Venture planning and analysis for large-scale energy technology developments: A policy perspective

Abstract

Venture analysis of a major energy R&D program involves a process whose objective is to provide insights into the policy question: “Should the government be in this particular energy-technology R&D business?” It is critical to recognize the broader policy formulation and analysis process within which venture analysis seeks to provide insight. Although several venture evaluation approaches have been suggested which incorporate multiattribute decision criteria, they suffer from either: a) the weakness of collapsing the various dimensionally incompatible decision criteria (monetary, environmental, energy, etc.) into a single index or numeraire; or b) they fail to take decision criteria other than energy and dollars into account at all. Both approaches are inadequate for affective venture analysis. The “portfolio problem” of multiple competing/interacting energy-technology options at the policy-decision level suggests that venture analysis results for specific technologies should be provided with complete assessments of various relevant decision criteria in their original (and most appropriate) metrics. Costs and benefits measured in dollars, ergs, environmental damage units, plant safety units, and so on should not be collapsed into a single ranking or evaluation criterion at the venture analysis stage. To do so will totally muddle and confound the higher-level portfolio policy-decision process which compares the effects of multiple energy-technology developments and alternative wealth distribution and implementation approaches. It should be noted, moreover, that while this paper has focused on the specific policy-level issues of R&D venture analysis for energy technologies, it appears that this methodology may be appropriate for a variety of public-policy decisions. Certainly most of the notions presented could be usefully applied to other public sector R&D efforts. Additionally, however, many of the concepts apply to non-R&D policy decisions where the emphasis is on the selection of a unified, time-phased program from a range of possible alternatives.