Stretching State Dollars to Catalyze the Clean Tech Sector

Around the nation, even as the economy continues to stumble, the ability of state energy offices to invest public funds in pre-com­mercial energy technology deployment for maximum economic benefit has been an enormous boost to businesses.

Algae flourish in light. Here, Lee Elliott adds samples to the collection in the algae light room, sometimes called the algae library Photo by: Dennis Schroeder

Many states are thinking creatively about leveraging their own resources on specific technology projects that help create good local jobs and sustained economic growth in key energy sectors.

Ohio, Colorado, and New York each have successful efforts under way that leverage state funds into vibrant partnerships with higher education and industry groups to advance research, development, and commercialization of clean energy technologies.

Certainly, the maturity of a technology has a major impact on the types and amounts of outside funding that a company can pursue and capture. Although there are exceptions, most venture capital funds, for example, tend not to enter deals at very early stages of technology maturity. Some angel investors may be willing to place bets on good teams with good ideas with quite preliminary indi­cations of technology viability, but most look for later-stage, more fully developed prototypes and systems. This narrow, critical investment band is of increasing interest to state energy and economic devel­opment decision makers.

Ohio, Colorado, and New York each have successful efforts under way that leverage state funds into vibrant partnerships with higher education and industry groups to advance research, development, and commercialization of clean energy technologies.

Certainly, the maturity of a technology has a major impact on the types and amounts of outside funding that a company can pursue and capture. Although there are exceptions, most venture capital funds, for example, tend not to enter deals at very early stages of technology maturity. Some angel investors may be willing to place bets on good teams with good ideas with quite preliminary indications of technology viability, but most look for later-stage, more fully developed prototypes and systems. This narrow, critical investment band is of increasing interest to state energy and economic development decision makers.

“Some government funding, such as ARPA-E, can be critical for the first ‘reduction to practice’ stage of technology development—for example, taking a novel new material idea and finding ways to make enough of it to make initial prototypes or sub-scale assemblies to begin to characterize performance over a range of operating conditions,” noted John Cerveny, director of resource development for NY-BEST.

Ohio’s pioneering Third Frontier produces high leverage ratios for state investments.


Housed within Ohio’s Department of Development, the Third Frontier program is a technology-based economic development initiative designed to create jobs and bring new products to market. Its programs seek to accelerate the development and growth of high technology within the state through direct financial support to organizations. Specifically, Third Frontier provides competitive grant awards to organizations or partnerships seeking to demonstrate market readiness and commercial viability for new, emergent technology.

When Ohio established the Third Frontier program in 2002, the state legislature required voter approval of the funds by means of a state-wide ballot referendum. Significant grassroots support exists in Ohio for both energy efficiency and renewable energy implementation among residents and businesses. In 2005, voters approved the first multiyear funds of $500 million through 2011. These funds came from the 1998 Tobacco Master Settlement Agreement between 46 states and the four largest U.S. tobacco companies.

Since its inception in 2002, Ohio’s Third Frontier has awarded more than $1 billion in the state’s largest-ever investment in economic development. The competitively placed funding goes to projects in industries central to the state, such as biomedicine, advanced energy and materials, power and propulsion, and instruments, controls, and devices.

In a typical year, Third Frontier invests about half of its awards in biomedical technology, such as cardiovascular imaging, with the balance going to energy, propulsion, instrumentation, and advanced materials projects. With the exception of the biomedical sector, each of these sectors saw employment shrink in Ohio between 2002 and 2004. The first Third Frontier investments began to flow in 2005. By the end 2008, Third Frontier’s direct investments cumulatively reached just over $400 million. This state funding attracted follow-on investments from federal, private, and higher-education sources that reached about $3 billion up to that point, well above expectations. Between 2004 and 2008, as these investments kicked in, each of these high-tech sectors (except for the advanced materials sector) experienced positive employment growth.

The Ohio Business Roundtable estimated that Third Frontier’s investments sparked the creation of about 50,000 jobs through direct and indirect employment gains through late 2009. Executive Director Norm Chagnon credits the success to Ohio’s focus on its research strength and on market data about its industrial and supply chain base. One of the big success stories lies in the realm of fuel cells.

“Back in 2003, Governor Robert Taft make a decision to support fuel cell research and development,” noted Chagnon, “because it would be a disruptive to the auto industry that has been a big employer in Ohio. By making fuel cells in Ohio, the state would maintain jobs it might otherwise lose.”

With its concentration of higher-education institutions and emerging tech firms, the state set a number of initiatives in motion. In 2003, Stark State College of Technology in North Canton partnered with the Stark (County) Development Board, Case Western Reserve University, and SOFCo-EFS Holdings, a local developer of solid oxide fuel cells, to establish the Fuel Cell Prototyping Center on the Stark State campus. Simultaneously, the Ohio Fuel Cell Coalition was formed in 2003 as a clearinghouse for industry, academic, and government leaders throughout the state.

By 2007, the Prototyping Center’s work drew international attention, as Rolls-Royce Fuel Cell Systems (US) acquired SOFCo-EFS to build a research, development, and commercialization base in northeastern Ohio. Rolls-Royce chose Ohio as its North American headquarter because the supply chain it needed was already in place.

The global firm’s goal in Canton is production of a 1 megawatt stationary fuel cell generator set (“genset”) for grid deployment.

By 2009, the onset of the recession led to some changes in funding tactics for Third Frontier within the state budget landscape.

“We gave up some revenue back to the state then,” explained Chagnon. “In exchange, we were able to go early to the ballot in May 2010 for $700 million for investments that we would make in 2012 through 2015. That vote was successful. We’re proud that Third Frontier secured $1.2 billion in funding with our two voter ballots.”

In September 2009, when Rolls-Royce announced the expansion of their research and development in North Canton, the firm and the state agreed, as part of the incentive, to retain 32 jobs and create 60 more. Overall, more than 68,000 direct and indirect jobs have been created and retained through Third Frontier since the program’s inception.

In the most recent funding round, Rolls-Royce received a major grant of just under $1 million in conjunction with another firm, RoviSys Company, for automation and demonstration of pilot-scale manufacturing of fuel cells.

Meanwhile, its landlord, Stark State College landed a $1.7 million grant from the U.S. Army to further advance the commercialization of fuel cell technology and to develop a prototype system to reduce fuel consumption. The U.S. Department of Defense is eager to boost efficiency for the nearly 100,000 military gensets deployed around the globe that power lighting, air-conditioning, computers, radios, and other command and control systems.

Stark State has generated more than $18.2 million in grants over the past five years to develop fuel cell curricula, support industry research and development, and prepare technicians for the emerging field. Today, 100 businesses and nonprofit and government entities form the Ohio Fuel Cell Coalition, which has become known as the Ohio Fuel Cell Corridor (

“Ohio has made an $85 million investment in fuel cell and hydrogen technology companies, which has leveraged more than $300 million in investment by industry and the federal government, creating much needed jobs in the state,” noted Ruth Cox, executive director of Fuel Cell and Hydrogen Energy Association, in summing up the impact over the past decade. “As a consequence, today nearly every American manufactured fuel cell has components or materials from Ohio companies.”

Governor John Kasich, who took office in 2011, has launched a new private, nonprofit corporation, JobsOhio, and has earmarked more than $1 billion from state liquor sales as a funding source for this new economic development effort.

Across all the Third Frontier programs, Ohio has netted $6 billion since 2003 in leveraged investments, of which about $1.5 billion derives from the sale of new products, technologies, or services that have been commercialized with a boost from state investments. In sum, success seems to lie in identifying major commercial partners who take advantage of local supply chains and research expertise, while the state spurs investment across the entire continuum of commercialization, from product research and demonstration to market deployment.

Colorado’s evolving
Collaboratory spawns
virtual research centers


Colorado’s leveraging of state funds has differed from Ohio’s in scale and approach, but has also produced substantial, positive results. In 2006, Senator Ken Salazar invited leaders from the NREL, the Colorado School of Mines, Colorado State University, and the University of Colorado at Boulder to find ways to collaborate on clean energy.

“It took six months to figure out how to staff this effort without creating new bureaucracy,” noted David Hiller. “We have very few employees, so the infrastructure is very flexible to allow pursuit of research by the centers that are virtual.”

The resulting deliberations produced the Colorado Renewable Energy Collaboratory as a research consortium, jump-started with help from the three universities and the federal laboratory.

In the annual state budget process, state funds are allocated to the Governor’s Energy Office, which distributes them to the Colorado Renewable Energy Authority. The Energy Authority in turn has one director from each of its four research institutions and three appointed by the governor. The principal purpose of the Authority is to direct the allocation of state matching funds to support one or more research proposals of the Collaboratory.

The Collaboratory is comprised of virtual research centers. Each center has both university and industry partners and its own management and administrative staff, typically housed at one of the sponsoring institutions. Each university has a seat on the center’s board and recruits companies to participate in a shared research program. To date, the Collaboratory has launched three centers—the Colorado Center for Biorefining and Biofuels (C2B2) in 2007, the Center for Revolutionary Solar Photoconversion in early 2008, and the Center for Research and Education in Wind in mid-2009—with two more centers on the drawing board—the Carbon Management Center and the Energy Efficiency and Management Center.

The state appropriated $2 million for three years starting in 2007. In 2010 another $2 million of Colorado’s State Energy Program funds came to the Collaboratory, for a total of $8 million appropriated to date. As the Collaboratory’s executive director, Hiller serves as the conduit between the virtual research centers and the Executive Board, while the Collaboratory’s four founding institutions fund his position.

The decision process within a center begins with a pre-competitive discussion of the needs in research, development, and commercialization for a specific technology. Next, the Collaboratory prepares a request for proposals with industry input. The three university partners prepare a final request for proposals. The team vets responses to the proposal request for quality. About one in three proposals is funded.

”Industry likes this process,” Hiller said, “because they get specific research attention on technology aspects they need to improve and because this process gives industry a chance to see good graduate students or post-docs in action for personnel recruitment purposes.”

Although younger and smaller than Ohio’s Third Frontier, the Collaboratory has equally impressive results for both shared research and sponsored research. Overall, in its first three years of operation, the Collaboratory has achieved a leverage ratio of 6:1, with $5 million in state funds spent or committed attracting $29 million in industry or federal funding.

Under the Collaboratory’s shared research funding matches, multiple companies collaborate with no exclusive rights to resulting intellectual property. Under sponsored research, the corporate participants retain exclusive intellectual property rights to the product being developed.

Lee Elliott, a graduate student at the Colorado School of Mines and a research participant at NREL, collects algae as he bioprospects in Golden Creek in Golden, Colorado. Photo by: Dennis Schroeder

By the end of 2010, the Collaboratory had committed $3 million in matching funds for shared research and achieved industry investment of $3.3 million. Industry investment in sponsored research has reached $5.2 million. The Collaboratory has invested matching funds of $2.9 million for federally funded research. The federal research funding into Colorado has been $20.4 million.

“The shared research program is intended to attract industry members to join the C2B2 center and to connect graduate and post-graduate researchers with industry players, so we offer a one-to-one match,” Hiller explained. “The DOE awards require only a 20% match, so there is much greater leverage.”

“Our typical grants are $50,000 to $100,000 for six months,” Hiller said. “Collaboration across universities was not required, but has become the norm. About 120 to 150 research proposals have been received, with more than half including members from more than one university.”

The C2B2, launched in 2007, was the Collaboratory’s first project. The center’s mission is researching ways to develop new biofuels and biorefining technologies, with the goal of transferring these advances as rapidly as possible to the private sector. C2B2 also trains new researchers for the renewable energy industry in Colorado. Sponsors have the opportunity to recruit future employees. The Center also provides educational and work opportunities for undergraduate, graduate, and postdoctoral students. The University of Colorado at Boulder is the lead institution for C2B2, but all four Collaboratory institutions play prominent roles in the activities of this center.

Although the biofuels industry has been hit hard by the recession, C2B2 remains the Collaboratory’s largest investment. From 2007 through 2010, state matching funds for C2B2 have attracted $2.1 million in sponsors’ commitments for shared research programs. The National Science Foundation awarded $336,000 to support C2B2’s Research Experiences for Undergraduates program. ConocoPhillips, a founding member of C2B2, has entered into a sponsored research agreement for $5 million in renewable fuels research over 3 years, with $1.4 million spent to date. The four Collaboratory institutions have also generated additional research funding from private and federal sources as a result of C2B2 relationships. In sum, matching funds of $1.77 million for biofuel research and development have attracted more than $7 million in private and federal commitments.

Companies outside Colorado, as well as venture capital funds, are beginning to take note. GEVO, an early stage but internationally recognized biofuels company, moved its headquarters, research operations, and 50 employees to Colorado from California to be closer to the research community and to C2B2 in particular. A number of biofuels companies have spun out of the universities, including Genesis Biofuel, OPX Biotechnologies (recipient of the Governor’s Excellence in Renewable Energy Award for 2010), Solix Biofuels, and Sundrop Fuels, each of which is based in Colorado.

“We are refocusing our pitch and programming to an extent around the unique and world-class training aspects of the center,” said Ryan Gill, managing director of C2B2 and professor of chemical engineering at the University of Colorado. “We believe that there will continue to be a need for highly trained BS-, MS-, and PhD-level scientists and engineers in biofuels and biorefining.”

“Moreover, we think that the C2B2 environment is rather unique from a training standpoint—a great environment to recruit talented individuals, training programs that span the three universities and NREL, a NSF-funded Research Experiences for Undergraduates program, and consistent input from industrial leaders in the fuels and chemicals space. We think this is hard to find anywhere else in the world,” Gill continued.

For example, many common products, such as paints, adhesives, and superabsorbents used in disposable diapers, rely on petroleum-based acrylic acids that could be replaced by bioacrylic acids.

”OPX will make acrylic acid that is cost-competitive to cost-superior with current petroleum routes, given the price of oil over the past five or so years, in addition to having substantial greenhouse gas emission advantages,” noted Gill.

Spun off from the University of Colorado in 2007, OPX Biotechnologies licensed a microbial genome engineering technology from the Boulder campus to produce biorefining fuels and chemical products. In 2011, Boulder-based OPX partnered with Dow Chemical Company to collaborate on industrial-scale production and eventual commercialization of acrylic products made from corn and cane sugar rather than from petroleum. OPX reports the life cycle analysis for its bioacrylic acid production process can reduce greenhouse gas emissions by more than 70% compared with traditional petroleum-based production. Since starting with a three-member team in 2007, OPX has grown to more than 40 employees. Although it is producing bioacrylic at a pilot scale now, OPX plans a demonstration-scale capacity of 5,000 gallons for later in 2011, with commercial-scale facilities operational in 2013.

Although founded prior to C2B2, OPX’s trajectory gives other biotech startups a great local success story. For example, C2B2 directly funds research on algae, to acquire what Matthew Posewitz of the chemistry department at the Colorado School of Mines describes as a “more informed understanding of central metabolism in these fascinating organisms.”

“Micro-algae have among the highest photosynthetic conversion efficiencies documented, are able to thrive in salt water, and are among the most metabolically versatile organisms known,” said Posewitz, as he explained why research into algae as bioenergy carriers is so promising.

Commenting on the Collaboratory’s other centers, Hiller noted, “The Center for Revolutionary Solar Photoconversion won part of a prestigious DOE Energy Frontier Research Centers award, and is still talking to industry members about substantial sponsored research.”

“Our Center for Research and Education in Wind has certainly been affected by the slow economy and the unpredictability of federal incentives for wind power, which impacts the finances of wind power companies,” Hiller continued. “But we’re very pleased to have two existing sponsored research agreements with Vestas and one more under discussion.”

The recession has affected Collaboratory efforts. In the leaner economy, some of the smaller firms with fewer than 500 employees may have a more difficult time maintaining the annual membership dues for a research center.

“We’ve had no further industry-sponsored research in biofuels since that ConocoPhillips agreement,” Hiller noted. “And I do think the lull in industry-sponsored research is largely a function of the economy.”

“However, we successfully competed for two large DOE biofuels research awards and one large DOE PV research award. In general, we anticipate that federal funding for research will decline over the next few years from the current high levels, but we expect industry funding to pick up.”

Asked about the Collaboratory’s impact on jobs, Hiller responded, “When ConocoPhillips announced its plans to build the company’s alternative fuels research and international corporate training facilities in Colorado, it graciously pointed to Colorado’s research capabilities and to the Collaboratory, in particular, as an important factor in its decision. Several wind power companies, most notably Vestas, have located research offices, headquarters, and manufacturing facilities in Colorado, and several thin film solar companies have evolved from R&D to production in Colorado.”

New York launches its
battery and energy storage consortium.

In New York, the state is making a substantial investment in accelerating battery and energy storage technology through cooperation between government, industry, and higher education. Incorporated in 2010, the New York Battery and Energy Storage Consortium (NY-BEST) is designed to help position New York as a global leader in energy storage technology for heavy-duty transportation, electric grid, and other applications.

Seeded by the New York State Energy Research Development Authority (NYSERDA) with approximately $25 million obtained through Clean Air Interstate Rule proceeds, the Consortium is charged with working with industry, academic, and government partners in an industry-driven collaboration.

“This funding is expected to last approximately five to eight years,” noted Jason Doling, project manager of transportation and power systems at NYSERDA, “and will cover NY-BEST operating costs as the consortium works to become self-sustaining, as well as research and development projects, and establishing testing and prototyping capabilities.”

As of March 2011, during its first year, NY-BEST had awarded funds for 18 projects involving 27 partners that totaled $15.2 million, with $7.9 million as NYSERDA’s cost share from CAIR funds. Sixteen of these projects will identify whether a technology should be flagged for further development. Two additional larger product development opportunities involve accelerating existing prototype battery technologies, namely for electrified transportation with General Electric (GE) and grid storage with Ultralife Corporation.

NY-BEST reports that these research projects will support more than 130 engineering and product development staff and help train up to 18 students over the life of the grant award.

“For the smaller dollar value seed projects, up to $200,000, partnering was not required, but applicants were encouraged to form collaborations between universities and commercial firms so that a commercial path was more clearly established,” noted Doling. “For the two larger projects with GE and Ultralife Corporation of up to $2.5 million each, collaborations were required.”

“In our battery business development effort, we are spending significant funds with universities in New York to enhance the region’s capability to analyze and develop battery energy storage technologies,” noted Glen Merfeld of GE Global Research. “The NY-BEST program will increase GE’s ability to foster these research efforts, and to help grow local talent in the area of high temperature sodium batteries.”

Specifically, the universities and research institutes with which GE is working include Alfred University, Columbia University, Clarkson University, Stony Brook University, and the Brookhaven National Laboratory. The areas of research under way are quite diverse, ranging from electrochemical modeling and measurements to development of glass seals and ceramics, as well as X-ray scattering techniques for nondestructive evaluations of electrochemical cells. GE’s Schenectady Battery Manufacturing Plant, in Schenectady, New York, will be hiring 50 workers by this summer and employ about 130 by end of 2011. The innovative battery that GE is testing and commercializing uses sodium halide technology and is aimed at heavy duty applications such as hybrid locomotives. GE views this product as disruptive technology in a marketplace currently relying on lead acid or lithium-based storage.

“We are taking a three-pronged approach: first, research and development; second, testing; and third, commercialization support,” NY-BEST’s Bill Acker said. “We continue to focus on R&D efforts, particularly with universities. But it takes more than R&D to grow new industries.”

“The ability to test systems in robust real-life environments to be able to test life cycle and failure mode is very, very important,” Acker continued.

Out of the overall NY-BEST budget, $3.5 million is earmarked for establishing a battery testing facility and standardized protocols, with additional federal and industrial funds to be leveraged in the creation of the facility. The battery prototyping, testing, and characterization facility will directly support commercialization efforts by providing NY-BEST members with a cell fabrication site and rigorous, standardized testing capacity.

“Through these services, members will have the ability to scale their devices and materials, fabricate cells, and perform tests at the cell, module, and system level,” noted John Cerveny, director of resource development for NY-BEST, “and subsequently share verifiable data with prospective customers and partners
for commercialization.”

The leverage ratio of funds attracted to state funds invested for NY-BEST has started at 1:1,
as expected.

“Over time, we expect that impact to multiply considerably. New York State has a solid history in creating programs that show very significant leverage over time,” Cerveny said. “NY-BEST is but one year into this area and expects that over time it will be
very strong.”

Indeed, several of the New York State Centers for Advanced Technology have ratios above 20:1, with some in the range of 50:1. Beyond direct fiscal leverage, NY-BEST has begun bolstering communication among participants in the emerging field of energy storage.

As Cerveny pointed out, “NY-BEST has created significant opportunities for networking among our members and other interested parties, and can already point to new business in New York State that has been fostered through these interactions.”

In a state beset with high energy prices, congested transmission lines, and an aging power plant infrastructure, NY-BEST’s Bill Acker points out a compelling reason for accelerating energy storage technologies: Electricity generation comes from two types of sources—those that can be turned up or down as demand rises or falls and those that cannot follow the load. “Unfortunately, those load-following sources are hydrocarbon fuel sources that have future energy price, environmental impact, and energy security concerns.” However, as Acker noted, “Energy storage is a key enabler for widespread use of wind, solar, and nuclear power, which are each non-load-following sources.”

“Periodically, throughout history, some technologies and some capabilities have the ability to transform industry. Energy storage is one of those technologies,” Acker commented. “I don’t think many people recognize how much transformative power energy storage will have when we have affordable, high-density storage for the grid and for transportation.”