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Dynamic optimization for commercialization of renewable energy: an example for solar photovoltaics

By R. Kenneth Richards, W. Bradley Ashton and James McVeigh

Abstract

There are several studies of optimal allocation of research and development resources over the time horizon of a project. The primary result of the basic noncompetitive models in this literature is that the optimal strategy is to choose a research intensity and ending date for the project such that the marginal costs of accelerating the project equals the marginal benefits of introducing the product sooner. This literature provides useful insights for the government planner who must allocate R&D resources for renewable energy development. However, several characteristics distinguish the process from the typical R&D planning problem. Specifically, with PV development, where the goal is to maximize the net present value of activities leading to cost reduction in commercial modules, there are (1) significant lag-times between investment in laboratory research and resulting effects in the marketplace, (2) a learning curve associated with the manufacturing process that also reduces the cost s of PV modules, (3) interim benefits from technical advances, (4) no clear end point to the R&D process, but rather a tapering off of the value of advances in technical efficiency, (5) significant uncertainty in the R&D process, (6) a family of products rather than an individual technology, (7) a co-mingling of government and private resources with implications for efficient management. A dynamic model is developed to characterize the optimal intensity and timing of government and private resource allocation for basic research in improving the technical efficiency of cells and subsidies to the manufacturing process to encourage progress on the learning curve. A series of propositions regarding optimal paths for each are examined. While the research is purely analytical, the results are useful for conceptualizing the R&D planning process. They also provide a basis for a numerical study that can address whether current levels and historic patterns of funding are optimal

Topics: Solar Energy, Management, 14 Solar Energy, Photovoltaic Cells, National Government, Research Programs, Commercialization, Planning, 29 Energy Planning, Policy And Economy Research Programs, Allocations, Optimization, Expenditures, Renewable Energy Sources, Manufacturing
Publisher: Indiana University, Bloomington, IN (United States)
Year: 2000
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Provided by: UNT Digital Library
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