The New New Deal

by Grunwald, Michael

  “Solar has a massive stigma as being expensive, but it’s not true anymore,” says SolarCity’s South Africa–born CEO Lyndon Rive, another former infotech entrepreneur whose cousin Elon Musk, the Ironman-inspiring founder of PayPal and Tesla, chairs his board. “We can already offer you a deal to buy future electricity for less than you’re paying now, and our costs are coming down every day.”

  It was no accident that green energy ventures like SolarCity, Sunrun, BrightSource, and Tesla—as well as SunPower, Serious, Solazyme, and yes, Solyndra—were so often rooted in the Bay Area. (Or that Chu and so many of his top aides were rooted in the Bay Area.) California had America’s strictest mandates for energy efficiency and renewable power. It was about to implement a cap on carbon. And the pioneering mega-state that gave us microchips, iPhones, Google searches, and the Hollywood vision of success was still America’s most powerful engine of innovation.371

  Clean-tech was the next California gold rush, as software and chip industry veterans adapted their skills to the digital grid and solar technology. Risk takers like Rive—who came to California for an underwater hockey tournament, got swept up in the Internet boom, and stayed to launch an IT start-up—were trying to reinvent the energy landscape, with help from legendary Silicon Valley venture capitalists like John Doerr and Vinod Khosla. SunPower chief technology officer Tom Dinwoodie took me to the roof of the historic “daylight factory” overlooking San Francisco Bay, where Ford built Model As before World War II, where the real Rosie the Riveter built jeeps and tanks during the war, and where SunPower now assembles the world’s most efficient silicon panels. He showed off the sleek solar array on the roof, then pointed across the bay at a collection of hulking tanks that Chevron uses to store fossil fuels.

  “Someday,” Dinwoodie said, “we’ll turn those tanks into hot tubs.”

  Dinwoodie was basically expressing the California creed, which was not all that different from the audacity of hope. There was a lot of Californification in the Recovery Act, and the entire Obama agenda.

  The right tends to caricature California as a hotbed of hippie-lefty vegan politics, the land of Daily Kos and the Sierra Club, yoga and medical marijuana, “Hollywood values” and “San Francisco values.” After the subprime collapse, when state government was paying employees with IOUs and headlines were ridiculing “California’s Wipeout Economy,” conservatives blamed government activism and a hostile business climate. But that hostile business climate had somehow nurtured Google, Apple, Facebook, Twitter, Disney, Cisco, Intel, eBay, and countless other futuristic companies that shape how we live. Even in the throes of the recession, California’s wipeout economy was attracting more venture capital than the rest of the nation combined. And government activism helped explain why. Public support for the University of California, federal energy labs, and the military-aerospace-industrial complex had helped fuel the infotech and biotech booms, and now eco-friendly energy policies were promoting the clean-tech boom. The Recovery Act would export a taste of California to the rest of the country.

  When I watched the Tea Party candidate Marco Rubio trash the stimulus in Florida, he riffed about how at that very moment someone in a garage was probably inventing a battery the size of a wineglass that would power a whole building—with no help from the government. But Yet-Ming Chiang had invented the pixie dust for A123’s early batteries with help from a six-figure Energy Department grant. Now Chiang was trying to invent the kind of battery Rubio had in mind through 24M, with a seven-figure ARPA-E grant to help him. A123 was working on a separate ARPA-E project to recycle used car batteries for the grid.

  Rubio was peddling a libertarian fantasy of technological innovation. ARPA-E was promoting the real thing.

  The Game-Changers

  The batteries of today are much better than the batteries of yesterday, but they can’t compete with the incredible power of gasoline. Envia Systems, another Silicon Valley start-up, is developing the batteries of tomorrow. Chief technology officer Sujeet Kumar showed me around the small lab where Envia is developing “nano-coated silicon-carbon composite anodes” and “high-capacity manganese-rich layered composite cathodes.” There was a dishwasher-sized vat where chemicals are mixed, a furnace where they’re cooked into black powders, a room full of multicolored wires where they’re subjected to intense thermal testing. It was typical lab stuff, except for the results: Test batteries stocked with Envia’s nano-glop are producing world-record energy densities of 400 watt-hours per kilogram. That’s three times as good as the first-generation Volt, a major step toward all-electric vehicles that go three hundred miles on one charge. The frustrating lead times of automobile production will keep this breakthrough off the streets until at least 2015, but it could shave over $5,000 off the price of a Volt.

  “We’ll make electric vehicles profitable without subsidies,” Kumar says.

  Kumar is a nerdy scientist and a proud capitalist, an Indian immigrant who says he came to America “because of free enterprise.” When Silicon Valley was all about pets.com and flooz.com, he patiently worked on nano-materials for batteries that nobody wanted; now, he says, “it’s my time.” But Kumar is the first to admit that Envia, which was founded in 2007 in the Palo Alto public library, would be nowhere without the federal government. Its underlying technology was licensed from an Energy Department lab. When it was struggling to raise seed money, ARPA-E awarded it a $5 million grant. Envia was then able to produce results that helped it raise $17 million in private capital—and its lead investor is General Motors, which owes its existence to the feds.

  “Clean-tech is capital-intensive and slow. It isn’t software,” Kumar says. “The risky technologies really need government support, or the innovation won’t happen.”

  When Summers called government a “crappy vc,” he was really objecting to its project finance work; he’s a big supporter of ARPA-E, which is more like a traditional early-stage venture capital firm. Even Mitt Romney has said he supports federal research “through programs such as ARPA-E.”372 And Envia is just one of the agency’s early success stories. In its first two years of high-risk, high-reward science experiments, eleven of its grant winners went on to raise nearly $200 million in private financing.

  Investors poured $27 million into FloDesign, which is developing next-generation wind turbines shaped like jet engines. Chiang’s 24M attracted an additional $10 million for its flow batteries. Another MIT-generated venture, 1366 Technologies—this one wonk-named for the number of watts of solar energy that hit each square meter of the earth’s atmosphere—raised $33 million for a manufacturing process that could slash the cost of silicon solar cells. Instead of sawing paper-thin silicon wafers out of ingots—an expensive, energy-intensive process that wastes half the material as dust—1366 plucks the wafers directly from molten silicon.

  Majumdar calls 1366 the agency’s first grand slam, a game-changer for solar power. “It’s amazing to see this stuff pan out so quickly,” he says.

  I’ve never felt dumber than I felt following Secretary Chu around the ARPA-E Innovation Summit, already known as the Woodstock for energy geeks, watching him grill scientists and engineers on the technical intricacies of their out-of-the-box research into carbon capture, power conversion, and the like. In my semidefense, he made some of the scientist and engineers feel dumb, too. One of his first stops was a showcase for a super-efficient “wave disk engine,” which would replace pistons with shock waves that blast hot gas into rotors that … oh, I lost track. “Where are the thermo-efficiencies?” Chu asked. It wasn’t the kind of question that cabinet secretaries usually ask. “If the shock wave goes turbulent, does it clear before the next detonation?” The team of Michigan State techies shot each other nervous glances.

  “Errr … we don’t know,” one of them stammered.

  This was Chu’s favorite part of his job. He was a true science junkie; after the oil spill, he studied diagrams of the well and calculated flow rate equations as if he had been detailed to the c
ontainment team. Chu also believed that this was the most vital part of his job, that the United States faced a Sputnik moment, that the brainiacs at the ARPA-E summit represented the best hope for another American century. China was installing more wind farms, high-speed rail lines, and high-voltage transmission wires than the United States. Thanks to a Recovery Act upgrade, the Energy Department’s “Jaguar” supercomputer had become the world’s fastest in 2009, but a Chinese model had taken over the top spot in 2010. “We’re in a technological race,” Chu told me later. “Our advantage is in that room.”

  ARPA-E aimed to steer all that brainpower into “white space,” the gaps in human knowledge where breakthroughs could reshuffle the energy landscape. Its first question was never: “Will it work?” It was: “Would it matter?” For example, air-conditioning hadn’t improved much in a century; it depended on an inefficient vapor compression process that clumped together dehumidification and cooling. Under the guidance of Ravi Prasher, another nano-genius who had overseen Intel’s thermal technologies, the agency’s BEETIT program—a strained acronym for Building Energy Efficiency Through Innovative Thermodevices—was seeding all kinds of alternative approaches, from “magnetic refrigeration” to “thermo-elastic cooling” to “ventilation enthalpy recovery.”

  Similarly, Envia’s batteries of tomorrow will approach the theoretical limits of lithium-ion technology, but they still won’t match gasoline, which is why ARPA-E is also financing the batteries of the day after tomorrow. Led by Dave Danielson, a gung-ho clean-tech venture capitalist, the BEEST program (Batteries for Electrical Energy Storage in Transportation) has invested in magnesium-ion, lithium-sulfur, and other speculative battery chemistries. Polyplus CEO Steve Visco, a former chemist at a national lab, is working on “lithium-air,” which could be ten times as powerful as lithium-ion. The problem is that lithium-air is highly reactive, and batteries aren’t supposed to explode; Visco showed me video of a lithium cube dropping into water and instantly vanishing. But then he showed me footage of a lithium cube encased in a Polyplus ceramic membrane dropping into water, and nothing happening. “That’s our magic right there,” he said. “If we can get the durability right, we’ll beat gasoline.”

  All of ARPA-E’s programs are chasing far-out dreams. GRIDS is investing in far-flung technologies that could store renewable energy on a massive scale; as Majumdar puts it, the current grid is constrained in much the same way a human being without a bladder would be constrained. AGILE is promoting more efficient transistors, inductors, capacitors, and other unseen building blocks of the grid. Cree, the lighting firm that Obama and Biden visited, won a grant to develop transistors that could cut electricity losses in half, while shrinking transformers from the weight of an elephant to the weight of Kate Moss. The goal is to replace ancient substations that occupy entire city blocks with tiny high-tech basement vaults that use one tenth the power and suffer far fewer outages.

  Electrofuels, the discipline invented by ARPA-E to overcome the inefficiencies of photosynthesis, was its most radical program, and the only one without an acronym. Deputy director Eric Toone, the biochemist who devised the concept, was amazed by the audacity of the proposals, many from renowned scientists who had never done energy work. “The intersection of really smart and really creative is a really exciting place,” he says. But he wasn’t sure any of their schemes to reengineer microbes would actually produce fuels. For years, genetic research funding had focused on human disease; the molecular biology of these organisms was still a complete mystery. “We didn’t know if we had the tools to manipulate them,” Toone says. “We had this great story, but we had no idea if any of this stuff was going to work.”

  We do now. In his introductory speech at the ARPA-E summit, Majumdar spoke of the dream of electrofuels, a word that wasn’t even in the dictionary yet, a dream barely one year old. And then he stunned the crowd. “If you think this is in the future, if you think this is science fiction, think again,” he said. He held up a vial of electrofuel engineered by a team at North Carolina State in collaboration with a Colorado biotech start-up called OPX; at energy.gov, there’s video of that fuel powering a jet engine. Majumdar then held up another vial of electrofuel, this one brewed by a team at MIT.

  Toone says he’s been astonished by the success of the electrofuel projects, and OPX has raised $36 million in follow-up financing. But the energy world is all about scale. A vial can prove a concept, but it’s a long way from refueling our way of life.

  “Now we know it works,” Toone says. “We just don’t know if it matters.”

  — SEVENTEEN —

  Political Recovery

  Behind the numbers, beyond the shouting, the Recovery Act was about middle-class everymen like Duane Bartley, a bearded Paul Bunyan type from a small mountain town in Colorado, a husband and father and electrical engineer who suddenly found himself unemployed and bankrupt in 2009. Bartley is a hard worker, a gentle giant who likes tinkering with engines with his dad and fixing appliances for neighbors in need. But the Great Recession didn’t just purge rottenness from the system. Bartley’s wife’s veterinary business failed, because her clients couldn’t afford pet care, and then the battery company where Bartley was working failed, because consumers couldn’t afford much of anything. He blasted out hundreds of résumés; not only didn’t he get a job, he didn’t get a single response. He didn’t even send out Christmas cards, because he couldn’t think of anything cheery to say.

  But in April 2010, Bartley landed a quality-control job with UQM Technologies, which was tripling its workforce after winning a stimulus grant to build motors for electric vehicles. Three weeks later, Bartley was introducing Biden at a Recovery Act event at UQM’s new factory, wearing one of those crazy-loud ties that guys who never wear ties wear, explaining how happy he was to give his teenage daughter some security.373

  “We’ll be putting stamps on our Christmas cards this weekend,” Bartley said.

  Bartley, as the newspaper cliché goes, was not alone.

  In the spring of 2010, recipients reported that Recovery Act grants directly funded nearly 700,000 jobs. And that reporting only applied to a third of the stimulus; it didn’t capture the impact of tax relief or aid to the vulnerable, much less the indirect impact of new hires like Bartley spending their paychecks. Overall, the White House estimated the Recovery Act had already increased employment by at least 2.5 million jobs, only slightly higher than estimates from independent forecasters.374

  But Biden had been around politics awhile, and he didn’t think people responded to numbers. He thought people responded to people, to testimonies like Duane Bartley’s.

  “That story can be told time and again, all over the country,” the vice president told the crowd. “Our job is to have Duane’s story repeated and repeated and repeated.”

  To Biden, it was a story about resilience, about America getting back in the fight. It was also a story about the Recovery Act’s investments in innovation, about the public sector helping the private sector manufacture the green products that will—“literally!”—drive progress in the twenty-first century. At UQM, Duane Bartley was troubleshooting motors for the all-electric buses that another U.S. company called Proterra was building in another stimulus-funded factory in South Carolina. The Recovery Act was also helping transit agencies in Los Angeles, San Antonio, and Tallahassee buy Proterra’s new buses. Biden thought that if Americans could see this new ecosystem taking shape, the politics of stimulus would improve.

  That was the basic idea behind the “Recovery Summer” of 2010, the West Wing’s last-ditch effort to revive the Recovery Act’s reputation.

  Obama sometimes humble-bragged about the “perverse pride” his administration took in putting policy first and letting the political chips fall where they may. He wanted his White House to behave more like the Aspen Institute than Tammany Hall, and the Recovery Act reflected that. The two biggest high-speed rail grants went to states with Republican governors. The biggest stimulus proj
ect was a nuclear cleanup in South Carolina, where Governor Sanford was savaging the stimulus. The competitive programs often attracted intense political pressure, but a slew of independent audits of the Recovery Act failed to uncover the administration putting its political thumbs on any policy scales.

  The White House, however, was not the Aspen Institute. Politics may not have dominated the conversation, but it was in the room. As the midterm elections approached, Rahm and other political aides often called Biden and his team with political questions: Do we have anything Blanche Lincoln can announce in Arkansas? The White House arranged frequent events in Nevada for Harry Reid, who was fighting for his political life against another Tea Partier. And there was a strong desire to deodorize the general stench around the Recovery Act, which, as Obama half-joked to his cabinet, was “the only thing less popular than I am,” even though its individual items still polled well. That suggested a political failure, and Biden was eager to correct it.

  By the Recovery Summer, more than half the stimulus had been spent, and it seemed to be winding down. But as Ron Klain told Democrats on the Hill, only the under-the-radar elements—tax cuts, state aid, food stamps—were winding down. The visible, marketable stuff was ramping up. That summer, there would be six times as many highway projects under construction as the last summer, eight times as many park projects, twenty times as many water projects.

  Finally, the shovels were ready. It would be nice to get some credit for them.

  Congressional Democrats were less eager for their constituents to see the Recovery Act in action.

  They thought Obama had done a horrible job selling the stimulus early on, letting Republicans dictate the narrative, getting bogged down in health care instead of pounding a jobs message. But by 2010, most Democrats had stopped clamoring for presidential backup on the stimulus. They no longer wanted to discuss the stimulus. The narrative of failure was set, and an election year when the major issues were sky-high unemployment and sky-high deficits seemed like a strange time to try to rewrite it. They were more concerned with salvaging their own jobs than the Recovery Act’s reputation. “It got to be so toxic,” says one House leadership aide. “It didn’t make any sense to talk about its benefits.”