The Energy-Related Inventions Program, Begun During the Oil Shortages of the ’70s, Says it Pays For Itself. That Depends on Who’s Doing the Counting.
DATE: Friday, June 9, 1995
PUBLICATION: PHILADELPHIA INQUIRER
SECTION: NATIONAL
PAGE: A01
BYLINE: By Gilbert M. Gaul and Susan Q. Stranahan, INQUIRER STAFF WRITERS
Contributing to this article was Frank Donahue
of The Inquirer’s News Research Library.
It was 1974. America was in its second year of severe oil shortages.
Congress, eager to promote development of new ways to produce or save
energy, believed the solution to the country’s dependence on foreign oil might
lie at home – in the ingenuity of its citizens.
Within a year, federal research grants of up to $100,000 each were
available to anyone with a promising technology. Individuals and small
companies were particularly encouraged to apply for funds from the new Energy-
Related Inventions Program.
Over the next two decades, respond they did. More than 31,000 proposals
were submitted for evaluation; 606 were funded.
From Alaska came a proposal for a composting toilet, and from Florida, a
female urinal (both save water). From New Hampshire, thermal window shades,
and from California, a one-step pavement patcher (both reduce fuel
consumption). From Ohio, aluminum roofing materials, and from Texas, computers
for industrial and commercial dryers (both cut heating costs).
Since 1975, the government has spent $76.2 million on the program, one of
the oldest technology-assistance efforts in Washington.
More than half – $38.65 million – has gone for administrative overhead. The
balance – $37.5 million – has been paid in grants averaging nearly $62,000
each.
Energy Department officials say the program has been a resounding success.
Boasts Fred Hart, acting director of the Energy-Related Inventions Program:
”This program appears to be paying for itself.”
As with so many programs that are part of the government’s massive effort
to strengthen the economy by push-starting new technologies, that depends on
who’s doing the counting:
- Many companies listed as successes went out of business years ago. Many
of the technologies are no longer in production. - On average, it has cost taxpayers $590,698 for each of the 129
technologies brought to market over the program’s history. - As of 1992 – or 17 years after the program’s creation – 668 people were
employed by companies making ERIP technologies. - The average cost of creating each of those jobs is $114,072 – more than
double the comparable cost in private industry.
Department officials aren’t even certain the 668 jobs represent “new” jobs,
resulting from the taxpayer-subsidized technologies.
“That’s a tricky question,” said Marilyn A. Brown, a senior researcher at
Oak Ridge National Laboratory, which has received $1.5 million in grants over
the last 10 years to measure the effectiveness of the program.
“They are jobs that are directly funded by the company that’s developing
the ERIP technology into a commercial product,” said Brown. “Whether they
would be fired if the product failed, or if they were hired when the product
underwent development, we don’t know.”
Hart, the program director, says he has never looked at the cost to his
agency of creating the 668 jobs. “It’s an interesting question, one that’s
never been asked before,” he said.
Brown agrees. “I think that would be an interesting statistic as well.”
It’s not that the Energy Department lacks data on the program. One
calculation the department uses to measure the success is taxes paid by
employees of companies with ERIP technologies.
Brown says she was asked by the agency not to be so “conservative” in her
calculations for a report card on the program. She’s now adding estimated
state sales-tax revenues and taxes paid by spinoff technologies.
That puts total tax revenues in the $5 million to $9 million range,
compared with an earlier estimate of $2.7 million, she says. And – voila! –
that means the program, which has a $4.4 million budget this year, “is a
revenue-generating investment by the federal government.”
Finally, not to forget the original mission of the program – to conserve
energy – the 1996 budget request to Congress notes that three of the
technologies funded by the program produced $531 million in energy savings
from 1981 through 1993.
Brown estimates that, as of 1992, cumulative sales of technologies are $763
million. That number is derived from interviews with a sample of program
participants and not independently confirmed, she said.
Numbers don’t tell the whole story.
For that reason, the Energy Department has created what Fred Hart calls
”the winners list” – 129 companies among the 606 that have received grants
for energy-related inventions and that have entered the market in the last two
decades.
“That’s kind of our success group here,” Hart said. The list records market
entries, he explained.
It doesn’t register market exits.
Thomas P. Hopper’s name is fourth on the winners list. The fact that the
Energy Department considers him a success comes as a surprise to Hopper.
“Who would say that?” he exclaimed. “There’s no way you could say this was
a success. It was a great invention. It just came and went.”
Hopper, an architect in Concord, N.H., received a $50,707 grant in 1978 to
perfect a thermal window shade to reduce heat loss.
Sure, at one point Hopper’s window shade company employed 40 people working
two shifts and his invention made the cover of Popular Science in 1979. But
the company went broke in the early 1980s.
Hopper blames that on two things: mismanagement by an investor and waning
interest in energy conservation once oil prices fell.
“I wish it had been a heck of a lot more of a success,” Hopper said from
New Hampshire Technical Institute, where he now teaches. “I still have the
patents and the equipment.”
Clint Elston is another “success,” according to the Department of Energy.
He sells $10,000 composting toilets. He has sold 12 of them since 1990, when
he received a $90,000 grant from the Department of Energy.
“I wouldn’t say we’re a commercial success,” said Elston, who owns AlasCan
Systems International Inc. in Fairbanks, Alaska. “I’m surprised we’re
commercially still in business.”
In addition to the $90,000 grant, Elston has financed his business by
borrowing against his credit cards and using an inheritance.
Elston blames regulatory intransigence for his sluggish business. State and
federal environmental officials, he says, would rather spend millions on
traditional sewage-treatment plants in his home state than issue permits for
the AlasCan toilets.
Bringing sewer service to some villages in Alaska costs $750,000 per home,
Elston says. Not only are composting toilets cheaper, he says, but “we also
give a forever warranty.”
Forever is also the word used by Fred Hart in explaining why Hopper and
Elston remain on his “winners list,” despite their rocky business histories.
Once on the list, he explains, “they stay in our database forever.”
The Energy-Related Inventions Program has spawned some extremely successful
technologies, including an invention to control spark timing in auto engines.
That recorded more than $100 million in sales.
Another success is a packing ring that improves the efficiency of steam
turbines. That technology now controls about 8 percent of the world market for
packing rings, according to the Department of Energy.
The program has earned accolades from some who have participated. One of
them is Eskil Karlson, an inventor from Erie. Since 1980, Karlson has received
five Energy-Related Inventions grants, totaling $467,529. Several of the
technologies he has perfected with that money are sold here and abroad.
“This particular program is about the best program I’ve seen in the whole
government,” said Karlson, whose inventions include an ozone-sterilizer
system.
“For the amount of money they’ve put in in American dollars, they’re
getting an awful lot back,” he said. “Frankly, I think that’s a direction we
should be going.”
Another recipient of five Energy-Related Inventions awards is Donald C.
Erickson, a partner in Energy Concepts Co. in Annapolis, Md. The company does
energy-related research and development and employs 11.
In 1978, Energy Concepts received the third Energy-Related Inventions
Program grant issued, for $80,820, to produce pure hydrogen from coal – a
technology that proved uneconomical, Erickson said.
The company received its most recent grant, $99,570, in 1993 to perfect a
natural gas-fired heat pump.
Technology such as Erickson’s is “highly unattractive” to investors, he
said. “Other than during the oil crisis of the ’70s, it’s been very much of an
outsider.”
Markets just don’t exist for many technologies spawned by the program. The
elimination of energy tax credits in the mid-1980s and today’s low oil prices
are the reasons.
“We have a very simple problem here,” said Ogden Hammond, who received
$91,962 in 1981 for a system to retrofit steam-heating systems to allow for
zoned heating. “Our technology made sense when oil was $35 a barrel and
climbing. When it’s somewhere between $13 and $18, it doesn’t.
“The technology didn’t defeat us; it was simple economics,” said Hammond,
who now runs a computer company in Monument Beach, Mass. He also is on the
winners list.
Hammond says his unsuccessful venture in energy technology personally cost
him $100,000 – “about the price of tuition at a good business school, and,
boy, did I get a business course!”
Applications for Energy-Related Inventions Program funding are first
evaluated by experts at the National Institute of Standards and Technology
(NIST), which works in partnership with the Department of Energy.
Experts weigh the technical merits of a proposal, its potential for
commercial success and its likely energy impact.
Certification of an idea by them sometimes is all an inventor needs to
attract investors, said Marilyn Brown, the Oak Ridge official.
“The documentation from NIST can be taken to the bank,” she said. ”That’s
why we feel that even those who don’t receive a grant have received a
benefit.”
And it explains why they are included on the Energy Department’s winners
list.
Sometimes the experts are wrong.
Jay Read’s idea for a “binary azeotropic, hot gas, fat extraction process,”
for example.
Read, of Plymouth, Ind., won both NIST approval and a $65,000 Energy grant.
“It really looked good in the lab,” said Read of his technology, which was
a high-efficiency boiler in his rendering plant.
He used the money to build a larger unit.
“When you put it in commercial production, you had such a turbulent
situation, you couldn’t keep the gull-dang material in the pot,” said Read.
The “material” was animal parts.
The technology, concludes the Department of Energy, was unsuccessful “due
to uncontrollable foaming.”
Read is not on the winners list.
Kathie Kidder Jones is, though – even though she never received any
funding from the Energy-Related Inventions Program.
Jones, who was a traveling sales representative, said she came up with her
invention after years of doing “the midair squat over dirty toilet seats”
while on the road. Her idea: a female urinal.
Not only did it offer a sanitary alternative to conventional toilets, said
Jones, but she contended it also conserved water – as much as 65,000 gallons a
year – and thus could qualify for energy-inventions funding.
Although Jones eventually convinced skeptical NIST experts of the merits of
her “she-inal,” as the urinal is called, the application hit a roadblock when
it reached the Department of Energy.
It had nothing to do with the technology, which she has developed with
private funds.
The official reason for the rejection was a low probability of achieving
market penetration. But Jones says she received another – unofficial –
explanation.
“They said they were afraid they would get a Golden Fleece award,” laughed
Jones, referring to the prizes handed out by former Sen. William Proxmire of
Wisconsin for extravagant government projects.
“Any way you looked at it, how are you going to explain to the world that
you’re investing in urinals?”
Backers of the Energy-Related Inventions Program argue that a certain
number of failures are to be expected.
“Tech transfer is a high-risk business, which by definition means there’s a
lot of failures,” said Sherwood Fawcett, who retired in 1985 as president of
the Battelle Memorial Institute in Columbus, Ohio, a federally funded research
laboratory.
Fawcett now is chairman of Transmet Corp., formed as a subsidiary of
Battelle to manufacture aluminum roofing materials. Transmet received $78,878
in 1985 from the energy inventions program.
The company filed for bankruptcy in 1989 and Fawcett joined a year later to
help restore it to solvency. Transmet now employs 12 people and has sales of
$1 million.
Fawcett says starting a new business takes twice as long and costs twice as
much as initially believed. And often, patience is in short supply in
government.
“There is a heck of a tendency for a government agency to say we need
successes, we’ve got to have successes,” said Fawcett. “The fact that the
business is risky and there are losses involved doesn’t mean you don’t do it.
“Anybody who plays in this game I call ‘new technology’ has got to accept
the fact that you’ll have some failures.”
Fred Hart concedes as much. But he puts a slightly more positive spin on
the process.
Even if the technology fails to achieve commercial success, said Hart, “We
can say we’ve given them a jump-start.”
© Copyright 1996 Philadelphia Newspapers Incorporated.
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