Is the government spending too much on clean tech?

ARPA-E handed out another $92 million in grants this week for energy research projects -- in energy storage (especially for wind and solar power), energy transmission (components that minimize loss of energy when power is transferred over the U.S.'s aging electrical grid) and energy efficiency in buildings (which consume 40 percent of all energy in the U.S.).

ARPA-E just turned one and is modeled after DARPA -- the research arm of the Defense Department, whose technical breakthroughs include the Internet. ARPA-E is part of the Department of Energy -- hence the "E" -- and its grants, which have been funded by the American Recovery and Reinvestment Act, are supposed to spark development of new technologies that will create U.S. jobs and lower U.S. dependence on foreign oil.

But the head of ARPA-E, Dr. Arum Majumdar, found himself explaining his agency's actions today at an event in San Francisco hosted by GE, which announced alliances with four venture capital firms and promised to contribute $100 million to a $200 million clean tech venture fund. (The VCs will be coming up with the other $100 million. Smart Planet offers extensive coverage of the event here).

Majumdar was on a panel whose moderator, Adam Lashinsky of Fortune, asked whether the government's funding of clean tech interferes with the free market and puts government "thumbs on the scale."

Lashinsky was trying to be provocative, but there are real problems getting clean tech projects funded, according to the panelists. The small amounts that ARPA-E hands out -- its $92 million went to 43 projects in 18 states -- may be enough to get clean tech projects started, but they need big money to scale, more than the government can afford.

"We want more companies to take a leadership role to do this," Majumdar said. "At the end of the day, the government's role is to reduce technical risks and look at a portfolio of approaches. The government is not good enough to scale."

Also, since it's run out of stimulus money, ARPA-E now has to submit a budget to Congress along with the rest of the federal government.

Google's Dan Reicher talked about the "valley of death," where clean tech companies languish when they can't raise enough money to grow past the early stage. He argues that this is another role for government, and said Google is backing a proposal in the Senate Energy Committee for another new government agency -- the Clean Energy Deployment Administration -- which would offer loan guarantees to struggling clean tech companies and would be self-funded so it wouldn't have to rely on taxpayers.

Other governments, like China, have no qualms about funding clean tech companies, Lashinsky pointed out, and several panelists said the U.S. will lose markets if the country can't figure out how to compete.

You can see where ARPA-E's stimulus money has been going by clicking here. You can also watch the panel discussion yourself in the video below.

And keep an eye on GE's $200 million clean tech project, called ecoimagination. GE plans to let the public help decide what to fund, and you're supposed to be able to submit your comments and ideas here.

This post was originally published on Smartplanet.com