1. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 1 Ideas on a Framework and Methods for Estimating the Benefits of Government- Sponsored Energy R&D Russell Lee Oak Ridge National Laboratory Presented at the conference on “Estimating the Benefits of Government-Sponsored Energy R&D,” Arlington, VA, March 4 and 5, 2002

2. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 2 Build on National Research Council Framework to Do Analysis for GPRA and Program Planning Build on National Research Council Framework to Do Prospective Analysis for GPRA and Program Planning

3. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 3 Expected Prospective Benefits (e.g., energy consumption): MINUS MINUS Expected Prospective Benefits (e.g., energy consumption): Energy Consumption in Reference Case W/O Technology MINUS Energy Consumption in Reference Case With It MINUS Net Change in Costs of New Technology 0 Time T Energy Consumption (expressed in $) 1. NEMS Reference Case 3. Specialized Model W/O Technology, Calibrated to NEMS 2. NEMS Reference Case with Improvement in Technology Category Backed Out 4. Specialized Model With Technology

4. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 4  What Portion(s) Can We “Credit” to the Government R&D Program? Government R&D Could be Justified If There Are … Barriers to Entry, Imperfect Information, Externalities, Public Goods, National Security Risks, or Non- Competitive Practices and … Total Benefits Exceed Total Costs

5. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 5 Impact of the Government R&D Program Could be An Acceleration of Technology Commercialization  What is t?

6. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 6 R&D Could Lead to Options that Provide Choices to Deal with Deviations from the Planned, Baseline Scenario 0 Time Benefits and Costs of the Technology that Results from R&D How Can Real Options Analysis Be Adapted When It Is “Impossible” to Get Estimates of Risks and Uncertainties?

7. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 7 Prospective Knowledge Benefits  Peer review process adapted to prospective planning needs  Use statistically derived relationships between attributes of research, their publications, and their linkages with patents

8. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 8 Focus on Energy Security

9. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 9 Probabilistic Risk Analysis of... Alternative Energy Infrastructure and Systems... Could Provide Estimates of Benefits of R&D that... Reduces Likelihood or Impacts of Disruptive Events

10. O AK R IDGE N ATIONAL L ABORATORY U. S. D EPARTMENT OF E NERGY 10 Each Workshop Focuses on... A Key Element of the Benefits Framework to … Develop Ideas About Practical, Cost-Effective Methods