State Dollars Flowing To Clean Energy Start-Ups Spurs Debate

Dec 15, 2015

Washington Governor Jay Inslee has made clean energy a signature issue of his administration. But some state clean energy grant money is flowing to startup companies staffed by former top state officials.

That’s fueled a larger debate about the value of spending state dollars on emerging technology.

Mukilteo, Washington-based UniEnergy Technologies makes batteries -- giant batteries that can store-up energy from the electric grid.

Russ Weed is the energetic vice president for business development at UniEnergy. He says energy storage is “the holy grail of the power industry and it has been sought for decades.”

In the back loading dock at company headquarters, shipping containers like the ones you see at the port are stacked up. But it’s what goes inside these containers that Weed says represents a major technological breakthrough: a vanadium flow battery that can be shipped anywhere in the world.

“You weren’t able to containerize a vanadium flow battery before because it was too big,” he said.

Vanadium flow technology holds appeal because, unlike Lithium, it retains its ability to hold a charge. UniEnergy is a young company with about 40 employees and the backing of Chinese investors.

‘Chicken and the egg problem’

But it’s also indirectly getting some early stage funds from Washington taxpayers.

That’s because UniEnergy has contracts to provide battery technology to two Washington utilities that are recipients of state clean energy grants. Weed said that public investment is very important for companies like his to grow.

“Chicken and the egg problem,” he said. “How do you get installations without happy customer references, but how do you get happy customer references without installations?”

The state’s matching grant program gives startups like UniEnergy and Seattle software company 1Energy the ability to demonstrate their products in a real world environment.

David Kaplan is the CEO and founder of 1Energy. He demonstrated 1Energy’s software that tells batteries when to charge and discharge. He said the state grant money that makes its way to his company also helps electric utilities innovate.

“Many, many benefits come to the state of Washington as a result of the work we’re doing,” Kaplan said.

Kaplan was among a small group of clean-tech insiders invited to a meeting with Governor Inslee in 2013 as the Clean Energy Fund was being developed. He was also a consultant to the Washington Department of Commerce -- the agency that now manages the grant program.

Ammunition for critics

The idea that state money is flowing to clean energy start-ups troubles Republican state Senator Doug Ericksen. He chairs the Senate Energy Committee.

“To pick and choose winners and losers in this type of technology environment with taxpayer dollars is a very difficult thing to do,” Ericksen said.

Ericksen said the state should stick to investing in research and development.

But a spokesman for Inslee disagrees. David Postman defended the decision to target state dollars to modernizing the electric grid.

“We need new technology here that’s going to push this,” Postman said. “And the governor has this particular interest in this because -- like with electric cars -- it’s all about the battery.”

Complicating the debate is the fact that both 1Energy and UniEnergy have put former Washington Department of Commerce staffers on the payroll. That’s given ammunition to critics like Ericksen.

“And you end up with situations like this where high-ranking executives in the executive branch, the Department of Commerce, that oversees these types of grants end up being the beneficiaries of the companies that receive those funds,” Ericksen said.

Stopping the ‘revolving door’

The individuals involved said they’ve complied with all ethics rules regarding employment after state service. Last spring, Ericksen called Commerce officials before his committee to explain their handling of the clean energy grant program.

“There were some questions,” Postman said, “We answered those questions in an open hearing, the Department of Commerce did, and then they put some provisions in there to do better the next time.”

Earlier this year, the Washington legislature reauthorized Inslee’s Clean Energy Fund but with new safeguards -- that fund includes the matching grant program. For instance, grant applicants must reveal if a former state employee is on the payroll.

Richard Locke is the former head of the Clean Energy Fund at the Department of Commerce and a supporter of Inslee’s clean energy policies. But he said he’d like to see even stronger rules to stop the revolving door.

“Once you go to work for the state, once you’re involved in allocating these resources, you can’t go to work for the recipient of these grants for a period of years,” Locke said.

Washington law already requires a cooling off period for former state employees before they work directly on a contract they helped authorize. Some argue a broader prohibition could dissuade people in the private sector from coming to work in state government.

This story was produced in collaboration with The Seattle Times.