Government R&D Investment Decision-Making in the Energy Sector: LCOE Foresight Model Reveals What Regression Analysis Cannot

Energy Strategy Review 21: pp. 1-15, August 2018

35 Pages Posted: 1 Nov 2016 Last revised: 24 Dec 2018

See all articles by Jungwoo Lee

Jungwoo Lee

Korea Institute of Energy Technology Evaluation and Planning (KETEP)

Jae-Suk Yang

Korea Advanced Institute of Science and Technology (KAIST)

Date Written: October 31, 2016

Abstract

Governments that prioritize R&D investment, future R&D investment decision-making depends on performance-based budgeting. Governments evaluate outputs and outcomes of R&D programs regularly and budget for next year on the basis of program assessment. However, existing assessment methodology disregards long-term technology development where in sector such as the energy sector takes a long time for technologies to progress from R&D to commercialization. This paper is a comparative analysis of existing R&D assessment models and the new foresight model developed from the point of view of government. Probit and ordinary least squares (OLS) models are used to analyze the performance of projects built on past R&D investment. The foresight model, which is based on the levelized cost of electricity (LCOE), is discussed in comparison. Results of the regression analysis show that government investment in market expansion of renewable energy technologies is minimal in Korea. In contrast, the LCOE foresight model results show that renewable energy technologies are appropriate targets for government R&D investment. The foresight model should be utilized for government R&D decision-making in the energy sector because it brings to light hidden information, including learning rates and technology dynamics, which remains unaddressed when analyzing using existing R&D assessment models.

Keywords: R&D Assessment, Government R&D, LCOE Foresight, R&D Decision-Making, R&D Investment

Suggested Citation

Lee, Jungwoo and Yang, Jae-Suk, Government R&D Investment Decision-Making in the Energy Sector: LCOE Foresight Model Reveals What Regression Analysis Cannot (October 31, 2016). Energy Strategy Review 21: pp. 1-15, August 2018, Available at SSRN: https://ssrn.com/abstract=2862073 or http://dx.doi.org/10.2139/ssrn.2862073

Jungwoo Lee

Korea Institute of Energy Technology Evaluation and Planning (KETEP) ( email )

114-gil, Teheran-ro
Gangnam-gu
Seoul, 06175
Korea, Republic of (South Korea)

Jae-Suk Yang (Contact Author)

Korea Advanced Institute of Science and Technology (KAIST) ( email )

291 Daehak-ro
Yuseong-gu
Daejeon, 34141
Korea, Republic of (South Korea)

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