Larry Starfield
Deputy Regional Administrator
Region 6 (Dallas)
Kevin Teichman
Deputy Assistant Administrator for Science
Office of Research and Development
Pai-Yei Whung
Chief Scientist
Office of the Science Advisor
Hank Habicht, Co-Chair
Managing Partner
SAIL Venture Partners
Daniel Hullah
Principal
RockPort Capital Partners
Eric McAfee
Managing Director
Cagan McAfee Capital Partners
John Preston
Managing Director
C Change Investments
Rosemary Ripley
Managing Director
NGEN Partners
Dan Watts
Executive Director
Otto H. York Center for Environmental
Engineering and Science
New Jersey Institute of Technology
Presenters:
Emily Baker
Director
Federal Policy and Political Advocacy
National Venture Capital Association
Walter Kovalick, Jr.
Assistant Regional Administrator for Resources
Management
Region 5 (Chicago)
Drew Bond
Director for Commercialization and Deployment
Office of Energy Efficiency and Renewable Energy
U.S. Department of Energy
EPA Attendees:
Amanda Aldridge
Office of Air Quality Planning and Standards
Office of Air and Radiation
Sonia Altieri
Office of Cooperative Environmental Management
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Appendix B: List of Summit Attendees (continued)
Diana Bauer
National Center for Environmental Research
Office of Research and Development
Sarah Bauer
Office of Science Policy
Office of Research and Development
Michael Bender
Office of Resources Management
and Administration
Office of Research and Development
Norman Birchfield
Office of the Science Advisor
Michael Brody
Office of the Chief Financial Officer
Rafael DeLeon
Office of Cooperative Environmental Management
Jordan Dorfman
Office of Water
Peter Fargo
Office of Research and Development
Sally Gutierrez
National Risk Management Research Laboratory
Office of Research and Development
Jeff Heimerman
Office of Solid Waste and Emergency Response
Mark Joyce
Office of Cooperative Environmental Management
Michael Kane
Office of Policy Economics and Innovation
Mitch Lasat
National Center for Environmental Research
Office of Research and Development
Cynthia Nolt-Helms
National Center for Environmental Research
Office of Research and Development
April Richards
National Center for Environmental Research
Office of Research and Development
Neil Stiber
Office of Science Policy
Office of Research and Development
Larry Weinstock
Office Air and Radiation
David Widawsky
National Center for Environmental Innovation
Office of Policy Economics and Innovation
Mary Wigginton
National Center for Environmental Research
Office of Research and Development
Other Attendees:
Richard Canino
New Energy and Industrial Technology
Development Organization
Sarah Carter
American Association for the Advancement of
Science Fellow
Ray Cheung
World Resources Institute, Inc.
Edie Findeis
EMS, Inc.
Prasad Guple
National Institute of Standards and Technology
U.S. Department of Commerce
Walter Howes
Verdigris Capital
Glen Kedzie
American Trucking Association
Valarie Latraverse
Canadian Embassy
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Appendix B: List of Summit Attendees (continued)
Mary Mai
Center for Environmental Innovation
Ron Mcllwain
Filtersure, Inc.
Jim McVaney
Rentech, Inc.
David Nguyen
American Trucking Association
Andrew Paterson
Econergy
Raymond Ricci
NanoRemediation Technologies
Brian Routhier
American Trucking Association
Edward Saltzberg
USA Energy Advisors
Paul Schaudies
GenArraytion, Inc.
Sumita Singh
National Venture Capital Association
David South
T&M Solutions
Richard Sustich
Center of Advanced Materials for Purification of
Water with Systems (WaterCAMPWS)
University of Illinois at Urbana-Champaign
EPA Project Officer and Contact:
Paul Shapiro
National Center for Environmental Research
Office of Research and Development
E-mail: shapiro.paul@epa.gov
Contractor Support:
Beverly Campbell
Angela Hays
Greg Ondich
The Scientific Consulting Group, Inc.
James Rea
SiteStories
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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ill
EPA-Venture Capital Community Summit:
Exploring Programs to Commercialize
Environmental Technology
November 12, 2008
Venture Capital Overview
Emily Baker, NVCA
About NVCA
Formed 35 years ago to foster better
communications among venture capital
professionals
Today focuses on advancing public policies
conduciye to entrepreneursnip, innovation
and capital formation
Also has research, education, networking
charter
Based in Washington DC
470 member firms
What is Venture Capital?
Venture capital is invested alongside management in private start-up
companies operating in innovative industries.
• Information Technology
. Life Sciences
. Clean Technology
Venture capital funds are capitalized by institutional investors and the
VCs themselves.
. Pension funds
• Endowments
• Foundations
The goal of a venture investment is to build a company to the point
that it can stand on its own as a public entity or be acquired as part of
a larger organization.
Venture Capital Characteristics
Venture capital is long term investment.
. Venture investments typically last 5-10 years, often longer, rarely less.
Venture capital is focused on innovation.
. VCs invest in companies that look to transform the status quo in high
technology spaces.
Venture capital is high risk am/high reward.
• Forty percent of venture backed companies fail; forty percent break
even/make minimal gains; only 20 percent make significant gains.
Venture capital builds value in companies and the economy.
• Venture capital investment stays in the company and is used for growth.
• Venture capitalists bring operational and scientific knowledge to bear to
catalyze growth, involving themselves in day-to-day operations.
Venture Capital = Economic
Growth
Venture investments accounted for just .02% of invested capital.
Despite the small venture industry size, companies that got their start
with venture capital accounted for 10.4 million jobs and $2.3 trillion of
revenues in the US in 2006 or 18 % of GDP.
Companies that were originally funded by venture capital include
Genentech, Microsoft, Apple, Google, FedEx and Starbucks.
Venture-backed companies outperform non-venture counterparts.
Current venture backed companies account for over 400,000 US jobs
across the country.
Innovations funded by venture capital include the pacemaker, Herceptin
(cancer), Integrilin (heart disease). VCs are also increasingly focused on
clean technology - solar, wind, carbon capture, energy efficiency.
Venture Capital Investment
is Productive ...
For VC every dollar invested in 1970-2001, there was
$7.90 in US revenue during 2006
For every $28,463 of venture capital invested in 1970-
2001, there was one job in the year 2006
Note these ratios are based on investment through 2001 ($2968)
because investment after that time has likely had little effect on 2006
jobs and revenues. If investment through 2006 ($421B) is used, the
ratios would be $5.55 and $40,364 respectively
Source: Wltmre Impact2W6by Global Insight
-------
Appendix C: Summit Presentations (continued)
1. Venture Capital Overview (continued)
Top 10 States for Venture
Capital Investment 2007
State
California
Massachusetts
Texas
Washington
New York
Pennsylvania
Maryland
New Jersey
North Carolina
Florida
Billions Invested
$14.19
3.59
1.42
1.34
1.17
.85
.63
.60
.59
.58
Top States for VC-Backed US Revenues 2006
M
Rank
1
2
3
4
5
6
7
8
9
10
State
California
Texas
Washington
Massachusetts
Pennsylvania
Georgia
Virginia
New York
Tennessee
Minnesota
National
Employment
at VC-Backed
Companies
566,600
293,700
144,200
131,300
121,600
120,000
104,900
98,000
92,100
82,600
2003-
2006
Growth
12.6%
10.2%
12.8%
12.8%
9.6%
11.0%
14.7%
10.6%
15.7%
16.2%
8
1 Top States for VC-Ba
M
Rank
1
2
3
4
5
6
7
8
9
10
State
California
Texas
Pennsylvania
Massachusetts
Georgia
Tennessee
Washington
New York
Virginia
Minnesota
eked US Job:
National
Employment at
VC-Backed
Companies
2,362,400
1,118,600
697,400
674,300
604,500
564,500
463,800
427,700
385,300
352,700
;2006
2003-2006
Growth
2.8%
5.6%
2.2%
3.0%
4.8%
2.6%
7.1%
2.4%
3.7%
9.5%
9
nture-Backed Revenues
VC-Backed US Revenues (trillions) As a % of total US GDP in 2006
Outpaces 2003 - 2006
Total US Sales Growth
2000 2003 2006
Source: Venture Impact 2006 by Global Insight
...;/: GiOBAtlNSIGHT
ntu re-Backed Employment
VC-Backed US Jobs (millions) As a % of total US Pvt Jobs in 2006
2000 2003 2005
So,m:VmamImf,a2H6tyalotal,tsU ;jS: QtQBAlINSIGHT
Internet-Specific & Clean Tech Investments
2005 -Q1 2008
Lffl
31'05 0205 0305 0405 0106 02 06 03 06 04 06 0107 0207 0307 Q4II
CHS Invested # of deals
31'05 0205 0305 0405 0106 02 06 03 06 04 06 0107 0207 0307 0407 010
CHS Invested # of deals
Rijibrt
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Appendix C: Summit Presentations (continued)
1. Venture Capital Overview (continued)
Investment Activity - Top Industries
01 2007, Q4 2007, Q1 2008
Federal Policy Initiatives
Needed to Drive Clean Tech
Renewable Portfolio Standard
Renewable Fuel Standard
Investment Tax Credits
Strengthened CAFE standards
More robust federal R&D for energy
Federal government as early adopter and user of clean energy
technologies
i
New Partnerships
NVCA is looking forward to working more
closely with EPA
Emily Baker, ebaker@nvca.org
Sumita Singh, ssinqh@nvca.org
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Appendix C: Summit Presentations (continued)
2. U.S. EPA: The Context for Promoting New Environmental Technology
U.S. EPA: The Context for Promoting
New Environmental Technology
Presented at the
EPA-Venture Capital Community Summit
Exploring Programs to Commercialize
Environmental Technology
November 12, 200
Walter W. Kovalick, Jr. Ph.D.
1 • • • - ' al Adminh ' '
U.S. EPA—Region 5
Kovalick.walter@epa.gov
Jission and Mandates
One of 20+ independent regulatory agencies
• Not a Cabinet department, but Cabinet status
Protect public health and the environment
Multiple statutes provide mandates
Clean Air Act
Clean Water Act
Safe Drinking Water Act
Resource Conservation and Recovery Act (as amended)
Comprehensive Environmental Response Compensation
md Liability Act (Superfund)
Federal Insecticide Fungicide and Rodenticide Act (FIFRA
Toxic Substances Control Act (TSCA)
Others
\\\\\ III/
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Appendix C: Summit Presentations (continued)
2. U.S. EPA: The Context for Promoting New Environmental Technology (continued)
. _.iat is the Regulatei.
Community?
Any business/organization that is required to
comply with EPA statutory or regulatory
requirements.
Includes:
• More than 800,000 permitted facilities under
CAA, CWA and RCRA
B-Over 20 million small businesses
• 80,000 units of local government
• Millions of regulated facilitates under more
than 12 major environmental statutes
Operations and Implementation
• Agency exercises discretion in balancing
mandate given in each statute—mainly
in HQ
• Traditional role—different types of
regulation
• Technology based—most stringent or cost effective;
can "freeze" technology, once set
• Health based—set for environ, conditions; room for
source control technologies to meet limits
• Market based—sets limit for nation/area; facilities
get tradable allowances
• Use restrictions (for chemicals/pests)—exposure
restricted by label directions or product restriction
Ops and Implementation (cont.)
• New Strategies (beyond "command and control")
(• Begun in 1990's—HQ together with Regions
• Compliance assistance
• Voluntary partnerships
• Performance track—beyond compliance
• Partnering for economic gain/development
e.g. Brownfields, CRADAs
• International developments/imperatives (ISO 14000/EMS
plus EU/China requirements)
N.B. As always, enforcement keeps a level playing field
Ops and Implementation (cont.)
I Almost half of 17,000 FTE in Regional Offices
• Most EPA regulatory programs delegated to
states and tribes
• Vast majority of inspection, permitting,
enforcement at state/tribal level
. ~2400 FTE for science and technology work-
mostly ORD
• Of $760M budget, ~$440M extramural
N.B. Large % of entire EPA workforce are scientists/
EPA Roles in Environmental
Technology Marketplace
Funding agent ^
Technology developer
Regulator/enforcer QQQ
Information broker
• Neutral &Q
• Verification agent ^^^
Partner in deployment's^
User of "first resort"9
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Appendix C: Summit Presentations (continued)
2. U.S. EPA: The Context for Promoting New Environmental Technology (continued)
Figure 1. Mapping of EPA's Environmental Technology Programs To the R&ID Continuum
's Work an..
Environmental Technologies
For niche areas, in depth understanding by
researchers/programs,
• E.g. drinking water treatment, air pollution control,
remediation, diesel retrofit
• Monitoring and measurement technologies
Secondary level of understanding of industrial
processes to set BACT, etc. levels
Appreciation of technology aspects of many
sectors through partnering programs, i.e. Design
for Environment, energy conservation, etc.
ervations: How Technol
Intersects with EPA Work
With few exceptions, EPA mission is not to be a
"technology development" organization
New environmental problems are viewed first
through statutory/regulatory lens (e.g. GHG
sequestration = UIC program) leading to
technology inquiry
While expert in some niches, EPA's mandates
don't call for comprehensive monitoring of
technology developments
The Environmental Technology Council is a forum
for joint action across programs/regions—see
www.epa.gov/etop
EPA's regulatory agenda charts the subjects and
issues to be addressed over a several year period
By its nature, technology driven regulations "fix"
best technology; resources normally limit EPA's
ability to continuously update "best"
EPA is well vested in technology diffusion
activities, esp. verification
EPA is experienced in operating SBIR and grant
programs; no mandates for many other financial
vehicles
44 Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Appendix C: Summit Presentations (continued)
3. DOE Commercialization: Energy Efficiency and Renewable Energy
Technology Commercialization
Energy Efficiency and Renewable Energy
U.S. Department of Energy
November 2008
Drew Bond
Director of Commercialization and Deployment
National security, environmental and economic goals form the basis for a robust National
Energy Policy but historical data demonstrates the magnitude and urgency of the challenge. \
I Energy Security I Environmental Stewardship I Economic Comperj
1 I I I I 1 I i I
USGreenhouseGas Emissions by Source®
USHistoricalTtade Deficit)
The DOE is divided up into three units concentrating on energy
R&D, basic science research and nuclear security
Secretary Samuel Bodman
Deputy Secretary Jeff Kupfer
EERE develops a broad range of clean energy technologies as
shown in the FY08 budget
FY07 National Lab Funding
EERE spreads the federal R&D funding across multiple
laboratories but works predominately with NREL
I EERE FY07 National Laboratory Funding by Laboratory • EERE FY07 National Laboratory Funding by Progi
| I | | I
Fall 2006 Question to DOE Program Managers:
"How has your program impacted the life of the American taxpayer?"
Answer:
"[Good Answer]...but the 'Commercialization Valley of Death' has
prevented us from being as effective as we'd like."
The historical "Commercialization Valley of Death" refers to
the quantitative challenge of transitioning between early adopters and mass market penetration
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Appendix C: Summit Presentations (continued)
3. DOE Commercialization: Energy Efficiency and Renewable Energy (continued)
A technological innovation must overcome four challenging transitions before
reaching the market.
DOE
1
PRIVATE SECTOR
Public benefit is
only fully realized
upon product
delivery to market
The EERE Commercialization Team focuses on building bridges between
Applied Scientists and Technology Investors
EERE Commercialization Bridges
are designed to overcome four primary gaps
9 > DOE traditionally hires scientists - not businessmen
a > Commercializing technologies requires both technical 8 business skill sets
> Communication is a fundamental prerequisite of commercialization
> Technical language fails to resonate with the business community
> Competition is stiff for venture capital funding
> VCs more likely to fund business plans and prototypes than research papers
> The Commercialization Valley of Death is not unique to national laboratories
> Best practices have been developed to foster a culture of innovation
Built off a proven venture capital model,
the Entrepreneur in Residence (EIR) program
forms the primary plank of the TALENT BRIDGE
DOE's Entrepreneur in Residence program
connects leading scientific and business talent
Structure
• DOE partnership with Venture Capital Firm
• EERE provides $100k matching-funds
and full access to laboratory
• Venture Capital Firm identifies, hires and
mentors EIRs
• Pre-Negotiated standard equity share license
agreement
Tailored for entrepreneurs and small businesses,
the Equity Share License agreement
forms a primary plank of the STRATEGY BRIDGE
Laboratory > Up-front license fee
Benefit > Royalties
Points of > All terms
Negotiation
Length of > 30 pages
Contract
Private Sector > Large companies with cash on
Preference hand
> Equity share of company,
royalties or combination
> Percent equity share
> 17 pages
> Small businesses on tight budgets
> Entrepreneurial ventures
*
Built off the Stanford license, the Equity Share License has been pre-negotiated with
venture capital general counsels, national laboratory general counsels and DOE general counsel
Designed to introduce investors to technology opportunities,
the Technology Commercialization Showcase
forms the primary plank of the INFORMATION BRIDGE
Need
• Many EERE funded technologies stall in the "commercialization valley of death" simply because the innovation has
not been clearly communicated to the business community
Structure
• Challenged EERE Program Managers to identify 8-10 most promising technologies in their portfolio
• Created simple, layman's descriptions of the innovation opportunity
• Invited prominent investors to a two day conference showcasing technologies
I Investors Represented
•MMMua^m > ROCKHORT
•' * ,f.l.t. * t
IJ^Pj^l BATTELLE | VENTURES
i
€>
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Appendix C: Summit Presentations (continued)
3. DOE Commercialization: Energy Efficiency and Renewable Energy (continued)
DOE Technology Commercialization Showcase Case Study:
Low-cost carbon fiber: increases fuel economy 25%
> Problem: Carbon fiber, a lightweight replacement for structural steel, is currently too expensive for broad
application ($12-$30/lb vs. $5-$8/lb)
> Description: ORNL has developed technologies to reduce the cost of carbon fiber production by utilizing:
• Low costs feedstocks (low-cost textiles and renewable lignin) and
Advanced processing methods (thermo-chemical stabilization, rapid oxidation, and microwave-assisted
plasma carbonization)
layman's
description of
technology
> Impact:
• Automobiles: Reduces vehicle mass by up to 40%which increase fuel economy up tc.
* Wind: Increases blade efficiency through superior properties
> IP Position: 3 patents issued, 5 patents filed,
7 invention disclosures
' > Technology Status:
•4 pi
icarbonizatio
e-assistedplasr
extile-based precursors
.-chemical stabilization
lasma oxidation
Timetoavailability 3-5years
Capital Needs A2-4MM Ib/year carbon fiber plant
is expected to cost $18M-$22M
Filling the gap between R&D and venture capital funding,
the Technology Commercialization Fund
forms the primary plank of the CAPITAL BRIDGE
Need
• Innovations struggle to find financing post-research
and pre-venture capital funding as described by the
"Commercialization Valley of Death"
Structure
• 50-50 industry matched funds required
• Funds restricted to prototype development,
demonstration and deployment - not further
scientific research Designed to complement angel
investment or early stage corporate product
development
Decision criteria
Potential market opportunity
Likelihood of commercial success
Management team
DOE priorities
Private sector partners
Laboratory
National Renewable Energy Laboratory {CO}
Oak Ridge National Laboratory (TN)
Lawrence Berkeley National Laboratory (CA)
Pacific Northwest National Laboratory (WA)
Sandia National Laboratories (NM)
Los Alamos National Laboratory (NM)
Argonne National Laboratory (I L)
Lawrence Livermore National Laboratory (CA)
<
Funds
($MM|
J4.0
J4.0
$1.5
$1.5
$1.4
J0.7
JO.T
$0.5
)
The Technology Commercialization Fund is a carrot to attract private sector partners
to examine the national laboratories' intellectual property portfolio 14
The Commercialization Team pursues an aggressive schedule to
accelerate the deployment of advanced energy technologies
H h
The EERE Commercialization Team advises many of the
Department's public-private initiatives
I > Commercial-scale integration and demonstration
| > Hawaii Clean Energy Partnership
B > Greensburg, KS
| > New Orleans, LA
i. > Federal Energy Management Showcases
S- > National Parks Service
a
> National Marine Sanctuaries
S^ > Quasi-Governmental Agency for Clean Energy Financing
£ > Advanced Research Projects Agency-Energy (America Competes 07 § 5012)
JT > Tax Policy
Loan Guarantee Program (EPAct 05 Title XVII)
DOE Technology Transfer Policy Board (EPAct 05 § 1001)
Commercial-Scale Cellulosic Biorefineries (EPAct 05 § 932)
Freedom Prize (EPAct 05 § 1008)
For further information please contact the
Commercialization Team
Carol Battershell, carol.battershell@ee.doe.gov
Drew Bond, drew.bond@ee.doe.gov
Wendolyn Holland, wendolyn.holland@ee.doe.gov
Report of the EPA-Venture Capital Community Summit: Exploring Programs to Commercialize Environmental Technology
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Appendix D: Stages of Investment
Sustainable
Analysis of Investment Styles
Investments
The sustainable development investment opportunity is broad and, as such, comprises a
wide range of investment styles across various stages of a company's development:
-52 • Venture Capital: New Clean/Environmental Technologies
.S1 •
Angel /A
Technology
Identification & I
Business |
Formation
Clean Energy Infrastructure
Existing and New Technologies
Project
Development
Buyout/
Expansion /
PIPES
Portfolio of
Assets
Clean technology venture capital will require a significant amount of additional private equity to
take new (and existing) technologies that are proven in pilot and demonstration plants to
commercial scale
While project development permitting risk is typically considered arbitrary and difficult to judge,
macro trends supporting the clean energy infrastructure build out (i.e. renewable portfolio
standards and cap & trade regimes) can help to mitigate this permitting risk
The later stage private equity clean energy opportunity is more limited, but will grow over time
as more clean energy infrastructure is built. Consolidation and buyouts are already beginning
to occur, particularly in more mature markets in Europe
Analysis of Investment Styles - Risk and Return Profiles, Financing
-5 • Venture Capital: New Clean/Environmental Technologies
.S1 • _
Angel /A
Technology
Identification &
Business
Formation
Technology selection
Business formation
Initial management
selection
Execution strategy
Technology scale up risk
from "bench scale" to
integrated demonstration
scale
Engineering, design
Management
First
Commercial
Scale Plant
Clean Energy Infrastructure
Existing and New Technologies
Project
Development
Medium
• Financing risks
• Performance
guarantees
• Site and permits
• Engineering & design
• Additional scale up:
• Construction cost
• O&M
• Performance
• Site selection
• Permitting
• Securing equipment
• Contractors' cost
estimates
• Organizational
structure and
management
• Financing
Buyout/
Expansion /
PIPES
Portfolio of
Assets
Low to Medium
Off-take agreements
(i.e. Power Purchase
Agreements or
"PPA"s)
Engineering,
Procurement and
Construction ("EPC")
contracts
Supply agreements &
logistics
Project debt & equity
financing
Hedging
Valuations
Growth potential /
incremental
development
Capital structure
40%+ IRRs
New "disruptive" technologies, such as:
• Solar thin film, other non crystalline technologies
• 2nd generation biofuels, including cellulosic ethanol
• Coal gasification; carbon capture and sequestration
• Battery technology (auto)
25%-30%+ IRRs
Development promote:
• Repayment of costs at financial close
• Equity promote to developer
Growth: wind, solar thermal, geothermal,
biofuels, waste-to-energy, hydro
12%-20% IRRs,
depending on
cash flow volatility
-i.e. low (landfill
gas); high
(biofuels)
25%+ IRR
Growth
Equipment/services
Generati on/d evel op.
$100bn total market
cap all clean energy
100% Equity
70%-100% Equity
70% - 80% Debt
Varies
JKntvrS GafS&t/QomfmAmiy Siiw&rtifc ISjjtinijf ffegfewf
-------
Appendix E: Federal Register Notice for the EPA-Venture Capital Community Summit
Federal Register/Vol. 73, No. 214/Tuesday, November 4, 2008/Notices
65603
Subsegment
090106
090107
090201
090202
090202-51 26
090203
090204
090205
090206
090207
090207-5112
090301
090401
090501
090502
090505
090506
Waterbody name
Holmes Bayou — From the Pearl River to the West Pearl River (scenic)
Pearl River — From Pearl River Navigation Canal to Holmes Bayou
West Pearl River — From Headwaters to confluence with Holmes Bayou (scenic)
West Pearl River
Morgan River — From Porters River to its confluence with Pearl River (scenic)
Lower Bogue Chitto — From River Navigation Canal to Wilsons Slough
Pearl River Navigation Canal — Below Lock No. 3
Wilson Slough — Bogue Chitto to West Pearl River
Bradley Slough — Bogue Chitto to West Pearl River
Middle Pearl River and West Middle Pearl River — From West Pearl River to Little
Lake.
Morgan Bayou — Headwaters near 1—10 to confluence with Middle River
Pushepatapa Creek
Bogue Lusa Creek
Bogue Chitto River — From MS State Line to Pearl River Navigation Canal (scenic)
Big Silver Creek
Bonner Creek
Thigpen Creek
Pollutant
Mercury and Turbidity
Mercury.
Mercury and Turbidity.
Turbidity
Mercury
Mercury.
Mercury and Dissolved oxy-
gen.
Mercury
Mercury.
Mercury and Dissolved oxy-
gen.
Mercury
Fecal coliform
Fecal coliform.
Mercury and Turbidity.
Fecal coliform
Fecal coliform
Fecal coliform.
EPA requested the public to provide
EPA with any significant data or
information that might impact the 29
TMDLs in the Federal Register Notices:
Volume 72, number 137, page 39420
(July 18, 2007) and volume 73, number
22, pages 6178 and 6179 (February 1,
2008). The comments which were
received, the EPA's response to
comments, and the TMDLs may be
found at http://www.epa.gov/region6/
wa ter/np des/tm dl/in dex. h tin.
Dated: October 28, 2008.
Larry D. Wright,
Acting Director, Water Quality Protection
Division, EPA Region 6.
[FRDoc. E8-26262 Filed 11-3-08; 8:45 am]
BILLING CODE 6560-50-P
ENVIRONMENTAL PROTECTION
AGENCY
[FRL-8737-6]
EPA-Venture Capital Community
Summit: Exploring Programs to
Commercialize Environmental
Technology
AGENCY: Environmental Protection
Agency.
ACTION: Notice of meeting.
SUMMARY: The Environmental Protection
Agency (EPA) will hold an EPA-Venture
Capital Community Summit: Exploring
Programs to Commercialize
Environmental Technology to follow up
the National Advisory Council for
Environmental Policy and Technology
(NACEPT) report on "EPA and the
Venture Capital Community: Building
Bridges to Commercialize Technology"
(April 2008). The report recommends
that EPA create programs, similar to
those of the U.S. Department of Energy,
to provide financial support (e.g., loan
guarantees, grants, revolving loan funds)
to encourage venture capital investment
in environmental technology
commercialization. The Summit will
bring together senior career EPA
managers (Deputy Assistant
Administrators and Deputy Regional
Administrators) with senior venture
capitalists who were part of the
NACEPT Venture Capital Study. A
report will be produced from the
Summit that will be a companion to the
NACEPT Venture Capital Report; both
will be given to the next
Administration, the venture capital
community, technology developers,
state and local governments,
Congressional members and staff,
academia, and members of the public.
The Summit will be open to the public.
DATES: The Summit will be held on
November 12, 2008, beginning at 10
a.m. and adjourning at 4:30 p.m.
Registration is at 9:30 a.m. Times noted
are Eastern Time.
ADDRESSES: The meeting will be held at
the Ronald Reagan Building and
International Trade Center, 1300
Pennsylvania Avenue, NW.,
Washington, DC, in the International
Gateway Room on the Mezzanine.
SUPPLEMENTARY INFORMATION: The
Venture Capital Report is available
electronically through http://
www.epa.gov/etop. A hard copy of the
report can be ordered from the National
Service Center for Environmental
Publications by requesting document
number EPA/600/R-08/043 through the
Web site ordering system at http://
www.epa.gov/nscep or by calling 1-
800-490-9198. The agenda for the
Summit can be found electronically
through the EPA Web site at http://
www.epa.gov/ncer/venturecapital.
The Summit is open to the public.
Registration before the Summit is
requested. Any member of the public
wishing to make a presentation at the
Summit should request to do so
beforehand. Presentations should be
limited to 3 minutes or less. Time
allotted will be shortened if several
people request to speak.
The results of the Summit will be
discussed the following day (November
13) in a NACEPT forum on future
directions for EPA to be chaired by the
EPA Administrator. This forum will be
part of the NACEPT Council 20-Year
Meeting on November 13 and 14, for
which there will be a separate Federal
Register notice.
Special Accommodations: EPA
welcomes the attendance of the public
at this Summit and will make every
effort to accommodate persons with
disabilities. If you require special
accommodations due to a disability,
please contact Linda Parham at
parham.linda@epa.gov at least seven
days before the meeting.
FOR FURTHER INFORMATION CONTACT: To
register for the Summit, request time to
make an oral public comment at the
Summit, and for details on how to
provide written public comments,
please see the National Center for
Environmental Research's Web site at
http://www.epa.gov/ncer/
venturecapital. Questions about the
Summit and written comments should
be submitted to Paul Shapiro at
shapiro.paul@epa.gov.
Dated: October 28, 2008.
William H. Sanders III,
Director, National Center for Environmental
Research.
[FRDoc. E8-26263 Filed 11-3-08; 8:45 am]
BILLING CODE 6560-50-P
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