A cargo ship transits the Suez Canal at Suez, Egypt, Feb. 2, 2011. Oil prices fell as investor fears that chaos in Egypt could disrupt the 2 million barrels of crude per day that transit the Suez Canal and an adjacent pipeline eased.
"Turning Fledgling Concepts into Reality"
Op-Ed, Boston Globe
February 21, 2011
Author: Juliette Kayyem, Lecturer in Public Policy
Belfer Center Programs or Projects: International Security
THE DECISION by Evergreen Solar, a company that had received $43 million in state assistance, to close its Devens plant and move its solar-energy technology to China set off recriminations throughout Massachusetts. The loss of hundreds of jobs is the most immediate consequence, but the entire saga threatens to turn public investment in new technologies into a political nonstarter.
Now, a few weeks after Evergreen's decision, it's worth taking a deep breath and reconsidering the debate about just how and when — and not whether — the state should provide such investments.
From the perspective of national security, independence from oil imports in the Middle East is necessary; our complicated relations with nations such as Saudi Arabia are made worse by our complete dependence on their commodity. Even the revolution in Egypt has made oil companies worry about the continuing accessibility of the Suez Canal, a crucial route to the Atlantic Ocean.
From the perspective of environmental policy, every alternative — from solar to nuclear to liquefied natural gas — ought to be pursued as part of a bipartisan agenda to clean up our air, land, and seas.
As if anticipating the political backlash over Evergreen's decision, the federal Department of Energy this month made a surprising announcement about its Advanced Research Project Agency — known as ARPA-E. Starting in 2009, it gave $151 million in grants to advance 37 clean-energy ideas deemed either too risky or too new to attract much private financing.
Since that initial funding, ARPA-E announced, six of those projects have made sufficient progress to generate more than $100 million in private venture-capital financing. Five of those six companies — 1366 Technologies, FloDesign, SunCatalytix, General Compression, and 24 M — are in Massachusetts.
What went wrong with Evergreen had little to do with bad policy; companies in Massachusetts clearly are at the forefront of technological innovation and, in some cases, need government support to flourish. ARPA-E companies, and not Evergreen, provide the better model for the state to recommit to public investment.
First, each of the grants under ARPA-E is relatively small — between $750,000 to $8 million — compared with the $43 million investment in one company, Evergreen. ARPA-E provided a stimulus to seek more funds; it served as a seed, and not the whole tree. ARPA-E puts a high value on the capability of companies to get matching funds, thereby choosing companies with a little fire in their bellies. (In contrast, Evergreen never formally applied to federal programs that provide up to $16.5 billion in grants or loan assistance.)
Second, the state support to Evergreen should have been conditioned on private or match funding, and not, as it was, on employee hiring. Job creation is not easily linked with innovation. Put another way, jobs will more likely come as an eventual benefit to the success of a cluster of innovative companies. As Josh Lerner, a professor at Harvard Business School and author of "Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed — and What to Do About It," puts it: "Jobs are created not by the companies the government or venture capital directly support, but because major corporations become attracted to areas where there is high venture activity."
Finally, when political leaders are committed to innovation — to creating an atmosphere where companies can flourish — they must be given room for error. DARPA (the Defense Department’s investment arm) supports thousands of innovative technologies, with success measured in the dozens. Even ARPA-E supported 37 companies, with private investment going to a mere six. With innovation, we "simply must have a greater tolerance for failure because the successes can be so revolutionary," said Lerner. The Internet, a DARPA investment, comes to mind.
There is no reason the state cannot also be a player in supporting local innovation. Evergreen may not have been the best company to choose; commentators have highlighted strategic manufacturing errors that sealed its competitive disadvantage to China. But Governor Deval Patrick's innovation strategy should not whither on the Evergreen vine.
There are at least five companies in Massachusetts that will agree.
Juliette Kayyem, a guest columnist, is former homeland security adviser for Massachusetts and most recently served as assistant secretary at the US Department of Homeland Security.
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