Energy researchers have warned that serious progress in industry-transforming research could founder.

And if the U.S. isn’t careful, it may even win in energy research but lose the business it creates.

That was the message from scientists, government officials, and business leaders at the Energy Frontier Research Centers (EFRC) Summit, which brought more than 1,000 experts from various sectors of the energy business to Washington, DC last week.

Experts agreed breakthroughs are needed to ease heavy U.S. reliance on fossil fuels – oil, coal, and natural gas – which power nearly all transportation, generate 71% of electricity, and produce most heat-trapping carbon emissions.

Speakers led by Energy Secretary Steven Chu, were optimistic that game-changing discoveries can happen, but agreed they can’t happen without collaborations among business, government and academia, across scientific disciplines. Chu pointed to health care, where diagnostic breakthroughs like imaging technologies stem from physics research.

Research is demonstrably an engine of business growth, said Yet-Ming Chiang, MIT professor and founder of battery pioneer A123 Systems. He said a 2009 study of companies created by MIT alumni alone identified 26,000 companies employing 3.3 million people with $1.8 trillion in revenues.

The difficulty is translating breakthroughs from the lab to sustainable businesses. John Hennessy, president of Stanford University and founder of several Silicon Valley startups, warned that energy breakthroughs will require far more time and investment than Internet innovations before they produce profits for venture capitalists.

Eric Isaacs, director of the Argonne National Laboratory, said energy has “two Valleys of Death” where great ideas can founder: firstly getting funding to develop an idea to the point where it can be commercialized, and secondly getting funding to commercialize it.

He and David Carlson, chief scientist for BP Solar, said that second step is too often taken abroad, especially in China, where manufacturing costs are lower. Carlson said Chinese wages are rising, and there are some indications some high-tech manufacturing is returning to the U.S., but costs will continue to drive those business decisions.

Chu cited nuclear technology, supercomputing and high-speed rail as areas where the U.S. developed breakthrough technology but lost the business leadership, and speakers repeatedly said long-term, consistent U.S. policy and funding are needed to keep the breakthroughs, and the business, in America. But Sen. Jeff Bingaman (D-NM), chairman of the Senate Energy Committee, warned that federal research funding faces steep cuts in Congress.

Few companies currently fund basic energy research. Mark Little, director of GE Global Research, said his company is the largest private funder, spending $5 billion annually and partnering with U.S. national laboratories. But those projects are “business-driven,” focused on developing products that GE business units foresee their customers will buy in the future.

The EFRCs are business-government-university collaborations that pull together whatever expertise is needed to penetrate daunting scientific barriers. Nate Lewis, head of one EFRC, the Joint Center for Artificial Photosynthesis (JCAP), described reaching out to scientists across the nation in JCAP’s project to imitate nature and turn sunlight directly into fuel, a long-dreamed-of goal requiring exponential leaps in chemistry.

Among the most-mentioned energy enigmas were those requiring game-changing discoveries in materials and chemistry: longer-lasting, lighter batteries for electric vehicles; flexible, megawatt-scale storage devices to enable more wind and solar on the grid; carbon capture to lessen the environmental hazards of burning coal; sustainable biofuels; and efficiency breakthroughs to make better use of energy consumed.

The conference heard one piece of good news: there’s no shortage of talent wanting to tackle energy. Hennessy and Mark Ratner of Northwestern University said their schools’ research is driven by students clamoring to attack energy issues. They said the challenge for universities, and the country, is finding funds to support the best young minds.