Ellen LutzCEO, Clean Markets LLC

September 28-October 1, 2010

• NASEO and ASERTTI jointly sponsored study• Purpose:

– To provide State Energy Offices with best practices & key success factors in energy technology innovation

– To minimize risk in funding innovative R&D– Develop recommendations for State Energy Officials when

evaluating higher risk technology innovation projects

• Status: study undergoing participant review

• Literature review of technology innovation• Twenty-one in-depth interviews with organizations

who have created clean energy technology breakthroughs

• Data analyzed by stage of development

Stage of Development

Number of Interviewees

Sectors

R&D 6 projects Universities, National Labs Research institutions, Innovation Centers,State Energy Offices, Non-profits, Private companies, other State partners

Demonstration 5 projects

Deployment 10 projects

INNOVATION MODELS TRADITIONAL RDD&D MODELS

“Ideation” stage precedes start of R&D activity

R&D direction generally based upon research to date

Intention: to discover completely new ways of addressing problems

Intention: to achieve incremental progress in technology performance

Requires multidisciplinary teams to act as one

Clean lines of separation exist between organizations and their responsibilities

Market “pull” – integrates market analysis early in research planning

Market “push” – research “pushed” into development with minimal market input

Significant overlap between phases – faster prototype and testing

Uses “phase gated” approach – stages of RDD&D treated as sequenced efforts

Assemble project & transfer to end user site

Activate project at end user site

Solicit end user feedback

Install O&M processes & procedures

Execute manufacturing plans to create economy of scale

Work with partnerships

Conduct basic and applied research

Investigate existing materials

Synthesize new materials

Model devices & approaches

Analyze technologies, market, policies, environmental issues

Develop partnerships

Develop & deploy working prototypes

Monitor & evaluate performance

Solicit peer/end user feedback

Make adaptations

Connect/simulate prototype with networked infrastructure

Develop & work with partnerships

R&D DEMONSTRATION DEPLOYMENT

Execute: ramp up for commercial success

Understand end user behavior and competitive set

Determine competitive advantage

Create long range forecasts

Execute business, marketing & operations plans

Continuously assess gaps & evaluate resources & partnerships

Create new ideas

Review ideas methodically

Evaluate market trends and technologies

Assess internal capabilities

Identify opportunities & focus RD&D

Find the right partnerships

Transform ideas into business opportunities

Mitigate technical & operational risk

Transfer & integrate technology

Rapid prototyping: Create real world pilots

Evaluate past failures and develop lessons learned

Develop business plan based upon end user feedback

IDEATION INCUBATION COMMERCIALIZATION

GOALS AND

STRATEGY

RESOURCES PROCESSES

TEAM ENVIRONMENT

INNOVATIONSUCCESS

EnvironmentEconomy

Project Management Intellectual Property

DiversityExperienceCommitment

ChampionMarket-FacingInnovation Culture

Partnerships CapabilitiesFunding

TechnologyAdvancement

Broad reaching goals:– Solve environmental or economic problems– Improve existing technology performance

Focused on:– technology performance – bottlenecks to achieve larger R&D goal

Incorporate market performance indicators:– Expedite market adoption– Deploy commercial application

R&DR&D

DEMONSTRATIONDEMONSTRATION

DEPLOYMENTDEPLOYMENT

• Team Qualities: Experienced, passionate, committed, talented leader and team

• Diversity: Multidisciplinary; involve R&D, commercialization, end users early

• Project Champion: Provides long term vision, networking, belief in project’s success

• Market Expertise: Understanding of market and ability to position in marketplace

• Culture: Allow time for creativity and innovation

PROJECT MANAGEMENT

• Provides clear direction & touchstone for evaluation

• Needs flexibility to adapt to changing conditions

• Many R&D organizations had rigorous metrics

• Routine meetings & regular reporting

• Majority had exit strategy in place

INTELLECTUAL PROPERTY

• Majority had IP process

• Major concern, especially R&D

• Private sector funders often require first right of refusal

• Manufacturers often want exclusive rights at demonstration stage

• IP rights well defined by private commercialization partners

PARTNERSHIPS

• One of most critical success factors

• Most effective & expeditious way to fill gaps

• Eliminates need to develop from scratch

• Goal to round out experience & skills of team: often R&D partnered with business acumen or vice versa

FUNDING

• R&D: Multiyear budgets 1-10 years; consistency reduces waste & keeps momentum

• Demonstration: 1 ½-3 years; $400k- $10.3M

• Deployment: $3M-$130M over multiple years

• Some exceptions:– smaller budgets create

greater sense urgency– Early success with small

budget attracts more resources

• Traditional RDD&D process can be adjusted to accommodate faster pace, flexibility & simultaneous development of innovation

• Best Practice areas involve: Goals, Team Environment, Processes and Resources

• State Energy Offices are in unique position to be an innovation catalyst within their states & create new categories of manufacturing jobs

• State Energy Offices can minimize risk of funding innovation by designing selection criteria for projects around best practices identified in this study

• Strive for game changers: Identify gaps in the state’s clean energy supply chain and challenge universities and industry to fill those gaps with innovative solutions.

• Reward good behavior: Develop project selection criteria that rewards innovation best practices and methodologies

• Require structure: States should require project management plans for high- risk projects, and have protocols in place for managing intellectual property arising from R&D projects.

• Look for an innovative environment: Look beyond the project to the culture within the project team itself.

• Encourage external funding. There is still value in soliciting projects that states cannot fund alone, and requiring external partners to contribute the needed cost share.

Ellen Lutz

215-242-1424elutz@cleanmarketswork.com

Ellen Lutz President and CEOClean Markets, LLC

www.cleanmarketswork.com