The Winding Path of DOE Prize Authority

What it actually took to turn a legal authority into a functioning program at DOE (Part 1)

A quick note: This post is a two-part series. I know some of you are just here for a “how-to” reference guide on prizes. That’s coming. We’ll provide a clean, summary guide at the end of Part 2.

Part 1 is the story. It covers the messy, real-world background of how this funding mechanism was actually unlocked and the institutional hurdles you may have to overcome to use prizes in your organization. In our view, you have to understand the story to see why the reference guide even matters.

Introduction: Picking the Right Tool for the Job

So far in our articles, we’ve started to examine the ‘what’ and the ‘how’ of public funding. We started with the toolkit itself in our primer on Government & Non-Dilutive Funding Mechanisms. And we discussed the timeline and learning challenges that can be faced without a common design framework in our “Full-Stack Funding Program Design” post.

But when thinking about program design, the hard part isn’t necessarily knowing the mechanisms exist. The challenge is that any program concept can be designed and implemented using any mechanism. There isn’t a clear signal or standard operating procedure that says “this should be a prize” or “this must be a grant.” We all tend to feel confident our program is using the “best” mechanism simply because it’s the one we picked, or the one our organization always uses.

For this post, we are going to dig into prizes, one of the mechanisms most commonly misunderstood. Too often, prizes are viewed as a simple transaction: a pot of money for one winner. This is a critical misunderstanding of the tool. A prize is a flexible incentive that can shift behavior, or be stacked into multiple stages to de-risk investment and accelerate progress. When utilized correctly, a prize is a unique tool that attracts new talent, de-risks ambitious goals, and can build an entire innovation ecosystem from scratch.

To show you what this looks like, we’re going to use the Department of Energy’s transformation into a prize powerhouse as a case study. We’ll show how this shift happened, why it works, and how its success was not tied to how much funding was used; it was about the beginnings of a full-stack design behind the mechanism.

What is a “Prize”? (And What It’s Not)

To understand why prizes work, we first need a clear definition of what they are, especially in the context of government funding.

At its core, a prize competition enables an agency to offer rewards for achieving a specific objective or solving a defined challenge. It is a tool for stimulating innovation by incentivizing individuals and companies to develop new solutions using their own funds. That sounds straightforward, but there are four key distinctions that separate prizes from traditional funding mechanisms, and understanding these differences is critical to knowing when prizes are the right tool.

A prize pays for results. A grant pays for effort: This is the most important distinction since everything stems from this difference. A prize is retrospective and awards completed work that successfully meets the challenge criteria. A grant is prospective and pays a recipient to perform a scope of work based on a “best effort” basis.

This distinction has massive budgetary and downstream effects that change the entire dynamic of a program. For example, because prizes reward success and competitors are spending their own funds and operating at their own risk there are no cost share or intellectual property (IP) considerations (except for when a competitor consents to handing over IP). If you need a reminder of IP considerations from grants check out the primer.

Now, you might be saying, “Wait a minute, cost share is important.” It’s a requirement in financial assistance regulations, shows the awardee has “skin in the game,” and shows the seriousness of the commitment of the competitor or performer. The assumption is without cost share that there’s no calculable way to estimate how much a competitor has put into an idea. So how would the government know what it’s truly leveraging?

The nuance here is that because prize competitors get no funding unless they win, they are already putting in far more “cost share” in the form of their own resources being used to compete. This massive, usually undocumented, skin in the game is the real cost share. Talk to any prize participant; they will tell you just how much they committed to win. While potentially calculable, DOE never asks for it so total prize cost share remains undocumented.

Funds are Fast and Flexible: Prize winners get their money fast. Funds are typically issued within 10-30 days of receiving payment information from selected winners. This happens without the months-long negotiations over budgets, milestones, and scopes that define the traditional grant process.

Once a winner receives the money, it becomes non-federal funding with no strings attached. One prize awardee shared that the $500,000 they received in a prize program was more helpful to them than a $2M grant they received because the funds could be applied to exactly what was needed, as soon as it was needed, versus dealing with award negotiations and modifications. Another shared, “This just makes sense. There should be an American Innovation Fund that works this way.” Prizes “make sense” in a way that other government funding sometimes doesn’t.

On the program manager side, prize design is flexible. You’re not locked into one single award. You can design multi-stage competitions with increasing tiers of funding, or award multiple winners in a single round. You can also award “other things of value,” such as technical assistance vouchers, or make awards from a few thousand dollars to millions.

This speed and flexibility is exactly what makes prizes effective, but it’s also what makes some federal managers anxious. Money goes out fast. There are no invoices to review, no quarterly check-ins, no project plans to approve. The questions become: Will competitors actually use the funding to advance their solution? Are we putting money toward activities that will truly move the needle? For managers accustomed to active oversight, this hands-off approach can feel like a loss of control. This leads to the next characteristic...

Limited Federal Involvement Post-Award and Between Stages. During the competition, the government’s role is limited. Unlike a cooperative agreement where federal staff are “substantially involved,” a prize sets the rules and the finish line, then steps back and lets the competitors compete. This can feel alien to people accustomed to grants with project management requirements that can include quarterly calls, quarterly progress reviews, and site visits. For a prize, the government’s job is to be a clear rule-maker, not a co-manager.

Prizes are Competitions. This seems obvious, but it’s worth stating. Prizes are for taking risks where the solution is uncertain. This is where the design flexibility comes in.

By design, only a few are expected to win. As you stack multiple prize stages, more funds can be given to fewer winners as they demonstrate more and more success. This allows you to test a wide set of ideas and then scale support for only the highest performers.

Note: This makes prize sound great but, like all mechanisms, they have major downsides we will cover in Part 2)

Why Use a Prize? The Strategic Case

With this context, let’s take a step back. Prizes as a concept are not new. They have a long and proven history of sourcing breakthrough ideas by rewarding results, not just effort. From the 18th-century Longitude Prize that revolutionized sea travel to more modern competitions that launched the private spaceflight industry, prizes have consistently solved complex technical challenges.

I remember the story that opened my eyes to prizes. I’ll share it here to see if it triggers the same response in you:

In 2000, a mining company, Goldcorp, had a mine that was underperforming, and while their geologists were sure more gold existed, they had no idea where to dig.

Instead of funding a slow and expensive internal search, the CEO did something radical. He released all the company’s proprietary geological data (generally considered very sensitive data) to the public and offered a $575,000 prize to whoever could help find the most gold.

The gamble paid off. Submissions poured in from around the world. The winning teams identified 110 deposit sites, 50% of which were new to the company. This move saved 2-3 years of exploration time and ultimately led to the discovery of over $6 billion in gold, transforming the company’s future.

For a government employee used to invoice-based reimbursement, this was a radical concept. I couldn’t stop thinking about how the federal government would have tried to solve that same problem.

Our standard process, the Funding Opportunity Announcement (FOA), AKA the Notice of Funding Opportunity (NOFO), is methodical and designed for diligence. At DOE, we would have spent months running requests for information and workshops to thoroughly define the problem. A FOA would be released which takes months to write and get internal approvals. Then a panel would have selected the top 3-5 proposals, funding them for millions of dollars. The key difference is that we would pay awardees for three years of effort based on a well-defined plan, with invoices for every hour they worked on the project.

This process is effective for managing large, complex projects and ensuring accountability. But it is also, by design, time-consuming and does not encourage the same level of risk in approaches that a prize can.

And the radical, creative approaches that actually worked for Goldcorp? They would have been a very hard fit for that model. They would have likely been seen as too speculative for a review panel to fund.

This isn’t to say that FOAs can’t fund high-risk, breakthrough solutions. Tons of government funding over the years has done exactly that. The point is that the FOA process is designed to support certain kinds of research, but not all. Prizes widen the aperture. They increase the diversity of innovations that can be funded, increasing the likelihood that breakthrough solutions are funded which may have been missed previously.

From Niche Tool to Powerhouse: The DOE Prize Story

So my curiosity was piqued, and there were a few others in DOE chattering about prizes. Jenn, Garrett, and I were lucky enough to be some of the few exploring what might be possible.

For DOE, the modern prize story begins in 2007, when the America COMPETES Act first authorized the agency to use prize competitions. An early, high-profile success was the L-Prize, which was launched in 2008 to fulfill a specific statutory requirement from the Energy Independence and Security Act of 2007. It was a large, “big carrot” prize that ultimately awarded a $10 million grand prize to Philips for developing a revolutionary, hyper-efficient LED lamp, an innovation with direct links to the LED bulbs we all use today.

And DOE had used some of its newly found authority under the America COMPETES Act for prizes to support student competitions. The National Clean Energy Business Plan Competition (2010 - 2013) and its successor the Cleantech University Prize (2013 - 2016) used and leveraged prize authority in combination with traditional grant authority to support dozens of student-focused business plan competitions, with support from private sector partners like Wells Fargo, which launched companies nationwide.

But progress for uptake on prize authority across the agency stalled, with limited uptake on prizes despite some of the early successes, particularly with student-focused competitions.

One major reason was a massive bureaucratic barrier. Most new legal authorities say “the Secretary shall do X,” and over time that authority is delegated down to lower levels, even all the way down to the program offices (as deemed appropriate by the Secretary). This did not happen for prizes; authorities aren’t delegated if no one is thinking or asking about them. Any staff member who wanted to try this new mechanism had to convince their entire chain of command, from their Office Director all the way to the Secretary’s office for any prize that the total prize pool exceeded $1 million. That limited both the execution and the willingness to try new things, given the burden to get a prize approved all the way up through the Secretary. (We’ll write future posts on the massive gap between policy and practice, but for now, just know this was a huge hurdle).

Having the authority to run a prize is not the same as having the capability or the model to do it effectively and at scale. For years in DOE, prizes remained a niche tool, used for one-off, large-scale challenges. It wasn’t yet a core part of the agency’s innovation playbook.

The Real Problem: A Leaky Pipeline

It was during this period (2014-2015) that we were seeing success in the Solar Energy Technologies Office (SETO) with our Sunshot Incubator program, which provided $500k-$2M in the form of cooperative agreements to solar entrepreneurs. But we had a troubling issue.

Each year, the number of new applicants was going down.

The organic growth of new, exciting solar companies aware of, and interested in, applying for government support was not where it needed to be. The solar industry was facing immense challenges, and we needed more entrepreneurs to help solve them.

An early effort called the Sunshot Catalyst program was experimenting with prize authority and offering services, but it wasn’t getting the traction we had hoped. While innovative, it was a complex, five-stage prize focused exclusively on software solutions. This narrow focus, combined with a multi-stage process for relatively small initial awards, didn’t create the broad, motivating signal we needed to attract the wide range of hardware and other entrepreneurs we were missing. Something more was needed.

The “Prize Mountain” Setback

In parallel to internalizing what this challenge meant for SETO, several staff inside DOE (including me, Jenn, and Garrett) spoke with hundreds of startups, business incubators, venture capitalists, and awardees of all sizes to explore what would motivate them to consider government funding and what form that funding would need to be in to be helpful. The solution we arrived at was something we called “prize mountain.” Here’s an early brainstorming slide we put together in our personal notes:

After much more discussion and refinement we thought we had it all figured out. Jenn and I wrote a 40-page white paper outlining an entirely new program model. We delivered it with pride to leadership and… were met with confusion and resistance.

Briefing Leadership on Prizes: “They’ll Just Take the Money and Walk Away”

We were told trying something this new was far too risky and to please stop pursuing this. A more traditional workforce concept or another idea that just helped entrepreneurship would be more acceptable. The complexity of the idea, met with the complexity of execution seemed too difficult and different.

The seemingly insurmountable issue was a fundamental disconnect in thinking. We had proposed a multi-stage prize with increasing dollar amounts, but leadership could not get past one key detail: prize funds have no strings attached.

Their views were filtered through the traditional funding lens, which is all about active project management and oversight. For them, “no strings attached” was not an incentive for the winner; it was a total loss of control for the agency. The core fear was not just that a winner would “walk away” with the first-stage cash. The unstated risk was that someone would take those unencumbered funds and do something that could cross the “bad newspaper headline” threshold, the worst fear of many leaders. It was a career risk, and for what? They were not willing to take on a new, unproven model.

This was the exact opposite of what our research showed. Having spoken with so many startups, we knew that when entrepreneurs have a clear target, some cash, and a good chance of getting more and increasing amounts of cash to help their startup, they don’t walk away. They work even harder toward the goal.

We cannot overstate how much this single issue was debated. It was the central point of resistance. And it’s worth noting, after all that debate, to date, after 100+ DOE prize programs (as of 2025) we are not aware of a single winner of an early stage of a multi-stage prize doing anything inappropriate.

But the argument was a non-starter. It left us feeling deflated and disappointed. We filed our write up away and pursued other efforts to try to make a difference.

The Inflection Point and the “American-Made” Solution

The inflection point came in 2017 with a new leader asking, “Isn’t there anything new and interesting we can do?”

It was a new Administration with a new team. There was pressure to demonstrate support for US manufacturing. Tariffs were being announced on imported solar energy products, and the Administration wanted to make an announcement about helping domestic manufacturers compete. The political need was clear. What was missing was a program that could credibly deliver.

In a serendipitous moment, Jenn was in a meeting with senior leaders who had been briefed on our two year old prize proposal. The conversation shifted. Our old “prize mountain” concept, which had been rejected as too risky and too complex, suddenly looked like exactly what was needed. A way to support domestic startups. A new approach that could be announced alongside the tariff policy.

The decision happened fast. In a flurry of meetings over the next few weeks, the structure was signed off by the highest levels of government. The Secretary approved it. The White House approved it. The beginning of the Solar Prize and the American Made Challenge platform were born. A years-long endeavor was revived and approved in a few weeks.

Note: This is just one example of how timing and the personalities of leaders dictate what happens in government, not policy. We’ll cover more on this dynamic in a future post.

Once the concept was approved, we collaborated with leadership at DOE and the National Renewable Energy Laboratory (NREL) to build a new, scalable model. We built on the legacy of the Catalyst Prize and leveraged the agreement between DOE and NREL to kick off the prize platform that would serve as a model to spur 100+ prizes across DOE.

The story of how we struggled to arrive at the final structure of the Solar Prize and all of its components is a case study in an early attempt at the full stack funding program design philosophy and will be covered in depth in Part 2 of this post.

What This Story Really Shows

Knowing what we created was fragile, we sought and succeeded (in partnership with some amazing attorneys and senior staff in DOE) to finally get prize authority delegated to lower level leaders and teach other offices about the opportunity. Those early efforts led to a few more prizes and then a few more. The American Made Challenge expanded from a single prize with $3 million in 2018 to over 100 prize competitions across 20+ DOE program offices and facilitated more than $500 million in support.

Similar to the Goldcorp prize the strategic investment paid dividends. The Solar Prize alone, for example, has awarded $26M to 140 teams. As of this writing, those teams have gone on to raise nearly $300M in follow-on funding and created hundreds of jobs.

This is the winding path prizes took at DOE that transformed the Department of Energy into one of the most prolific and successful users of prize authority in the U.S. government. What the story really shows is the massive gap between a law being passed allowing and supporting the use of prizes and that law becoming a real, usable tool.

In a large bureaucracy, a good idea or a new legal authority is not enough.

Real change requires a rare alignment of several forces. It takes persistence from staff who are willing to hold onto a new approach even after being told “No.” It takes an organizational culture that empowers staff to think about new solutions, rather than shutting them down as “too risky.”

And even with all that, it still comes down to timing, like a new leader asking the right question at the right moment, and champions in leadership who are willing to spend their political capital to bypass the risk-averse culture, ignore past failures, and actually try something new.

It’s a case study in how innovation actually happens in government: not as a clean policy decision, but as a messy, difficult process driven by people, timing, and a willingness to take a real risk.

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Innovation Waypoints is brought to you by Waypoint Strategy Group.

In Part 2 of this series, we’ll break down the specific “Full-Stack” design layers that made this model work. We will also explore the critical question of when a prize is the wrong tool for the job and provide that summary reference guide I promised.