Can the Military Find the Answer to Alternative Energy?

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DARPA-hard." Typically, DARPA requires contractors to come up with solutions that are orders of magnitude superior to current technology. It pays companies—from startups to IBM—as well as top universities to meet a goal. Then, other than imposing strict reporting requirements, the agency gets out of the way of the researchers' work.

In addition to spurring the development of palm-size fuel cells, DARPA has contracted with companies to miniaturize solar cells that would supplant the need for generators. It now wants to develop inexpensive diesel and jet fuel from algae that could be produced in the battle zone. All three programs include the aim of accelerating the manufacture of any new product by private companies, from whom the military could buy.

The agency certainly has no shortage of ambition. Take its solar panel program. Current technology converts into electricity just about 20% of the sunlight that hits meter-square silicon panels. DuPont (DD) and the University of Delaware are partners in a DARPA contract worth up to $100 million to elevate efficiency to 40%, at an affordable price. The idea is to capture the sunlight that would normally fall across an entire solar panel and concentrate it into a cell about the size of a fingernail. A number of those miniaturized cells would be arrayed across a panel that could be folded up and toted into battle, where it would power the needs of a half-dozen to a dozen soldiers. "It's an aggressive goal," says Brian Pierce, who is managing the DARPA program. In contrast, solar cell maker SolFocus of Mountain View, Calif., is working on similar technology for civilian applications but is aiming for much more modest efficiency gains.

DARPA wants the cost of the new panel not to exceed $1,500—compared with the more than $15,000 DuPont recently spent on a working model of the panel and its cells. Dan Laubacher, DuPont's manager for the project, says the system is at least two years away from delivery to the military. But as production ramps up, he says, the ultimate cost "could be lower" than the $1,500 targeted by DARPA. Eventually, as costs come down, DuPont hopes to sell the panels to utilities.

DARPA-inspired fuel efforts would change the military. How much the agency could change the commercial alternative energy industry is a matter of debate. Some in Silicon Valley welcome DARPA's commitment. Vinod Khosla, a co-founder of Sun Microsystems (JAVA) and one of the most active venture capitalists in alternative energy in the Valley, notes that so far both the private and public sectors have failed to make a definitive breakthrough in alternative energy. "Nobody knows the right answer. So the more the merrier," he says. In this context, "DARPA's ability to take a long-term view of research is positive."

However, some argue that alternative energy is not similar to other DARPA efforts in the past, when the agency had a tremendous impact. In nurturing a proto-Internet, for example, DARPA was alone in the field. Now hundreds of companies are exploring solar panel technology, doing advanced battery research, and experimenting with algae-based biofuels. This is also a global field, where Japan, Germany, and China already have the lead in critical areas.

Others say DARPA's goals can be unrealistic. DARPA wants to reduce the current cost of algae-based fuel from $20-$30 per gallon down to $3. In January, DARPA awarded contracts worth up to $34.8 million to two companies to produce aviation fuel at $3 a gallon from algae. The competitors are General Atomics, best known as the maker of the Predator drone, and Science Applications International (SAI). They have three years to do it. Some doubt these companies—or any company—can achieve that goal.

Chris Somerville, director of the BP-funded Energy Biosciences Institute at the University of California Berkeley, has specifically avoided investment in algae-based fuel because his team does not see costs dropping below $10 a gallon. "We're skeptical that that's going to be possible," Somerville says of the $3 price target. DARPA's answer, as expressed by Nowak, is simple: "If you want to change the world," he says, "set the bar high."

LeVine is a correspondent in BusinessWeek's Washington bureau.

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