Working paper

An Optimal Allocation between R&D; and Prototype Funding: The Case of Generation IV International Forum’s Nuclear Energy Initiative

National Research Council of the National Academies, Prospective Evaluation of Applied Energy Research and Development at DOE (Phase One): A First Look Forward (2005) proposes a cost-benefit methodology to evaluate U.S. Department of Energy’s Research, Development, and Demonstration (RD&D;) programs. This paper develops the methodology for nuclear energy programs. The RD&D; process is analyzed in two stages with two success probabilities: (1) that the technology will transition from the R&D; Stage to the Prototype Demonstration Stage, and (2) that the technology will be adopted commercially. It models discounted expected total benefits of an RD&D; program as a function of the levels of funding, stage durations, the probabilities of success, and spillovers to other technologies. Project duration is an exponential function of funding. Project success is a logistic function of funding and uncertainty. Spillovers are linear functions of funding at each stage. This specification allows calculation of the marginal effects of changes in funding on discounted expected total benefits for a single technology. The paper uses this method to offer an optimal allocation of pre-prototype R&D; funding in the development of the Generation IV International Forum’s advanced nuclear energy systems under a specific parameterization and funding constraint.

    Keywords: Research ; Development ; Demonstration ; Commercialization ; Decision Analysis


    JEL classification : D81 (Criteria for Decision-Making Under Risk and Uncertainty), O32 (Management of Technological Innovation and R&D;) Presented in November, CEMI seminar. CDM Working Papers Series


    • CEMI-WORKING-2006-001

    Record created on 2006-02-01, modified on 2016-08-08

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