In this episode, I sit down with Dr. Vanessa Chan, DOE’s Chief Commercialization Officer, to discuss the challenges of commercializing new clean energy technologies. Her office has helped develop a common vocabulary among stakeholders (“adoption readiness levels”) and concentrated the attention of public and private capital on certain key technologies (“pathway to liftoff” reports). It’s wonky stuff, but it has transformed and turbocharged DOE’s commercialization efforts.
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David Roberts
Hello, everyone. This is Volts for October 16, 2024. The Department of Energy has gotten serious about technology commercialization. I'm your host, David Roberts. As I discussed early last year with Brian Deese, outgoing director of the National Economic Council, the US has explicitly embraced industrial policy, taking a more active hand in the composition, character, and location of the nation's industrial activity. One of the key skills involved in industrial policy is commercialization, the ability to push promising new technologies from idea to prototype to startup to mass market.
And so, one of the priorities at Biden's Department of Energy has been to boost the pace of commercialization to ensure that DOE research money doesn't just disappear into its labs, but that technologies developed in those labs make it out across the so-called valley of death and into the hands of real-world consumers.
My guest today, Dr. Vanessa Chan, works at the heart of those efforts as DOE's Chief Commercialization Officer and the head of its Office of Technology Transitions (OTT). Her job, daunting as it sounds, is to drive private-sector uptake of new clean energy technologies by coordinating commercialization activities across the DOE's sprawling network of 21 national labs, sites, and plants.
The idea is to create a common language and a common set of analyses and recommendations that allow public and private actors to collaborate on commercialization across heterogeneous areas. The OTT is involved in a huge range of DOE initiatives, but there are a couple for which Chan is directly responsible, and that strike me as particularly meaningful in that I think they are going to permanently reshape the way DOE thinks about and approaches commercialization.
The first is "Adoption Readiness Levels", and the second is "Commercial Liftoff Reports." Yes, I realize these might not sound thrilling on the surface, but I hope I have earned your trust on these matters enough that you will have a listen — I think Dr. Chan and I can convince you that these seemingly arcane procedures are crucial to driving a faster clean energy transition. With no further ado, Dr. Vanessa Chan, welcome to Volts. Thank you so much for coming.
Dr. Vanessa Chan
I'm so excited to be here. Thanks for having me.
David Roberts
Before we get into the details, the specifics, let's back up a little bit and just talk. You have been in your career involved in consulting with clean energy startups at McKinsey. You've been involved in entrepreneurship in startups. You've been involved in academia as a professor at the Philadelphia School of — what is it, School of Engineering, and...
Dr. Vanessa Chan
Yes, University of Pennsylvania Engineering School.
David Roberts
Got it. So, you've been in academia; you've seen this area from all these different angles. So, I'm curious, who came to you to recruit you, and what did they say they wanted from you?
Dr. Vanessa Chan
Well, great question. And you've known me for half a second, but anyone who knows me knows that I'm someone who's pretty impatient, wants to get things done, and really looks to have an impact. So, working in federal government was never on my vision board. So when I was approached, I was like, "Really? Are you guys sure that I'm the person you want? Because I'm not sure this is what would make sense." But basically, what happened was I have spent my entire 20-something years commercializing technologies. And where this started from was I have a PhD from MIT, where I had what many consider a successful PhD, which is I had a first author paper in science, I had a patent and so forth.
But one thing that was really bugging me was, I spent five years getting this PhD, and I wasn't sure how it was actually going to change the world. I was not convinced that I was going to be able to have the right kind of impacts as a professor, but was being groomed to be a professor, and that was all I really knew. And so, what happened was, a friend of mine actually asked me to go with her to a McKinsey and Company presentation because she didn't want to go on her own. And I told her I wasn't interested, I was going to become a professor.
And she was like, "They have free cocktail shrimp." And I was like, "Oh, that's great." I'm making $18,000 a year. I can tell you where you can get a, you know, back then, a seven-dollar burrito where it's just big enough for lunch and dinner. So, cocktail shrimp was not on my menu. So, I went and actually found an incredibly intelligent, thoughtful group of people who convinced me to apply for a job. And so, fast forward, I got a job offer, and I was thinking, "Well, you know, it'd be great to understand how the real world actually uses technology."
So maybe when I become a research professor, I'll be able to do research which has more direct impact in the real world." And so I was like, "Let me do this for two years." So the problem was, my very first study was for a client who was trying to commercialize a gas sensor technology, and they weren't able to make money off of it. And I got deep into the issues with technology commercialization on my very first study. So when my thesis advisor came to me a year or so later, he said, "Hey, there's a couple of open faculty positions."
I was like, "Oh, I'm sorry, Ned. I think I'm staying here because I found my calling." Which is, how do I actually get technologies out of the research labs and into the market? And so, I did that for about 13 years. You know, when you are in... for such a long time, I feel like you're not really evolving and growing. I became a partner at McKinsey, called the "innovation practice," and was the first woman elected partner in the North American chemicals practice and was really kind of enjoying my job, but I wasn't really growing. And I think the next generation has to be very entrepreneurial.
And so, I decided to do my own startup. I had this idea where I am someone who's a maker. I make things, I knit, I do jewelry, I do pottery, and I have all these, like, little inventions I have around my house. And I had just watched the movie Joy, and I was like, "How about if I try to bring my product invention to QVC?" So, I left McKinsey, did a Kickstarter campaign, and basically wanted to learn how to innovate and teach my children how to be entrepreneurs. So, they were seven to nine at the time, and they joined my "board of directors" and got a firsthand look at how to do this.
And then fast forward 18 months later, I actually got a contract on QVC and sold my tangle free headphones on QVC and learned a lot about branding, social media, marketing. I mean, you and I are old enough that we never had social media or even computer emails, right, when we were growing up, so I wanted to learn that. And then at the time, I also, you know, decided to do some angel investing. And then Penn Engineering came calling and said, "Hey, you know, we are looking to really innovate. And we actually have a class which needs a third section, and it's engineering entrepreneurship.
You're a Penn alum. You led innovation for McKinsey. You're now an entrepreneur. Would you consider coming and teaching as a professor of practice?" And I was like, "You know what? It'd be kind of neat to go back to the next generation and really try to shape where they're going." And then I had a big light bulb moment, which was: we actually don't teach commercialization at all in academia. In fact, if anything, we're anti-commercialization, and let me tell you why: When I was getting my PhD, I was told, don't talk to anyone about your research, because the name of the game is to publish or perish.
And so, if you talk to people about your research, you might get scooped, and they're going to publish before you. Then, you end up joining a research group where everyone's working on the same technology. In my case, it was block copolymers. So, every single PhD coming out of Ned's group had a thesis on block copolymers. You're very much technology push, and then when you are getting your PhD, the very last thing you do is you defend your PhD. So, you're telling everyone why you're the smartest person in that room and why you need to defend what you've done.
So, translate that to entrepreneurs and people trying to commercialize, which is, don't talk to anyone about what you're doing when they ask you questions, defend what you're doing. And it's just the antithesis of commercialization. And when we're in academia, we teach people all the hard science, don't get me wrong, hard science, research and development, that is the first two stages of commercialization. But we don't teach them what the real-world issues are.
David Roberts
And the real world issues are all about collaboration and emotional intelligence, which is not necessarily what you get in MIT undergrads.
Dr. Vanessa Chan
Yeah, I mean, you know, when you're in engineering schools, right, you're doing a lot, you're working really hard, you're getting to tackle some extremely difficult scientific matters. And quite frankly, academia in general is a pretty lonely journey, right? Because it's all about getting a GPA, and you are responsible for that GPA, even when you're getting your SAT score. It's a lonely journey. It's not about teamwork and collaboration. And so I think the key for me was we can really do some transformations here. And so I scrolled my way to be the undergrad chair for the material science and engineering department.
The first time a non-tenured, non-research professor was made an undergrad chair. But what that allowed me to do was to reform the curriculum and start pulling a lot of those real-world skills into the senior design thesis for the Material Science Department, which was the second class that I was teaching. There, I taught the students to actually go and interview the real world, understand what the technology is actually going to do in terms of having an impact, taught them how to communicate, and so forth. And so what was interesting was, during that time, in about 2017, I think it was, I got a phone call from a former client who was like, "Look, the DOE is looking to create a foundation around commercialization.
So, this would be a 501(c)(3). And I told them that if you're going to talk to someone about commercialization, there's one person you have to talk to, and that's Vanessa." So, they asked if I would join a workshop, and my husband was commuting at the time to Walmart, so he was the head of energy in Walmart, so he was in Arkansas. So, I couldn't go for the full day. So, I went for part of the workshop and really spoke a lot about the challenges with commercialization, the things we have to change as a nation and so forth, and didn't think anything of it.
And then fast forward to 2020. Someone that was in that workshop was the person who threw my name in the hat to be the chief commercialization officer. So, the reason why I share that story is that sometimes opportunities are not convenient because it's easier to say no. Right, if you've got a lot of things that are in balance. But that one, yes, that I made to go to that one workshop is why I'm sitting here in the seat today.
David Roberts
Well, I mean, it kind of sounds like, in retrospect, your entire professional journey has been sort of, it seems very directional, like you've spent your entire life preparing for exactly what you're doing right now.
Dr. Vanessa Chan
It's exactly that. It's like, I wish I was a genius and said, "Hey, I knew exactly why I quit McKinsey on a great salary to do kickstarting." But for me, it's always been about learning and pushing and really thinking about what needs to be done differently. And so in many ways, I think you're right, because here at the DOE, as the Chief Commercialization Officer or coming from an academic background is very helpful because many of the folks in our research labs, which are incredible, are very steeped in research and development. And so understanding their mindset and thinking is really critical.
In order to commercialize anything, we need to be able to get the private sector to act. As a former McKinsey partner, I've been in boardrooms and have worked with the C-suite teams around how they actually deploy their capital and bring technologies to market. Then, as a startup founder, I understand how hard it is to actually bring something to market and all the challenges. So, like, I'm a kid in the candy store. I love my job, and it has been so much fun. I've been here since day one of the Biden-Harris administration, and honestly, it's been the best job I've ever had.
David Roberts
Let's get into some specifics then. I want to talk about these Adoption Readiness Levels, but I think to give people a little context. Let's back up and first talk about Technology Readiness Levels (TRLs). They have been around a long time, as I understand it, so just maybe talk about what are TRLs and how are they currently used? And then we can sort of set up, you know, why you felt the need to supplement them.
Dr. Vanessa Chan
Sure. So, Technology Readiness Levels were invented in the 1970s by NASA in order to launch rockets to the moon. They go from a scale of one to nine, where when you're at TRL nine, it means you have a product or a solution that actually works, that could actually launch a rocket to the moon. It was very important because when you're trying to build something that complicated, you have to make sure the technology is all working. It serves a very important purpose. However, when you're trying to commercialize something, getting to TRL nine is insufficient to actually get to wide-scale adoption in the marketplace.
David Roberts
As many a frustrated entrepreneur can tell you.
Dr. Vanessa Chan
Exactly. And so, what's happening is we're all anchored on, you know, "We're on TRL three. How do we get to TRL five?" But there are so many other things like unit cost economics, regulatory issues, all that matter. Because when you're building a rocket to the moon and you're NASA, you actually don't care about the cost of it.
David Roberts
Right.
Dr. Vanessa Chan
You actually don't need a permit to land on the moon.
David Roberts
You don't need customers.
Dr. Vanessa Chan
You don't need customers. You don't need to worry, "Do I actually have a supply chain that can mint these things out?" It doesn't matter. And so, that's why when I came into DOE and OTT — and by the way, there's so many acronyms out there, I just want people to remember that at OTT, we call ourselves the otters. OTT otters, because they're cute, friendly, they make tools to help the ecosystem. And so, this is our spirit animal. So, people are like, "Who is that crazy lady that was on your podcast? Where was she?" Just remember, "Oh, yeah, she's head of the otters that's been doing all these things."
David Roberts
Head OTTer.
Dr. Vanessa Chan
Head OTTer. Exactly. And so, when I first joined the Biden-Harris administration, the Department of Energy was very much an R&D organization with 17 amazing national labs doing great stuff. And the reason why it was really more of an R&D organization was that many of our equities and the dollars we were getting from Congress were focused on the early stages of research and development. When BIL and IRA passed, we ended up getting half a trillion dollars that were now going towards demonstration deployment.
David Roberts
Just in case anybody doesn't know, although I suspect surely everyone listening to Volts knows by now, but BIL is the Bipartisan Infrastructure Law and IRA is the Inflation Reduction Act, both of which dumped many, many billions of dollars on DOE and on research and commercialization.
Dr. Vanessa Chan
Yeah, and that's one of the important things, is to define commercialization, because the way we define it, and I think this is a widespread definition, that everyone really needs to take, is it's going from research to development to demonstration to deployment. Too often, I hear people say, "We do R&D and we commercialize." But if you do that, then you're decoupling the market from the early stages of commercialization, and it's really important to have that market input into R&D. So, with the passage of BIL and IRA, it led to demonstration deployment, the last two stages of commercialization being very important to the DOE because of the equities that we now had to get the dollars out the door.
And that is when I think the nature of being the Chief Commercialization Officer and the Head OTTer really changed, because now the question is, how do we connect research, development, demonstration deployment across DOE and across the nation? Because in the end, half a trillion is a lot of money, but it's nothing compared to the 23 trillion the private sector has. So what I was really thinking about was, how do we take the half a trillion to buy down the risk to the point where the private sector will activate their 23 trillion to actually bring these to market?
David Roberts
So, part of doing this is developing a coherent way. Technology readiness levels, as we said, will tell you basically whether the technology works, which is not nothing, but as you say, only a small part of the commercialization journey, spectrum, whatever, what have you. So, what you've developed is kind of a language for talking about adoption readiness levels, which means how ready is a technology to be adopted by the mass market, which involves all kinds of things outside of technology readiness. So, maybe just start by going through a few of those. What sorts of things go into adoption readiness levels that are not visible in technology readiness levels?
There are 17, so you don't have to go through all of them. But —
Dr. Vanessa Chan
No, no, I won't, I won't. And it makes it sound like, "Oh, my gosh, you know, here's an MIT PhD putting together 17 dimensions. Really complicated." It's actually pretty straightforward. And for those of you who are interested, you can actually go to OTT's website and find the Adoption Readiness Level framework.
David Roberts
You know, it's funny, when I first encountered this, I saw the 17 and I had that same reaction. I was like, "Oh geez, 17 new metrics." But then I started reading through them and I was like, "Yeah, yeah, you definitely need that one. Oh yeah, that's, you gotta have that one." You know, like it's —
Dr. Vanessa Chan
So, basically, there are kind of four buckets of the 17, right? The first is what we call value proposition. So, if you invent something new, the question that you always need to ask yourself is, are you inventing something that is providing superior value to what is currently on the market today? And not only that you can provide something of superior value, but is it at the right price point or cost where someone is actually willing to pay for it? And quite frankly, that is one of the biggest challenges that we find with commercializing new technologies, is oftentimes the cost is prohibitive for it to actually get to deployment.
The second group of risks that we think about is around resource maturity. What that means is, if you're going to be trying to commercialize something, you end up needing capital invested into the work. So, is there money that is willing to flow into the solution that you're working on? Do you have a workforce that actually is ready to go do this? Do you have any issues with the materials that you need going into it? Sometimes, there might be some challenges with availability, materials, and the next kind of category that we have is around license to operate.
So, it may be that you have something that people are really excited about. But, are there any challenges with regulatory or societal acceptance or non-economic risk?
David Roberts
This one's coming up so often these days: technologies that check almost all your other buckets, but get here and it's like permitting, environmental review, community pushback. All these kinds of things are where they're running aground then.
Dr. Vanessa Chan
Yep. And then the final one is market acceptance, which is, you know, you could have many things which are working. The value proposition is there, but if competitors and others are not willing to work with you, or you aren't able to get people to take demand off-take. So for example, in the case of electricity, you need some of the large players to actually buy the electricity. If they're not willing to do that, then you actually are not able to commercialize your technologies. And so these four categories are what embody the 17 dimensions. And the reason why this is so important is, as I mentioned earlier, we don't teach this in school. We don't teach these kinds of things that we have to worry about.
And so, what's been really interesting is we've been rolling this out, especially for founders who come from a technical and a PhD background. This almost becomes an interview guide of telling them what they don't know.
David Roberts
Yeah, I was going to say, like, students don't know this, but lots of entrepreneurs don't know this. Lots of literal business owners who are out there trying to sell things don't know about it. I mean, it is sort of like the first time I've seen all these kind of risk factors gathered in one place, you know, and it's like they all kind of seem obvious when you look at them. But it's a lot.
Dr. Vanessa Chan
No, and it's never been organized. I think that's why this has really taken off with, like, venture capital firms right now that are using this, and they're forcing all the people coming to get money to actually fill this out so they can assess where they are against ARLs. These are the kinds of things the private sector has to address. These risks have to be overcome to get to full-scale deployment. So, this really is the language that we've created here.
David Roberts
Yeah, well, I'm curious, is the idea here to sort of, like, add all this up and come up with, like, a single adoption readiness level number that you can sort of compare across technologies? Or is that too simple?
Dr. Vanessa Chan
Yeah, I think this is where, you know, I'm someone who truly believes in a growth mindset, and it's something where the journey is more important than the final number. And so in the end, what we did was we said, "Look, assess yourself in the 17 dimensions. And in fact, there may be some you're not sure because you didn't even know they were important. So figure that out by doing interviews." And then what you do is you count the number of dimensions which have either high or medium risk. And then we have a table that you look up to, then convert that into an ARL, an Adoption Readiness Level.
And the reason why we did it this way is when you go try to raise money, you can talk about two or three things that are kind of large risks, and investors will be able to wrap their head around a bit. Talking about, well, you know, "We have some issues with the cost. We have issues with permitting. We have issues where there's challenges with material supply. Oh, yeah, by the way, there's no workforce." The Adoption Readiness Level plummets pretty quickly. And so I think that's really the reason why is we are trying to get people on the same page of the things that have to be addressed.
And sometimes, oftentimes, it's not one single entity that can address this. They actually need to work together to tackle some of these risks. And so, that's why this is really more of a qualitative tool versus a quantitative tool.
David Roberts
Who does these assessments? I mean, can just anybody do them? I mean, are they sort of, like, loosey-goosey enough that I could just jump in and sort of, like, do it, or is there some official procedure?
Dr. Vanessa Chan
So, perfection is the enemy of progress. And so, we have this tool right now on the OTT website that you can download. We actually launched a new website today, which includes videos that you can watch to run you through some assessments. But if you're like a larger organization and you need, like, an incubator and accelerator and others who really want to train a lot of people through it, send an email to arl@hq.doe.gov, and my team will field it, and we'll literally do a 1-hour workshop with you. And after that 1-hour workshop, anyone who's listened to it will be able to use the tool on their own.
David Roberts
Oh, interesting. So, then you can do a 1-hour workshop where you basically teach someone, like an incubator, how to do this kind of assessment.
Dr. Vanessa Chan
Exactly. A workshop. And we've led workshops with a couple hundred people. It's pretty straightforward. And when we were designing this tool, it was really important to me that we kept it as simple as possible. Even though it's 17 dimensions, if you go there, a lot of it's common sense. And you're like, "Oh, okay, that makes sense. That makes sense." And so this is not meant to be rocket science, pun intended, it's the opposite of rocket science. And so it's actually complementary to TRLs. We're not saying get rid of TRLs. TRLs are absolutely critical, but you need to do an ARL assessment on top of your TRL assessments.
David Roberts
Yeah, it's like, none, no particular piece of it is complicated. Like, I read through the 17 risk factors, and all of them seem pretty simple. It's more just like a tool of, "What am I forgetting?" You know what I mean?
Dr. Vanessa Chan
Exactly. It's like a checklist.
David Roberts
When you're launching a technology and trying to bring it to market, there's just a lot to keep in mind. This is like a handy way of gathering all your risk considerations in one place.
Dr. Vanessa Chan
Completely, and you know, when I was an angel investor, when I was, like, supporting my clients, when I was at McKinsey, these were the kinds of conversations we were having around these risk dimensions. And so, really, what we're doing is linking all the stuff that matters in the ecosystem and making sure, as an ecosystem, we know how to tackle these.
David Roberts
So is the idea here not just for this to be a tool that DOE uses to assess technologies it's working on, but for this framework, this language, to sort of get out there so that DOE and incubators and entrepreneurs and investors are all in some sense speaking the same language?
Dr. Vanessa Chan
Yes, and private companies and others, because in the end, if you're going to commercialize hydrogen, you're going to commercialize long-duration energy storage. All these risks are important, and anyone in the ecosystem has to understand these risks. And what's been really exciting is when we developed this originally, there's a couple of parts of DOE's offices that started using this because it made sense to them. So the Office of Clean Energy Demonstration, which has billions of dollars going out the door, uses it to manage their entire portfolio, which is really helpful, because what you want to do is understand why your readiness levels are low and what actions have to be taken to increase the readiness levels.
And then, we started rolling it out to the national labs through Energy I-Corps, which is a program I run, training entrepreneurs how to actually bring their technologies to market. Now, we started doing pilots at national labs with Sandia National Labs and Pacific Northwest National Labs, all wanting to run their portfolios through it. And we're doing more of these across our 17 national labs. And what's interesting is this thing has taken a life of its own. So, the National Science Foundation heard about it with the new TIP directorate. So now, they're having their program managers use it in assessing technologies.
B Capital, which is a venture capital firm, found it, and now they're using it. Breakthrough Energy loves it and is using it for thinking about what the gaps are in commercialization and having a lot of their companies run through it.
David Roberts
It just seems like it's going to enable people to skip a lot of duplicative efforts. All these conversations that an entrepreneur is having with a possible investor, they're all reinventing the wheel over and over again, trying to talk about these things. So, I can imagine this will just be immensely helpful.
Dr. Vanessa Chan
Yeah, it'll be a shortcut. Right now, people say, "TRL five," you know what that means? I'm hoping when we get to the time not too far in the future, you say "ARL nine," they know what it means.
David Roberts
Are DOE agencies using this in deciding how to hand out grants and stuff like that? Like, has it made it that far up yet?
Dr. Vanessa Chan
Yeah. So OCET, as an example, absolutely is using it. A lot of our technologies, like the Hydrogen and Fuel Cell Technologies Office and our industrial offices that have money going out the door, are using it. And, you know, LPO and others also are using this. And the other thing we'll talk about, which is pathways to commercial liftoff, to guide how the dollars are going out the door. Because in the end, these are the things that we really have to understand when it comes to a risk standpoint. You know, the thing that's really interesting to me is there's even other industries looking at this.
So, the Geneva Association, which is the insurance industry's association, got a hold of this, and now they've created an entire insurance risk framework based on ARLs. So, when I'm telling you that this is going viral, it's pretty crazy. I think the most viral I've gotten is when I had a university professor from Simon Fraser reach out to me, and they actually wanted it to be part of a PhD thesis. And I was like, "Okay. Now I know this is really going viral if it's getting to a PhD thesis."
David Roberts
Well, also, yeah, it just gives you a tool to compare across very different technology buckets, right? It gives you a sort of common scale or metric.
Dr. Vanessa Chan
And by the way, this isn't just for energy technologies. You could use this for consumer products. You could use it for medical anything. I mean, this is a pretty universal framework because in my lifetime when I've done commercialization, I've done it across many, many things, not just energy. And in the end, it's all about the same stuff.
David Roberts
Yeah, well, one striking feature of this, you know, I was sort of looking at these, thinking about advanced geothermal, which is, you know, a favorite of mine, a beloved favorite of mine, you know, just thinking about, if I'm looking at this from the standpoint of an enhanced geothermal company, I'm like, "I can do that and I can do that and I can do that." But some of these are just outside of my power, right? I mean, some of these, like the policy environment, is like, I have limited control over the regulatory environment, permitting and siting. There's some things I could do.
But what you find out when you run through this is that for a lot of technologies, a big piece of commercialization is going to have to come from someone else. Someone else is going to have to help. The government is going to have to step in to do this thing. It not only tells entrepreneurs where they need to focus their efforts, it also seems to me to sort of flag where you need better public policy, better action from the government completely.
Dr. Vanessa Chan
And, you know, the thing I would say to folks who are doing this and saying, "Oh, I don't have control over that," well, you actually do, because what you can do is you band with other people that are in the same situation as you, and you guys go approach people and say, "We need to fix this because all of us are stuck right now because we can't get this to work." And so, one of the other things that we've done here at OTT is we've created some consortia that are being led by our national labs to tackle some of these challenges that are existing. So, we have one for hydrogen called CHyTAC, and we have another one for long duration energy storage, where through our pathways to commercial liftoff, which we'll talk about a little bit, a lot of the same thinking, or the same thinking, is in the pathways to commercial liftoff, where we identified the critical risk factors.
And then, now we actually have consortiums that are trying to figure out how to address the risk factors that are preventing all these technologies from reaching the marketplace.
David Roberts
Let's talk about these commercial Liftoff reports. I'm in this world and pay attention. So, I think it's probably no surprise that I've heard about these, but I have been really impressed with the reach of these things. In some sense, they've gone viral too, which says to me that there was a need here that was not being met. So, talk about just sort of like the origin and the inspiration for these commercial Liftoff reports.
Dr. Vanessa Chan
Yeah, and so when the BIL and IRA were passed, it was clear to me that the private sector really needs to play an outsized role in bringing technologies to market. And for this administration, the way we think about the energy transition is that it is private sector-led, but government-enabled. And how do we actually do that if we are all not coordinated? And there was twice that I've been really excited about what we've done as a nation to get us where we need to get to. One was when Gordon Moore created Moore's Law, where we need to double the number of transistors on a chip every two years.
We were able to do that because what SEMATECH did, which was a government-led consortium, was pull together SEMATECH's roadmap, which created a common language and pathway that everyone that was playing in the CMOS ecosystem, competitors, members of the value chain, all knew what they had to do walk step, to actually get to the point where we could fulfill Moore's law and that coordination we've done in the past. I was like, "We need something similar." The second time was with the Manhattan Project, when we did something like, you know, in a very fast amount of time that we didn't think we would be able to do by coordinating as a nation to get there. So my inspiration was, how do we take SEMATECH, add it to the Manhattan Project, and aim it at clean energy, was really the thinking.
And having spent a lot of time with the private sector, understanding capital deployment and the kinds of analysis that is done in the boardroom and others for decision making, I was like, "We need to infuse that private sector thinking into DOE." And now we have all this money through BIL and IRA that needs to be deployed in a way where we're buying down risk to the point where the private sector is willing to step in. So the challenge we have right now is many of these technologies actually work, for the most part, but they're too expensive or there's other risks around it. And so the question was, how do we take the money that we've gotten and aim it to a point where the private sector will also write checks alongside ours?
So, what I did with the rest of DOE was, we identified four areas where there was BIL and IRA money going out the door, including hydrogen, long duration energy storage, carbon management, and nuclear. We started work on these in September of 2022 and really brought a private sector thinking lens into this. We also interviewed thousands of the private sector folks to get their thoughts around what's it going to take for these to commercialize? And for each of the different liftoff technologies, we found, you know, four to five things that we had to tackle systematically where the risks were too high, and if we didn't tackle them, we would not be able to commercialize.
We then tied those things, the Liftoff reports, to the money going out the door. So, if you were applying for the hydrogen hub money, you needed to have read the Liftoff report to understand what we were trying to do. And I love that as an example, because OSAD had $8 billion that was going towards hydrogen hubs. And through the work we were doing, we saw that there was a big risk around market acceptance, which is one of the categories that we have within the ARLs, and in particular, demand offtake, which is one of the dimensions that in many cases, when you're trying to commercialize technology, no one wants to buy the technology until they're clear they have a stable supply chain.
The supply chain does not want to stand up until it knows that it has demand off. Exactly. Chicken egg, catch 22. So, we did something kind of novel, which is we reserved a billion dollars of the 8 billion that was given to actually help with the demand offtake. And so now we're taking a look to see, "Okay, can the government play a role on contract for differences and so forth?" Because the first hydrogen hubs are not yet at scale, meaning they're not yet at economies at scale. So, the hydrogen coming off is going to be more expensive than if we are in a steady state where we have the nth of a kind.
So, we need to figure out ways the government can help with the risk associated with first movers who are going to have more expensive hydrogen going out the door. So, that was very innovative, and that came directly from both ARLs and the pathways to commercial liftoff. And that's really how it's worked.
David Roberts
These Liftoff reports strike me as just a very sort of close and rigorous application of Adoption Readiness Levels. Just sort of like, take a technology and run through all these 17 and find out where the risks are for a particular technology.
Dr. Vanessa Chan
Yep. But we didn't want to bake ARLs into it formally because I don't want to confuse people. ARLs can be a bit overwhelming. So, there's been a little bit of a chicken and egg with this one, too. We launched the pathways commercial liftoff, and now we're introducing the back-end side of it. But I think the thing that I really do appreciate about this administration is we started this in September, and we had these live on a website called Liftoff.Energy.Gov by March of 2023. So, anyone who's read the Liftoff reports knows that they're pretty meaty pieces of ore.
And to get everyone aligned on what those things were saying, we had the White House and others approve it. To have a live website within start to finish in six months is pretty fast. So, there is a big culture change that we had to drive as we're doing this as well, because in the private sector, right, we do things by 80/20. You don't need real precision on things because directionally, things have to be correct. Whereas when you're coming from an R&D organization with engineers and PhDs, there's a lot of vetting of numbers to make sure that things are—
David Roberts
Perfect to the second and third decimal place type of things.
Dr. Vanessa Chan
Exactly. So, there was also a culture change that we had to do in the first wave of things to get people comfortable with bringing this kind of private sector thinking into the DOE, because it's a different way of thinking. But, I think all these things have gone viral, you know, in your words, because of the fact that now there's a joint roadmap that we, together with the private sector, know what we have to do to actually bring all these technologies to market.
David Roberts
Yeah, and it's funny, you know, I was thinking about this when I — this is sort of a slight tangent, but one of the best tips I ever got as a parent for parenting is like, you need to have a relatively small and memorable set of rules. But one of the most magical things you can do is to write the rules down and just put them up on the wall. And then all of a sudden, the rules are their own thing, separate from you. The rules take on their own sort of reality. And I was thinking a lot of this stuff about how to commercialize hydrogen is pretty obvious.
I mean, it's pretty intuitive. Just sort of anybody sort of taking a look at the state of things, but there's a weird, spooky power in just writing it down and just having it there in front of everyone. All of a sudden, everyone's like, "Ah, good, okay, let's do this." It's crazy, the sort of catalytic effect that just putting it on paper has.
Dr. Vanessa Chan
Yeah, and I think the other thing too is, we did some really rigorous analysis in order to vet what the cost curves need to look like and so forth. But then we wanted to make sure that it was simple, meaning "Just a handful of things that you guys have to tackle." The handful of things are pretty big, right? But you know, this is what we need to do. And then what happens is, when we all just, similar to your Manhattan Project and SEMATECH, when we all are collectively agreed, here's the problem we're trying to tackle.
We can then channel our different resources to tackle that problem. I think the challenge before pathways to commercial liftoff and ARL was people were just like, "Commercialization is hard, right? So, it takes a lot of money, we have to do this, and we align ourselves." Yeah, a fog. And so, what we're trying to do is like, get those little lights during the fog, which is like, "Go here, then go here." We're not quite sure how we get there, but we at least know the pathway we have to go, right?
David Roberts
There's a separate document on the DOE site related to this, called Societal Considerations and Impacts, which just has a lot about sort of urging developers to do engagement with communities, to figure out what communities want and need to figure out how to do this liftoff in a way that is commensurate with equity and community involvement. And you're probably aware, one of the big ongoing discussions in the clean energy world these days is this tension between speed and community involvement. There's this idea going around that sort of like NIMBYs are slowing everything down. There's too many places where communities can come in and slow things down.
And that there's sort of an intrinsic tension between community engagement and satisfying all the different constituencies and satisfying all the sort of equity considerations and speed. A) Do you think there is such a tension? And b), how do you think about navigating it?
Dr. Vanessa Chan
So, look, I think in the end, when you're trying to commercialize anything, especially the technologies we're talking about, which are pretty large in scale, you're doing it locally, right? Like, our energy runs off a local grid. The things we're doing are all impacting communities. And so, if we don't engage the communities, then we can't do this in a thoughtful way. The Biden-Harris administration was very clear around their EJ40 target, which is that 40% of the investments we make will be impacting those who have been negatively impacted in the past. And so, I do think this is critical.
I think in terms of slowing things down, I don't like people saying that because I feel like slowing things down is when you're not actually engaging in the right way. I actually think people are willing to move fast if you're willing to talk to each other and get to a kind of helpful dialogue. And I think there are some that do it well and others who don't frame things the right way. Just similar to the way we got our pathways commercial liftoff out in six months, people would have told me that's impossible to do. You know, it's bureaucratic.
But if you do things in the right way, it is possible. And one thing I want to share with you is that to date, 81% of the impact of the dollars going out the door from the DOE have gone to communities with below-average salaries.
David Roberts
Interesting.
Dr. Vanessa Chan
Which is amazing, right? So, we've actually doubled the impact in many ways of EJ40. And we've been moving really, really fast as an institution. You know, I've been meeting a lot of former DOE employees, and they're just shocked at the speed at which we're moving. And so, when I look at the impact we're having and the speed we're moving, I actually don't think things are slowing down.
David Roberts
It's early days, obviously, for all of this, but these initial Liftoff reports have been out for —
Dr. Vanessa Chan
A year and a half. They have until March of 2023.
David Roberts
So, I mean, it's unfair to ask this so early in the process, but is there like a success story? Is there like, have you seen something tangible come out of industries in response to these things?
Dr. Vanessa Chan
Absolutely. We have seen that for every dollar out the door going from DOE right now, we've seen six dollars of private investment coming to match it. This was true in the hydrogen hubs, where it's like $7 billion, $42 billion came out for hydrogen from the private sector. So, it's doing exactly what we wanted it to be doing. We also are seeing moves in the private sector of understanding the things that they need to do. And so, I think we're moving faster because we're more coordinated and because we wrote these jointly with the private sector, that's why they've gone viral. This is really organizing thoughts in a way that it's actually pretty straightforward.
Right? Like, it's not that hard. And so, we are seeing the impact, because I'm seeing the private sector move, which is really —
David Roberts
Yeah, this is like the opposite of a bureaucracy coming along and imposing sort of hassles on you. This is like bureaucracy coming along and organizing your efforts, which is what you'd like to see.
Dr. Vanessa Chan
Which is what SEMATECH and the Manhattan Project did, and that's what we're doing here at DOE. Unless we organize, all of us, we're never going to make it.
David Roberts
Right. So, you started with these four. I think there are eight out. Now there's eleven. Losing track. Cranking them out. So, a couple of questions. One is, have you noticed now that you've done eleven of these, that's like eleven real deep dives into specific technologies and their specific pathways to commercialization. Are you noticing sort of running themes or lessons that you feel like you can sort of extract and have broad application across everything? Like, what are the sort of takeaways so far?
Dr. Vanessa Chan
So, since you brought up parenting, I will say all eleven children are all very different. I love them all equally. People ask me, "Which one do you love the most?" I love them all equally. Although the secretary will say that she loves geothermal the most, she's been pretty public about that. I share her preference. I love them all equally because we need them all. Just like Pokemon, you have to collect them all. We need all of these to actually get us to the clean energy transition. And they all have, you know, a little bit of differences in terms of what their challenges are.
So, for example, for innovative grid, this is one that really, I scratched my head on, because the technology actually works. Like, there are no technology risks, there's deployable technology. And we have shown that if we do some things like reconductoring, dynamic line rating, we can actually increase the current capacity of the grid by up to 30%. But the ecosystem's not moving right versus something like long-duration energy storage, where the technology is not there yet, we have to move the technology along.
David Roberts
It almost seems like in that case, and maybe hydrogen's a little bit like this too, in that case, the market and the demand are almost out ahead of the technology, which is the reverse in the case of the grid.
Dr. Vanessa Chan
Yeah, but I will say that there is one common theme, and quite frankly, it is what is keeping me up at night. Because usually, I can look at things and be like, "Okay, here's how we're going to solve it, or how we get together to solve it." The one thing that's really keeping me up at night is the capital markets and capital deployment is not happening fast enough. And the theme that I have seen over the decades is that whenever you're trying to commercialize new technologies, there's like an S curve that you have to go through. And there's this thing, as you mentioned, called the valley of death, although I'd like to call it the valley of opportunity, it's just people are not walking across it.
So, the valley of opportunity. The challenge is that right now, what's happening is we have a way of assessing whether or not something is investable through NPVs, ROIs, WACCs, you know, all these different acronyms that some investment committee put together around what a hurdle rate is that you have to get over for you to invest in something. Now, the challenge is similar to GPAs, which were invented by a professor, as to what an A is. Investment committees make up hurdle rates of what is defined as a good investment. And with these new technologies, we're not yet at scale, so therefore we can't hit the hurdle rates.
And that's why we're stuck. And there's a bit like we're in the Squid Games right now, right, where we're like 8th and 9th, like everyone's, you know, first in line to be 8th and 9th. No one is first in line to be 1st, 2nd, or 3rd. Like, "You go", "No, you go." No one wants to go because they know the first ones are not going to make the money they want. And so we need to reframe how we look at risk and investments as an ecosystem. Because if we are able to catalyze and pull the risk together in the ecosystem, we can get down the learning curve faster, which is when the economics make sense.
And that's when you actually can make money in the private sector.
David Roberts
Well, it almost seems like you need a different kind of investor. You need investors that are more patient, that are willing to accept longer-term, lower rates of return. How much control do you at DOE have over that? The investor community needs to do that for itself, doesn't it?
Dr. Vanessa Chan
I had 20-something speaking engagements at New York Climate Week, pushing people on this one. And it's really resonated with people, which is the reason why we're not moving, is because investment committees have made these decisions on what is investable, and they're expecting new technologies to be able to hit these things. And so the issue is that that magical group of people who are patient, willing to take, they don't exist right now in the US. And if we don't move it, then we're going to get to the point we were with solar, right, where basically other governments are going to step in and say, "You know what?
We're willing to take the hit," and go after it. And so, I think we've done a really good job here in the federal government at DOE and across the Biden-Harris administration of taking the dollars that we have through BIL and IRA to catalyze the private sector. But the private sector also has to come now and think about how do we invest in the first ten of a kind together. So, we are all jointly taking the risk. How do we move beyond quarterly earnings? I think one of the challenges with private sector companies is the tenure of a CEO is usually three to five years, and they are being asked to make capital investment decisions that are going to benefit a CEO two or three down the line.
And humans don't work that way, right? And then they also have the quarterly pressures. And so, I think there's a need to look at how do we think differently about new technologies where we have to hit scale. Because the way in which we right now are grading them is unfair. It's almost like you have some third graders who are being told to do AP. They're not there yet. They're absolutely not there yet.
David Roberts
Shouldn't this be the role of something like Breakthrough, where it's basically like Bill Gates doesn't need quarterly returns on his Breakthrough investments? Couldn't they do this?
Dr. Vanessa Chan
But look at the scale of this. I mean, this is beyond Breakthrough. This is beyond the federal — I mean, this is the entire ecosystem. We're talking about a dozen different things that have to happen. And so, this is where I think we have to rethink some of this in order to really do it transformatively. And what I tell people is, if we can innovate here at the DOE, and we really have, I mean, getting this kind of stuff out the door as quick as we have, bringing private sector thinking in all this stuff, if we can innovate in the DOE, I know the private sector can innovate like I never thought we could innovate in federal agencies.
But I'm still here after three and a half years because we've been moving so fast and innovating so fast. And I know others can do it if they just have the risk appetite for it. That's where I get excited about folks like the Geneva Association, Breakthrough, and others, because they see the need for this. The question is, can other people stand up and do something similar? To give you an example, right now, the third thing that I'm really excited about is the Foundation for Energy Security Innovation (FESI) — have you heard about this? So, in the CHIPS and Science Act, it was put into law that we needed to create a 501(c)(3) foundation for the DOE.
So, this is a 13th federal foundation. For example, NIH has CDC, In-Q-Tel is CIA's foundation. And so, this foundation is there to support the mission of the DOE and in particular, commercialize technologies, which is why I was tasked to help stand up the DOE, the FESI, and stand up the board. So, we appointed the board in May of this year, and they are going to be able to do a lot of things that federal agencies can't do, including bringing philanthropic capital in and so forth. So, I'm pretty excited about this as being an additional tool in the toolkit to drive commercialization.
David Roberts
One other thing I wanted to return to before we move on from this, just because it's a hobby horse of mine, you mentioned the grid, the Advanced Grid Liftoff report, and how you're beating your head against the wall a little bit there. And part of it, what occurs to me, is anything that has to run through electric utilities does not seem commensurate with speed and scale to me. Is that a big worry? Like, are you running into that over and over again, or do you think that's just sort of confined to the grid space?
Dr. Vanessa Chan
I mean, I think human nature is one where we like to do what we're comfortable with. And I get it with, like, you know, utilities and oil and gas and others. Where they are quite risk-averse, because when there's failures, they can be pretty catastrophic. Right?
David Roberts
Yeah.
Dr. Vanessa Chan
So, I think that's a lot of what is driving that kind of culture. And so, I think the key thing around this is finding utilities that are a little bit more nimble, willing to take a little bit more risk, trying to pilot some things, and then showing when it doesn't break, that, you know, this is a good thing to do. Which is what the Innovative Grid Liftoff report was doing, was showing technologies that have been demonstrated already in existing utilities, in existing real world, and showing that there's a business case for it. Where right now, when you take a look at some of the technology we talk about there, it's 5% of the cost of what would take to actually build a new grid to get to this. So, the ROI is there, right?
David Roberts
Right.
Dr. Vanessa Chan
So, I think that's really the key. And then, trying to get people to move when we've shown that the risk is much lower, but it's hard.
David Roberts
What we need is a bunch of Vanessa Chans in utilities across the country. How do you choose what tech to do next? You've done eleven. Now, is there some process, or do you just have a list already that you're just working your way down?
Dr. Vanessa Chan
Well, the first ones we chose were because, as I mentioned, there's money going out the door. Also, because this was a new way of doing things. I was looking for leaders within DOE that would understand what we're trying to do and help us through this process. So, those four were pretty great ones to start with. Once those four went quite well, they became the change agents for the rest of DOE to say, "Hey, this is a good thing." Then we started looking at where the money was that was going out the door.
So, for example, the Grid Deployment Office had money going out the door for GRIP, which is one of their programs for many of these reconductoring and innovative technologies. So much of the work that we've done on Liftoff reports is actually tied to dollars going out the door. What's really important is if you want to get the DOE money, we're telling you, "Here are the things that you need to address." And by the way, we're addressing these things because if we address them, then the capital from the private sector will activate. So this becomes almost like a flywheel, where the stuff we're doing is then directly linked to what the private sector's thinking, which is where the money really is.
David Roberts
Yes, just getting those two in sync. Two final questions. One is, how do these Liftoff reports relate to the Earthshots? So, listeners might be familiar with. There was a solar shot, which is just the aspirational goal of reducing the cost of solar by some insane amount, which of course, this being solar, solar did. And then that, I think, inspired a bunch of other Earthshots. You know, are these and the Liftoff reports related, coordinated in any way, or are they just separate operations?
Dr. Vanessa Chan
They are coordinated in the sense that, in order to reach the Earthshots, you actually need to kind of follow these pathways to commercial liftoff. But many of the Earthshots were done because I think it's helpful for people to have a framing of what's the big thing we have to go hit. And so that was really the point of the Earthshots, was to give a metric and a target for where we need to get to. But in terms of how to get there, that was the tricky thing. And that's what the pathways to commercial liftoff are.
What was interesting is, as we're doing some of the work, we actually found that some of the Earthshot targets were even more aggressive than we needed them to be. So, for long duration energy storage, we actually are able to hit liftoff as we get the path towards the Earthshot. And so, they absolutely are linked.
David Roberts
Oh, so you think you can commercialize at some price lower or higher than the Earthshot?
Dr. Vanessa Chan
Yeah, for the case of long-duration energy stores, through some of the analysis that we have done. But I think it's really important to have big bold targets out there because I think when you have big bold targets, you can get to where you need to get to.
David Roberts
I mean, my intuition — and this is just, I have no way of proving this — is that if you get everybody on the same page, moving in the same direction in a coordinated way, you get the private and public sectors coordinating toward barriers and risks that they all agree on and can all see. Once that happens, I just think these things are going to go way faster than anybody thinks they're going to go. They're going to get cheaper than anybody thinks. I think we all are biased towards conservatism when we predict and propose these things. But if you can really get everybody firing in the same direction, I think we're going to hit targets that now seem crazy.
Dr. Vanessa Chan
That was the only way we were able to do SEMATECH and the Manhattan Project. And we're seeing — I mean, one of the things, when you read the nuclear report that's interesting, is we've actually had 50 first-of-a-kind because in the US, what we've done is we have had 50 different designs for nuclear reactors. Now we need to have the Ikea model, right. We do one and we do it well. But it wasn't until we did the analysis that we saw what was going on here is we're not going to scale fast enough because we can't anchor on one design.
So, I think there are things like that which I think are really important to showcase and to get the private sector aligned on, "How do we get there faster?" They're really requiring more coordination because, in the end, it's all about economics. I have yet to have anybody raise their hand when I'm giving a talk and I ask people, "How many people here want to pay more for something?" Nobody does. And so, we're not going to actually get to full-scale deployment until these technologies are cost-competitive. And that's what we've seen with solar, right? I mean, solar has been amazing in terms of its growth once it got cheap, and that's what we need to do with this stuff here.
David Roberts
Final question, this might seem a little random, but it is on everyone's mind these days. One of the big things happening in technology now that I don't think anybody really saw coming, at least not at the scale that it's hitting us, is this rapid rise in electricity demand, driven approximately by AI and data centers. But as all good Volts listeners know, coming in behind that, you have the electrification of vehicles, of the HVAC industry. You got a lot of electricity demand coming down the pipe. It's just hitting earlier, I think, and faster and bigger than anyone expected.
And it occurred to me, as I was reading through all this, that it seems like a big macro factor that is quite relevant to the commercialization pathways of several technologies. So, I wonder, has it occasioned you doing any sort of reassessment of technologies that you've already assessed in terms of ARLs? Is it changing ARLs in various places? Like, what is the kind of relationship between this striking demand growth and the work you're doing?
Dr. Vanessa Chan
Yeah, so great question. And in fact, that was something that was keeping me up at night at one point, which is why we had a team go together and actually put together a briefing on how these different pathways to commercial liftoff are actually going to meet the energy demand that is there. So, if you guys go to the Liftoff website, we actually put together an entire topic brief on it. And what we found, right, is that electricity growth demand is supposed to grow by about 15% to 20% the next decade and double by 2050 per what all the things that you were talking about in terms of what's driving it.
But what's really interesting is, in the near term, we actually can expand the existing supply if we were to scale what we have. So, for example, these innovative grid technologies, I think, are super critical. Virtual power plants is another one which we have a Liftoff report on, where, you know, for those who aren't familiar with it, the idea is you have bi-directional batteries which you can, you know, charge when demand is low on the grid, and then you can off-charge to the grid when demand is high. So that's where you get to a virtual power plant.
And there's all kinds of things like that that we can do in the near term, if we were able to really get our act together on technologies that have been proven, and then the idea is that buys us time for the other things like long-duration energy storage and nuclear to get their act together. So, it's a lot like, you know, driving a stick shift, which is if you pop the clutch too fast, then you're going to stall. So, if we can ease into some of the things that we know are working, it gives us time right now for the other stuff that isn't quite there to actually get there when it needs to get there. But, I think the key thing is we have to move and act now like there's no time to be waiting.
And that's the challenge.
David Roberts
It really raises the need for commercialization of a lot of these things.
Dr. Vanessa Chan
Completely.
David Roberts
Well, this has all been fascinating. You sound like you just have the funnest job.
Dr. Vanessa Chan
Oh, my gosh. I have the best job in the world. This has been amazing.
David Roberts
I mean, just to sort of coordinate all these exciting new technologies, kind of coordinating them as a kind of a herd thundering toward the market. It's just like, what a time to be alive, right?
Dr. Vanessa Chan
It's been amazing. BIL and IRA have just really transformed what the nation can do here. The DOE is an incredible community. Like, this is all a work of hundreds of people across the DOE. And we all are wanting to move fast and be bold. And it's just amazing to be under the leadership of Secretary Granholm who is very focused on "deploy, deploy, deploy." And having that mindset and mandate around it has been just spectacular. So, I think it's always fun when you can actually make a difference in the world and you can tell your kids you were there trying to do that.
David Roberts
Yeah, you found your spot. You've been looking for how to make an impact on the real world, and here it is. This is a story that the clean energy community is not sufficiently aware of. Just the sort of activity, the scale, and the speed of things that are going on inside the DOE now. So, thanks for giving us a glimpse.
Dr. Vanessa Chan
Well, thanks for having us, and I really appreciate being on a show that I listen to all the time. So, thank you. Thanks for having me.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes my guests and I sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
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