US ARPA-E a Model for Carney’s Industrial Ambitions

Canada needs concentrated investment, expert management, and a willingness to accept failure if it wants to build competitive industries, says American energy policy expert David Victor.

Spreading public money without focus can undermine that effort. A smaller economy must choose where it can compete, fund promising approaches, and connect successful technologies with financing and customers.

“You can’t just sprinkle money widely,” Victor told Energi Media.

Victor served on the National Academies committee that evaluated ARPA-E, the American energy innovation agency modelled on the defence research agency DARPA. Speaking in his personal capacity, he described an institution that helps government take technological risks and manage them.

How Government Builds Technological Capability

ARPA-E brings specialists into government for limited terms. They identify technological opportunities, select portfolios of projects, and oversee their development. Projects can be redirected or stopped when an approach fails to deliver.

Victor said the agency has helped companies developing batteries, storage, grid technologies, electric vehicles, and clean fuels at stages in their evolution.

He also identified weaknesses. In his assessment, ARPA-E could take more risk, track failing investments closely, and improve portfolio management.

Those criticisms do not erase its value. The relevant comparison, he argued, is with institutions operating in the real world, where uncertainty cannot be eliminated.

Political leaders must explain why some public investments will fail. They must also distinguish a reasonable technological bet from a failure to recognise that conditions have changed.

“Failure is when a bet doesn’t pan out and you don’t know it,” he said.

Financing the Next Step

Research funding alone cannot carry a technology into commercial deployment.

Victor described an innovation system linking universities and laboratories with early technology development, scale-up support, and financing for large projects. Each part performs a different task.

Government loan guarantees, for example, can absorb some risk that discourages commercial lenders from financing unfamiliar technologies. That can help a project obtain debt financing and lower its cost of capital.

“It’s the ecosystem as a whole that needs to work,” Victor said.

Capital-intensive clean technologies are especially sensitive to financing costs, he added. Higher capital costs increase the importance of institutions that help manage investment risk.

Canada Needs Focus and Global Markets

Victor declined to assess Canadian programs directly. But he said Canada possesses several ingredients associated with American innovation success, including leading universities, frontier technology, and the ability to attract talent.

The challenge is to concentrate those strengths.

Canada cannot match a larger economy’s investments across every technology. It should identify areas where Canadian firms can help define the technological frontier and build access to international customers.

Victor pointed to smaller European economies as examples of countries that concentrate on selected strengths while remaining open to trade.

For Canada, market access is essential. The domestic market alone cannot support every ambition for globally competitive technology companies.

Public funding therefore needs to work alongside professional project management, later-stage finance, and international trade. The measure of success is whether that system helps promising technologies become viable industries and deliver economic benefits.