Evaluating R&D Projects in Regulated Utilities: The Case of Power Transmission Utilities

Abstract

Research and development (R&D) project selection is essential for many organizations; however, it is a complex decision since it is affected by many factors. These factors vary among organizations because of their different objectives and conditions and limited budgets for the investments. Therefore, the main motivation of this article is to create a method to help improve the ex-ante selection of R&D projects in regulated organizations. More importantly, the case application is the electric transmission utilities sector, which plays one of the most critical roles in the entire electric power system. The main objective of this article is to develop a model to select R&D projects based on a holistic approach aligned to strategies, utility objectives, and market conditions in the electric transmission sector. At the same time, it identifies, categorizes, and quantifies the factors associated with R&D projects in the power sector. The analysis is framed into a multicriteria model, hierarchical decision model—HDM proposed by (Kocaoglu, 1983), which considers all the aspects associated with R&D projects. The model and the application are potentially applicable to regulated organizations around the world. Moreover, the flexibility of the model allows it to be adopted by electric transmission utilities with similar characteristics to utilities in the United States. A complete analysis of criteria and subcriteria has been done. There are gaps in the literature that have been identified and that support the idea of using a multicriteria analysis to evaluate R&D projects. The methodology is described, and the application of the model is provided.