LASEN Laboratory of Energy Estimating spillover benefits of ......Chair of Economics and Management...
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Chair of Economics and Management of Innovation Laboratory of Energy Systems Estimating spillover benefits of Fusion energy research, development, demonstration and deployment program CEMI LASEN Magnetic Confinement Thermonuclear Fusion Technology Key Advantages • Abundant and world-wide equally distributed fuel resources • Inherently safe (no runaway chain reaction) • No local air pollution, no emissions of greenhouse gas • No high-level long-lived radioactive wastes Drawbacks • Very long research & development cycle • Complex reactor technology Image: EFDA PPCS, 2005 www.efda.org Maintenance Vacuum vessel Heating & current drive Central solenoid Breeding blanket Poloidal field coil Toroidal field coil Power conversion system Electricity supply to the grid Isotope separation Primary fuels Wastes Divertor D+T+ashes Pumping Energie Energy 1. To identify the main types and specific examples of positive externality effects (spillovers) of Fusion RDDD. Objectives • Recent R&D evaluation practice and scientific literature suggest to consider all social costs and benefits, including negative and positive externality effects, while allocating public funds among multiple R&D programs. • Considering that the expected benefits of Fusion technology are confronted with a high degree of uncertainty, the decision-makers are facing the problem how to optimise the public funding of Fusion RDDD program. • The global quest for energy security creates the need for accelerated development of new safe, clean and resource unconstrained energy technologies, such as thermonuclear Fusion. Context Externality Concept Positive Negative Society Risk Public R&D costs Technical knowledge and other societal benefits Security Local pollution Greenhouse gas (GHG) emissions Externalities, also known as spillovers or third-party effects, are unpriced by-products of the production or consumption of goods and services of all kinds Recycling / cleaning of wastes Reduction of GHG emissions compared to baseline Deuterium Tritium Neutron Helium FUSION ENERGY 1g of D + T --> 30000 kWh of electricity • However, the practical tools allowing to perform socio-economic assessment of global long-term energy R&D programs, such as Fusion, including their positive externalities (spillover benefits), are still missing or incomplete. 3. To carry out a case study of Wendelstein 7-X Fusion stellarator experimental facility. 4. To elaborate a set of plausible Fusion demonstration and deployment scenarios and to perform on this basis prospective evaluation of Fusion RDDD program. 2. To develop an integrated methodological framework that would allow for taking into account spillover benefits in the socio-economic evaluation of Fusion RDDD program. Environment Methodology Module 2 Global Long Term Energy Scenarios Building Prospective techno-economic analysis of future energy markets and projection of potential market share of Fusion technology Module 1 Fusion R&D Spillovers Modelling Ex post / near term ex ante microeconomic assessment of the socio-economic benefits of Fusion R&D projects Module 3 Fusion R&D, Demonstration and Deployment Scenarios Simulation Ex ante socio-economic assessment of Fusion RDDD program basing on the global / regional electricity supply scenarios and taking in account the spillover benefits of Fusion RD&D activities and construction of commercial Fusion power plants Module 4 Strategic Evaluation and Policy Recommendations Sensitivity analyses and strategy optimisation Classification of Fusion RDDD Spillovers Value drivers Spillover effects Fusion RDDD program Company value Projected Growth Rates ROIC WACC Revenues Costs Invested capital Technological factors Commercial factors Organisation & Methods factors Personnel- related factors Fusion R&D Projects (1, 2…n) Fusion DEMO projects Commercial Fusion power plants Value drivers Spillover effects Fusion RDDD program Company value Projected Growth Rates ROIC WACC Revenues Costs Invested capital Technological effects Commercial effects Organisation & Methods effects Personnel- related effects Fusion R&D Projects (1, 2…n) Fusion DEMO projects Commercial Fusion power plants Accumulation of knowledge stock (publications, patents); Formation of human capital (PhDs, experienced researchers, research networks); Strengthening of companies’ technological and marketing capabilities; Creation of “real option” value (due to flexibility in managerial decisions); Success / failure signals to industry Disembodied knowledge spillovers Market spillovers (due to supply of competitively priced energy services and non-energy products / services); Induced economic activity at regional scale (due to economic multiplier effects); Improvement of national payment balance (due to technology export and reduction of fossil fuel imports); Energy security enhancement Technology spin-offs (non-energy applications of technologies and products developed in the process of Fusion R&D); Network spillovers (learning and scale economies due to increased demand for subjacent products and services; induced innovation in related sectors) Improved performance / lower cost of clustered components specific to different energy technologies (due to learning-by-doing); Non-electric applications (heat & hydrogen production; nuclear fuel transmutation; spent fuel treatment) Embodied Macroeconomic Cross-industry Intra-sectoral Form \ Level Module 1 Module 2 Module 3 Publications Spillover benefits are estimated at the level of individual companies participating in Fusion R&D projects It is assumed that Fusion R&D spillovers may have a positive impact on the key driving factors of the company value, namely return on the invested capital and growth rate, and their underlying drivers Calculation of the company value is based on the “Economic Value Added” , also known as “Economic Profit” approach The increase in the company’s value subject to different Fusion demonstration, deployment and indicative (no Fusion) scenarios is taken as proxy of the pecuniary value of Fusion R&D spillover benefits Conceptual Fusion R&D spillovers model • • • • Long-term electricity supply scenarios have been developed for 11 world regions using least cost probabilistic simulation dynamic programming model PLANELEC-Pro The model allows to determine the optimal expansion plans of the power generation systems that adequately meet the projected electricity demand at minimum cost given the quality-of-service and CO2 emissions constraints The outputs of the model are optimal expansion plans concerning the number, the time and the type of power plants to be installed, total discounted cost of the expansion plan, levelized system electricity cost, CO2 emissions of each year, etc. For each of the world regions a “reference” case of system expansion without Fusion and its different variants providing for introduction of Fusion power are simulated • • • • Projected World Total Power Generation Capacities 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 2000 2020 2040 2060 2080 2100 GWe Fusion Renew Oil NG Nuc Coal Hydro Global long-term energy scenarios building with PLANELEC-Pro model ITER / IFMIF ITER / IFMIF DEMO -1 DEMO -2 DEMO -1A DEMO -1B DEMO -2 FPP deployment FPP deployment FPP deployment FPP deployment Failure Failure Market conditions unfavorable (wait/ improve) CASE 1 CASE 2 p1 (1-p1) p i – probability of success T i – time to completion C i – costs S i – spillover benefits R i – revenues from energy sales p1 x p2 p1 x (1-p2) C1, S1, T 1 C 2, S2, T 2 CF, SF, RF C3, S3, T 3 CF, SF, RF p1 x(1-p2) x p3 p1 x (1-p2) x (1-p3) C4, T4 Market conditions unfavorable (wait/ improve) C 1,S 1,T 1 p1 (1-p1) p1 xp2* p1 x(1-p2*) C 2*, S 2*, T 2 C F, S F, R F C 3,S 3,T 3 p1 x (1-p2*) xp3* p1 x (1-p2*) x (1-p3*) CF, SF, RF C4, T4 C 2 * > C 2 p 1 x p 2 *> p 1 x p 2 p 1 x (1-p 2 *) x p 3 *>p 1 x (1-p 2 ) x p 3 Stochastic Real Options model is being developed in order to perform overall socio-economic assessment of Fusion RDDD program Numerical estimates of Fusion RD&D spillover rates as well as the costs & revenues of future Fusion power plants (FPPs) are taken as inputs from Modules 1 & 2; assumptions on the deployment spillover rates as well as the cost, duration and probabilities of success of Fusion “R&D” and “Demo” stages are taken as exogenous inputs The model takes into account both types of uncertainty (aleatory and epistemic) and allows to estimate “strategic” value of Fusion RDDD program arising due to flexibility in the managerial decisions (options to wait / improve if market conditions are unfavourable) • Fusion RDDD Real Options model • • • Gnansounou E., Bednyagin D. (2007) Multi-Regional Long-Term Electricity Supply Scenarios with Fusion, Fusion Science and Technology, Vol. 52:3, pp. 388-393 • Gnansounou E., Bednyagin D. (2007) Estimating Spillover Benefits and Social Rate of Return of Fusion RDDD Program: Conceptual Model and Implications for Practical Study , Report on task TW5-TRE-FESS/D, EFDA - SERF PhD candidate: Denis Bednyagin (EDMT) Thesis advisors: Dr. Edgard Gnansounou (LASEN-ENAC) Prof. Dominique Foray (CEMI-CDM) Advices and support of Prof. Minh Quang Tran (CRPP) and Dr. Christian Eherer (EFDA) are gratefully acknowledged Preliminary Results and Conclusions • Integrated evaluation framework developed in the present study represents an important step forward in the practice of the socio-economic evaluation of global long term RDDD programs in energy sector due to inclusion in the analysis of the previously ignored value of the positive externality effects. • The results of the simulation of multi-regional electricity supply scenarios demonstrate that Fusion power may become an important energy supply option by the end of XXI century (with market share up to 20% in most developed world regions) provided that sufficient public funding is granted during the demonstration and initial deployment stages. E-mail: [email protected] • LASEN-ICARE-ENAC • Station 18 • EPFL • CH-1015 • Lausanne • SWITZERLAND
Transcript of LASEN Laboratory of Energy Estimating spillover benefits of ......Chair of Economics and Management...
Chair of Economics and Management of Innovation
Laboratory of Energy Systems Estimating spillover benefits of Fusion energy research,
development, demonstration and deployment program CEMILASEN
Magnetic Confinement Thermonuclear Fusion Technology
Key Advantages • Abundant and world-wide equally distributed fuel resources • Inherently safe (no runaway chain reaction)• No local air pollution, no emissions of greenhouse gas • No high-level long-lived radioactive wastes
Drawbacks• Very long research & development cycle• Complex reactor technology
Image:EFDA PPCS, 2005www.efda.org
Maintenance
Vacuumvessel
Heating & current drive
Central solenoid
Breeding blanket
Poloidal field coil
Toroidal field coil
Powerconversionsystem
Electricity supplyto the grid
Isotopeseparation
Primaryfuels Wastes
Divertor D+T+ashesPumping
E n e r g i eEnergy1. To identify the main types and specific examples of positive externality effects (spillovers) of Fusion RDDD.
Objectives
• Recent R&D evaluation practice and scientific literature suggest to consider all social costs and benefits, including negative and positive externality effects, while allocating public funds among multiple R&D programs.
• Considering that the expected benefits of Fusion technology are confronted with a high degree of uncertainty, the decision-makers are facing the problem how to optimise the public funding of Fusion RDDD program.
• The global quest for energy security creates the need for accelerated development of new safe, clean andresource unconstrained energy technologies, such as thermonuclear Fusion.
Context
Externality Concept
Positive Negative
Soci
ety
Risk
Public R&D costsTechnical knowledge and other societalbenefits
Security
Localpollution
Greenhouse gas (GHG) emissions
Externalities, also known as spillovers or third-partyeffects, are unpriced by-products of the productionor consumption of goods and services of all kinds
Recycling / cleaningof wastes
Reduction of GHG emissions comparedto baseline
Deuterium
Tritium
Neutron
Helium
FUSION
ENERGY
1g of D + T --> 30000 kWh of electricity
• However, the practical tools allowing to perform socio-economic assessment of global long-term energy R&Dprograms, such as Fusion, including their positive externalities (spillover benefits), are still missing or incomplete.
3. To carry out a case study of Wendelstein 7-X Fusion stellarator experimental facility. 4. To elaborate a set of plausible Fusion demonstration and deployment scenarios and to perform on this basis prospective evaluation of Fusion RDDD program.
2. To develop an integrated methodological framework that would allow for taking into account spillover benefits in the socio-economic evaluation of Fusion RDDD program.
Envi
ron
men
t
Methodology
Module 2
Global Long Term Energy Scenarios Building Prospective techno-economic
analysis of future energy markets and projection of potential market
share of Fusion technology
Module 1
Fusion R&D Spillovers Modelling
Ex post / near term ex ante microeconomic assessment
of the socio-economic benefits of Fusion R&D projects
Module 3
Fusion R&D, Demonstration and Deployment Scenarios Simulation
Ex ante socio-economic assessment of Fusion RDDD program basing on the global / regional electricity supply scenarios
and taking in account the spillover benefits of Fusion RD&D activities and construction of commercial Fusion power plants
Module 4
Strategic Evaluation and Policy Recommendations
Sensitivity analyses and strategy optimisation
Classification of Fusion RDDD Spillovers
Value drivers Spillovereffects
Fusion RDDD
program
Company value
ProjectedGrowthRates
ROIC
WACC
Revenues
Costs
Investedcapital Technological
factors
Commercial factors
Organisation & Methods
factors
Personnel-related factors
Fusion R&D
Projects(1, 2…n)
FusionDEMO
projects
CommercialFusion
power plants
Value drivers Spillovereffects
FusionRDDD
program
Company value
ProjectedGrowthRates
ROIC
WACC
Revenues
Costs
Investedcapital Technological
effects
Commercial effects
Organisation & Methods
effects
Personnel-related effects
Fusion R&D
Projects(1, 2…n)
FusionDEMO
projects
CommercialFusion
power plants
Accumulation of knowledge stock (publications, patents);Formation of human capital (PhDs, experienced researchers, research networks);
Strengthening of companies’ technological and marketing capabilities;Creation of “real option” value (due to flexibility in managerial decisions);
Success / failure signals to industry
Disembodied knowledge
spillovers
Market spillovers (due to supply of competitively
priced energy services and non-energy products / services);
Induced economic activityat regional scale (due to
economic multiplier effects);
Improvement of national payment balance
(due to technology export andreduction of fossil fuel imports);
Energy security enhancement
Technology spin-offs(non-energy applications
of technologies and productsdeveloped in the process
of Fusion R&D);
Network spillovers(learning and scale economies
due to increased demand for subjacent products
and services;induced innovationin related sectors)
Improved performance / lower cost of clustered components specific to
different energy technologies
(due to learning-by-doing);
Non-electric applications (heat & hydrogen
production;nuclear fuel transmutation;
spent fuel treatment)
Embodied
MacroeconomicCross-industryIntra-sectoralForm \ Level
Module 1
Module 2
Module 3
Publications
Spillover benefits are estimated at the level of individual companies participating in Fusion R&D projects
It is assumed that Fusion R&D spillovers may have a positive impact on the key driving factors of the company value, namely return on the invested capital and growth rate, and their underlying drivers
Calculation of the company value is based on the “Economic Value Added” , also known as “Economic Profit” approach
The increase in the company’s value subject to different Fusion demonstration, deployment and indicative (no Fusion) scenarios is taken as proxy of the pecuniary value of Fusion R&D spillover benefits
Conceptual Fusion R&D spillovers model
•
•
•
•
Long-term electricity supply scenarios have been developed for 11 world regions using least cost probabilistic simulation dynamic programming model PLANELEC-Pro
The model allows to determine the optimal expansion plans of thepower generation systems that adequately meet the projected electricity demand at minimum cost given the quality-of-service and CO2 emissions constraints
The outputs of the model are optimal expansion plans concerning the number, the time and the type of power plants to be installed, total discounted cost of the expansion plan, levelized system electricity cost, CO2 emissions of each year, etc.
For each of the world regions a “reference” case of system expansion without Fusion and its different variants providing for introduction of Fusion power are simulated
•
•
•
•
Projected World Total Power Generation Capacities
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
2000 2020 2040 2060 2080 2100
GWe
Fusion
Renew
Oil
NG
Nuc
Coal
Hydro
Global long-term energy scenarios buildingwith PLANELEC-Pro model
ITER / IFMIF
ITER / IFMIF
DEMO -1
DEMO -2
DEMO -1A
DEMO -1B
DEMO -2
FPP deployment
FPP deployment
FPP deployment
FPP deployment
Failure
Failure
Market conditions unfavorable
(wait/ improve)
CASE 1
CASE 2
p1
(1-p1)
pi – probability of successTi – time to completionCi – costsSi – spillover benefitsRi – revenues from energy sales
p1 x p2
p1 x (1-p2)
C1, S1, T1 C 2, S2, T2 CF, SF, RF
C3, S3, T3 CF, SF, RFp1 x (1-p2) x p3
p1 x (1-p2) x (1-p3)
C4, T4
Market conditions unfavorable
(wait/ improve)
C 1, S 1, T1p1
(1-p1)
p1 xp2*
p1 x(1-p2*)
C 2*, S 2*, T2C F, S F, R F
C 3, S 3, T3 p1 x (1-p2*) x p3*
p1 x (1-p2*) x (1-p3*)
CF, SF, RF
C4, T4
C 2* > C 2
p1 x p2*> p 1 x p2p1 x (1 -p2*) x p3* > p1 x (1 -p2) x p3
Stochastic Real Options model is being developed in orderto perform overall socio-economic assessment of FusionRDDD program Numerical estimates of Fusion RD&D spillover rates as well as the costs & revenues of future Fusion power plants (FPPs) are taken as inputs from Modules 1 & 2; assumptions on thedeployment spillover rates as well as the cost, duration and probabilities of success of Fusion “R&D” and “Demo” stagesare taken as exogenous inputs The model takes into account both types of uncertainty (aleatory and epistemic) and allows to estimate “strategic” value of Fusion RDDD program arising due to flexibilityin the managerial decisions (options to wait / improve if market conditions are unfavourable)
• Fusion RDDD Real Options model
•
•
• Gnansounou E., Bednyagin D. (2007) Multi-Regional Long-Term Electricity Supply Scenarios with Fusion, Fusion Science and Technology, Vol. 52:3, pp. 388-393• Gnansounou E., Bednyagin D. (2007) Estimating Spillover Benefits and Social Rate of Return of Fusion RDDD Program: Conceptual Model and Implications for Practical Study , Report on task TW5-TRE-FESS/D, EFDA - SERF
PhD candidate: Denis Bednyagin (EDMT)
Thesis advisors: Dr. Edgard Gnansounou (LASEN-ENAC) Prof. Dominique Foray (CEMI-CDM)
Advices and support of Prof. Minh Quang Tran (CRPP) andDr. Christian Eherer (EFDA) are gratefully acknowledged
Preliminary Results and Conclusions• Integrated evaluation framework developed in the present study represents an important step forward in the practice of the socio-economic evaluation of global long term RDDD programs in energy sector due to inclusion in the analysis of the previously ignored value of the positive externality effects.
• The results of the simulation of multi-regional electricity supply scenarios demonstrate that Fusion power may become an important energy supply option by the end of XXI century (with market share up to 20% in most developed world regions) provided that sufficient public funding is granted during the demonstration and initial deployment stages.
E-mail: [email protected] • LASEN-ICARE-ENAC • Station 18 • EPFL • CH-1015 • Lausanne • SWITZERLAND
