This week’s announcement from President Obama and Bill Gates of a multibillion-dollar public-private partnership for clean energy innovation was a major development for the Paris climate negotiations and the international energy community.

The world’s leading energy and climate analysts have long identified the need for substantial increases in research and development, and 20 countries have now committed to deliver, backed by billions from titans of high-tech industry and finance.

Never before has a group of private investors come together at this scale for the purpose of commercializing energy technologies resulting from government-funded research. If successful, the partnership could prove to be a landmark development in the history of public-private partnerships and venture philanthropy broadly, mobilizing tens of billions of dollars and potentially leading to the creation of a patient capital asset class for commercializing high-risk, high-impact technologies -- building on precedents like the Green Revolution and the 1 billion lives it saved from starvation in the 20th century.

For the United States, the partnership presents an unprecedented opportunity to increase the commercial impact of its energy innovation system, particularly the Department of Energy’s multibillion-dollar annual investment in energy research and technology development. Fortunately, the U.S. is better positioned than any nation in the world to partner with the Breakthrough Energy Coalition (BEC) and other investors.

The biggest winner of all is likely to be the American taxpayer, who could see a significantly greater return on every tax dollar spent on energy research, development and demonstration (RD&D) -- not to mention long-term energy cost reductions, new high-growth businesses, and global climate leadership.

More broadly, Congress and the Obama administration should take this unique opportunity to further optimize the DOE to focus on its energy innovation mission, address long-standing inefficiencies in its RD&D management, and further enhance its ability to collaborate with investors and industry.

By combining increased energy RD&D spending with real management and performance reform to ensure high return on taxpayer investment -- all leveraged by billions in private investment commitments -- Democrats and Republicans alike can come together to seize this moment to double federal energy RD&D.

Many ideas on how to proceed will be debated in Washington and across the country over the months ahead, as well as into the next administration and Congress. To help jump-start this important public dialogue, what follows below are some early ideas on how DOE, BEC, and other mission investors can make the most of this partnership as its designs are fully established.

But first, let’s quickly recap on how we got here.

Mind the gap: The energy innovation valleys of death

The fundamental purpose of Mission Innovation and Breakthrough Energy Coalition is to correct a major market shortcoming -- namely, the ongoing failure of the private marketplace to invent, develop and scale more affordable, secure and clean energy technologies for public benefit.

This is a goal the U.S. and other nations have pursued for decades for different reasons -- think of France’s dash to nuclear energy in the 1970s -- but it has become ever more urgent in the face of climate change and competition for new energy industries. As the International Energy Agency recently concluded, “Recent trends reaffirm the need to accelerate energy technology innovation.”

More than two decades of economic analysis and real-world market observation have informed us that the energy sector faces basic structural obstacles to technological innovation and diffusion, above and beyond most industries. To name a few: knowledge spillover, high capital intensity, non-differentiated product markets, regulatory disincentives, market-distorting subsidies and barriers to entry, long-term product and infrastructure lifecycles, and unpriced market externalities.

The nature of these barriers also makes them very difficult to resolve with simple technology “pull” mechanisms, such as pollution taxes or regulations.

The result is chronic under-investment from the private sector in energy RD&D. Analysts used to refer to this as a single “valley of death,” but over time we’ve developed a more nuanced model for the energy sector. During my time at the DOE, we consistently identified three key gaps in the energy technology commercialization cycle, including laboratory technology maturation, seed-stage commercialization, and first-of-a-kind (FOAK) demonstration projects.

At the height of the first cleantech investment wave in 2008, it appeared that venture capital might be capable of filling most of these gaps, and some assumed that private investors would be increasingly willing to take on higher levels of risk as clean energy demand grew and capital markets matured.

Unfortunately, cleantech VC collapsed thereafter, once the fund managers and their limited partners came to fully realize the structural barriers to energy innovation. For early-stage cleantech ventures, VC investment fell 85 percent from 2007 to 2014, according to Bloomberg New Energy Finance. We now know this is largely structural and not simply a cyclical decline.

Following the cleantech VC collapse, there have been very few remaining investors in clean energy companies or projects willing to take practically any form of technology risk. This led the White House and DOE to launch the Clean Energy Investment Initiative earlier this year to catalyze a new wave of mission-oriented investors, resulting in $4 billion of private investment commitments and other executive actions, including the creation of DOE’s new Clean Energy Investment Center.

Mission Innovation and the BEC take this effort to the next level. To increase the likelihood of success, what follows are three areas of suggestions. First, cultivate technologies through a diverse portfolio of innovation models. Second, improve the management of public and private funds and coordinate for impact. Third, support the full technology innovation pipeline and create pathways to scale-up and deployment.

1. Cultivate technologies through a diverse portfolio of innovation models

In terms of early-stage technologies, participating investors should cultivate technologies from a diverse portfolio of DOE programs and performers. ARPA-E is probably the most well-known program since its launch in 2009, representing $280 million of DOE’s current $5 billion energy RD&D budget. It has a strong track record advancing novel technologies toward commercialization.

Beyond ARPA-E, promising early-stage investment opportunities arise from a wide variety of sources, from multidisciplinary research centers at national laboratories and universities, to industry-laboratory consortiums, to small-business grants, to regional business incubators, to other forms of financial assistance, technical support, and cooperative research DOE offers to startups and large companies alike.

The national laboratories alone have nearly 6,000 active intellectual property licenses based on lab-developed technologies, and every year they disclose up to 2,000 inventions and receive 800 new patents.

To more effectively leverage its RD&D system, the DOE has pursued several new innovation models in recent years, including the Energy Innovation Hubs, Energy Frontier Research Centers, Bioenergy Research Centers, SunShot Incubator, Lab-Corps, Small Business Vouchers, Cyclotron Road, Clean Energy Incubator Network, Manufacturing Demonstration and System Integration Facilities, other regional consortia, and more.

The DOE is also currently establishing a new Technology Commercialization Fund, and the long-standing Small Business Innovation Research grants program supports promising performers. Mission Innovation governments and BEC investors will want to leverage and potentially scale up these models.

2. Improve the management of public and private funds -- and coordinate for impact

Both the government agencies and private investors involved with this effort can adopt more effective ways of managing and coordinating their funds for maximum impact, learning from successes and failures of the past.

On the private investor side, details on the funding vehicle for the BEC have not been released. To enable truly patient investments, one would hope for a fund structure that avoids the limitations of traditional 10-year closed-end VC funds.

A potential model could be a permanently capitalized holding company similar to i(x) investments, recently founded by Howard Warren Buffett, grandson of Warren Buffett. Another could be a 20-year closed-end fund, which Matthew Nordan at PRIME has designed. Yet another could be the Clean Energy Trust’s evergreen investment fund for early-stage cleantech companies, the Clean Energy Prize Fund.

For institutional investors that join the BEC, Ashby Monk and Jagdeep Bachher have examined how institutionals can rethink their VC-type investments. 

On the government agency side, the DOE has played a vital role in U.S. energy technology development, but it was not originally designed primarily for energy innovation, as reflected in its budget: energy-related RD&D represents only $5 billion of DOE’s $27.5 billion annual budget, with the remainder for nuclear security, environmental cleanup, and basic discovery science. As such, there is significant opportunity to optimize its RD&D management.

Over the years, a number of task forces and think tanks have examined ways to improve the DOE and its national lab system from across the political spectrum (here, here, here, here, etc.). These are beyond the scope of this piece, but at least three basic areas stand out for the purposes of Mission Innovation.

First, DOE should strengthen its capacity to effectively collaborate with and assist the Breakthrough Energy Coalition and other mission-oriented investor networks, such as Aligned Intermediary, Ceres, Confluence Philanthropy, CREO Syndicate, PRIME Coalition, and the Stanford Steyer-Taylor Center. The DOE’s new Clean Energy Investment Center was designed precisely for this purpose and should be fully institutionalized at the agency.  

Second, DOE should continue improving its institutional capacity to manage technology transitions across its program offices and national laboratories and into the marketplace. At the least, this means fully institutionalizing the new Office of Technology Transitions, establishing analogous functions within each program office (building upon the EERE Tech-to-Market and ARPA-E Tech-to-Market teams), and properly resourcing all the National Laboratory Technology Transfer Offices. These offices would all benefit from the flexible hiring authority of ARPA-E to enable more streamlined hiring from the private sector.

Third, Congress and DOE should continue breaking down stovepipes across narrow technology sectors with atomized budgets across the Department, in order to pursue off-roadmap and cross-cutting opportunities such as grid modernization, subsurface science and engineering, materials, energy-water nexus, and other areas identified in the recent Quadrennial Technology Review.

Recent progress has been made, particularly through the creation of the Office of the Under Secretary for Science and Energy, and the Office of Technology Transitions housed within it, to coordinate across the DOE’s basic and applied energy programs.

3. Support the full technology innovation pipeline -- and create pathways to scale-up and deployment

Finally, to maximize commercial impact, the participating governments and investors should pursue investments across the innovation pipeline -- from early-stage research through commercial-scale demonstration and innovative project finance -- with the goal of de-risking technologies for later-stage investors and corporate strategics with lower risk tolerance.

Most experts now agree that the linear model of innovation -- where government simply funds basic research, invents breakthrough technology, and then transfers it to the private sector for commercialization -- is highly reductionist. So is the tired dichotomy between “R&D-only” versus “deployment-only” approaches.

Rather, the emerging approach for strategic, non-military sectors like energy is a “technology transitions” model that addresses the multiple, interlinked connections among multiple stages of research, development, demonstration, and early deployment.

This approach recognizes that technology commercialization is a full-contact sport involving high levels of risk and uncertainty at numerous stages. This often requires multiple rounds of public and private support to achieve escape velocity into the marketplace, as well as different types of support at different stages -- from research grants, to technology maturation resources, to technical assistance and shared facilities, to innovative financing mechanisms, including loan guarantee programs.

Furthermore, cost-reductions occur not only with RD&D, but also with scale-up and early deployment in the form of learning curves and economies of scale, as the world experienced dramatically with solar photovoltaics over the past few years.

Importantly, a technology transitions approach also recognizes that to achieve real-world impact on the energy sector, every technology roadmap must be clearly informed by and connected with industry (and in this case, later-stage investors) beginning at the research stage. The pathway to scale-up and deployment should be identified early and often to ensure technology development is optimized at each phase, and when necessary, to more quickly identify no-go projects.

Your turn, Congress

Over 50 years ago, Vice President Henry Wallace visited Mexico, which was suffering from rampant hunger and substandard food production. Upon his return, he met with the president of the Rockefeller Foundation and recommended a new project focused on improving Mexican agriculture. The foundation took Wallace’s advice and sent a small group of agricultural experts on a 5,000-mile journey across Mexico in a station wagon to review the situation.

Upon their return, the Rockefeller Foundation created the Mexican Agricultural Program to transfer U.S. agriculture technologies to Mexico, developing high-yield grains, expanding irrigation infrastructure, distributing hybridized seeds, and creating synthetic fertilizers and pesticides.

This story is now considered the founding of the Green Revolution, credited with saving over a billion people from starvation globally and considered one of the most impactful philanthropic and technology transfer projects of the 20th century. The leading scientist, Norman Borlaug, went on to win the 1970 Nobel Peace Prize.

Today, the United States faces an even greater opportunity for public-private partnership on clean energy innovation and technology transitions.

For nearly 40 years, since the consolidation of the Department of Energy itself, we have neglected to make the basic investments our nation and the world needs to secure its energy and environmental future. The challenge has grown so urgent that dozens of major investors and philanthropists from around the world have now stepped up to spend billions of their own dollars on high-risk ventures to help solve it, alongside 19 other countries committed to doubling their energy R&D budgets.

Your turn, Congress.  

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Teryn Norris served as Special Advisor at the U.S. Department of Energy until November 2015, where he managed finance and commercialization programs and served on the founding team of the Office of Technology Transitions. Follow him at http://twitter.com/terynnorris.