be employed in the period of time during which it is valid to count program benefits. The public program may introduce early technology, or accelerate private development, but in general would not substitute for private activities over long periods of time. However, some of DOE’s activities might justify longer investment-recoupment periods. If the activity is long-term, very risky, and provides a scientific base for technology (some sequestration activities may fit this description), the public program could accelerate technology deployment by considerably longer than five years. If a longer recoupment period is used, the panels should explain why private sector investment would be unusually retarded in the absence of the government program.
Another complication that arises in this study, as in the retrospective study, is allocating credit between the public and private sector. The issue is not materially different in the two cases: important new technology is virtually always the joint product of efforts of different parties. A retrospective study has the advantage of hindsight so that we can allocate credit with more confidence. The allocation needs to be done here as well, although, as with other benefits, on the basis of judgment rather than facts. Note that the allocation of credit is part of the benefits calculation rather than the probabilities of success.
Current energy security concerns center on two scenarios: the classic oil disruption and an electricity disruption. Either can lead to consequential economic disruptions, although the ultimate magnitude of the losses due to disruptions is currently the subject of controversy. We recommend that as an interim procedure a quantity rather than dollar approach be used to characterize benefits in this category, e.g., the extent to which disruptions are mitigated by the programs through energy conservation, reductions in electricity use, reductions in the need for networked transmission, or other activities.
A problem that arises in assessing RD&D programs comes from the interrelationship of different projects or programs for both technological and commercial success. The technology goals of a system may require success of multiple subcomponents; alternatively, the program may include several projects only one of which need be successful for the technology to work. The former case is usually characterized as “serial” projects and the latter as “parallel.” If we let p1 be the probability of project 1, and p2 the probability project 2 is successful, then the probability that the program is successful is
serial: p1 * p2 (The program succeeds when the projects succeed.)
parallel: 1 − (1 − p1)*(1 p2) (The program succeeds unless both projects fail.)
These are but two ends of a continuum: it may be that the program is most likely to succeed when both (or several) projects succeed, but is complicated, rather than doomed, by the failure of a program component.
A parallel problem exists on the benefits side. Consider programs that are independent technologically (for example: sequestration and wind power). When multiple programs address the same commercial market (alternate ways to generate electricity), and all are successful, the benefits may be identical to the case where only one of the projects succeeded. Alternatively, the magnitude of benefits of a program may depend on several other technologically independent activities. A famous non-energy example is the case of lasers and fiber optics: the value of the former was enhanced by many orders of magnitude when the invention of fiber optic cables enabled a telecommunications application.
As is discussed above, the value chosen for the probability of market acceptance can reflect these concerns. If alternative technologies are critical for market application, or if alternative technologies are under development for the same market application, then the probability of market acceptance, given achievement of technical program goals, will be reduced. Similarly, the probability of technical success can take account of the technological interdependencies described here. However, given the interest of the energy policy community in the DOE portfolio of projects, we recommend a separate calculation when the interdependent programs are within the DOE portfolio. Several options exist to deal with the interdependencies and we expect that these and others are appropriate in different circumstances.
First, projects with highly dependent technological attributes should be considered, if possible, as a single program. This may diverge in important respects from DOE’s organization, which reflects budgetary authority, historical trends, organization of activities among and within the DOE laboratories and a host of other activities. The need to consider disparate projects jointly underscores activities within DOE that would benefit from coordinated management.
Technologically dependent programs will typically have interdependent benefits. If the projects are included within a single program matrix, the latter can be correctly identified or reasonably approximated within the matrix.
Programs with interdependent benefits but technological independence need identification to allow a correct assessment of the DOE portfolio. Two options are to incorporate the dependence within the probability of market assessment, or allowing the probabilities and benefits to presume independence and note the interdependence separately so that matrices can be “rolled up” to allow assessment of the broader portfolio.