Models of Energy Innovation: Best Practice Study For State Energy Officials by Ellen Lutz CEO, Clean Markets LLC www.CleanMarketsWork.com

1. Ellen Lutz
CEO, Clean Markets LLC
September 28-October 1, 2010

2. • NASEO and ASERTTI jointly sponsored study
• Purpose:
– To provide State Energy Offices with best practices & key
success factors in energy technology innovation
– To minimize risk in funding innovative R&D
– Develop recommendations for State Energy Officials when
evaluating higher risk technology innovation projects
• Status: study undergoing participant review

3. • Literature review of technology innovation
• Twenty-one in-depth interviews with organizations
who have created clean energy technology
breakthroughs
• Data analyzed by stage of development
Stage of Number of Sectors
Development Interviewees
R&D 6 projects Universities, National Labs
Demonstration 5 projects Research
institutions, Innovation
Deployment 10 projects Centers,
State Energy Offices, Non-
profits, Private
companies, other State

4. INNOVATION MODELS TRADITIONAL RDD&D MODELS
“Ideation” stage precedes start of R&D direction generally based
R&D activity upon research to date
Intention: to discover completely Intention: to achieve incremental
new ways of addressing problems progress in technology
performance
Requires multidisciplinary teams Clean lines of separation exist
to act as one between organizations and their
responsibilities
Market “pull” – integrates market Market “push” – research
analysis early in research planning “pushed” into development with
minimal market input
Significant overlap between Uses “phase gated” approach –
phases – faster prototype and stages of RDD&D treated as
testing sequenced efforts

5. R&D DEMONSTRATION DEPLOYMENT
Conduct basic and Develop & deploy Assemble project &
applied research working prototypes transfer to end user site
Investigate existing Monitor & evaluate Activate project at end
materials performance user site
Synthesize new materials Solicit peer/end user Solicit end user feedback
feedback
Model devices &
Make adaptations Install O&M processes &
approaches
procedures
Analyze technologies,
Connect/simulate Execute manufacturing
market, policies,
prototype with plans to create economy
environmental issues
networked infrastructure of scale
Develop partnerships Develop & work with Work with partnerships
partnerships

6. IDEATION INCUBATION COMMERCIALIZATION
Create new ideas Transform ideas into Execute: ramp up for commercial
business opportunities success
Review ideas methodically Understand end user behavior and
Mitigate technical &
operational risk competitive set
Evaluate market trends Determine competitive advantage
Transfer & integrate
and technologies technology
Rapid prototyping: Create Create long range forecasts
Assess internal capabilities real world pilots
Execute business, marketing &
Evaluate past failures and
operations plans
Identify opportunities & develop lessons learned
focus RD&D
Continuously assess gaps &
Develop business plan evaluate resources & partnerships
Find the right partnerships based upon end user
feedback

8. Technology GOALS Environment
Advancement AND Economy
STRATEGY
Project Management
Partnerships Capabilities
Intellectual Property
Funding
RESOURCES INNOVATION PROCESSES
SUCCESS
Champion Diversity
TEAM
Market-Facing Experience
Innovation Culture ENVIRONMENT Commitment

9. R&D Broad reaching goals:
– Solve environmental or economic
problems
– Improve existing technology performance
DEMONSTRATION Focused on:
– technology performance
– bottlenecks to achieve larger R&D goal
DEPLOYMENT Incorporate market performance
indicators:
– Expedite market adoption
– Deploy commercial application

10. • Team Qualities: Experienced, passionate, committed,
talented leader and team
• Diversity: Multidisciplinary; involve R&D, commercialization,
end users early
• Project Champion: Provides long term vision, networking,
belief in project’s success
• Market Expertise: Understanding of market and ability to
position in marketplace
• Culture: Allow time for creativity and innovation

11. PROJECT MANAGEMENT INTELLECTUAL PROPERTY
• Provides clear direction & • Majority had IP process
touchstone for evaluation • Major concern, especially R&D
• Needs flexibility to adapt to • Private sector funders often
changing conditions require first right of refusal
• Many R&D organizations had • Manufacturers often want
rigorous metrics exclusive rights at
• Routine meetings & regular demonstration stage
reporting • IP rights well defined by
• Majority had exit strategy in private commercialization
place partners

12. PARTNERSHIPS FUNDING
• One of most critical success • R&D: Multiyear budgets 1-10
factors years; consistency reduces
• Most effective & expeditious waste & keeps momentum
way to fill gaps • Demonstration: 1 ½-3 years;
• Eliminates need to develop $400k- $10.3M
from scratch • Deployment: $3M-$130M
• Goal to round out experience over multiple years
& skills of team: often R&D • Some exceptions:
partnered with business
– smaller budgets create greater
acumen or vice versa sense urgency
– Early success with small
budget attracts more
resources

13. • Traditional RDD&D process can be adjusted to accommodate faster
pace, flexibility & simultaneous development of innovation
• Best Practice areas involve: Goals, Team Environment, Processes
and Resources
• State Energy Offices are in unique position to be an innovation
catalyst within their states & create new categories of
manufacturing jobs
• State Energy Offices can minimize risk of funding innovation by
designing selection criteria for projects around best practices
identified in this study

14. • Strive for game changers: Identify gaps in the state’s clean
energy supply chain and challenge universities and industry to fill
those gaps with innovative solutions.
• Reward good behavior: Develop project selection criteria
that rewards innovation best practices and methodologies
• Require structure: States should require project management
plans for high- risk projects, and have protocols in place for
managing intellectual property arising from R&D projects.
• Look for an innovative environment: Look beyond the
project to the culture within the project team itself.
• Encourage external funding. There is still value in soliciting
projects that states cannot fund alone, and requiring external
partners to contribute the needed cost share.

15. Ellen Lutz
President and CEO
Clean Markets, LLC
www.cleanmarketswork.com
Ellen Lutz
215-242-1424
elutz@cleanmarketswork.com