Title :
Energy Technological Change and Capacity Under Uncertainty in Learning
Author :
Shittu, Ekundayo
Author_Institution :
Eng. Manage. & Syst. Eng., George Washington Univ., Washington, DC, USA
Abstract :
This paper explores the role of learning in managing the capacities of existing and emerging energy technologies. Specifically, we address how uncertainties in learning rates impact R&D investments into a range of electricity generating technologies. Understanding managerial strategic response under learning uncertainty is particularly important as decision makers face competing R&D portfolios, dwindling and unstable financial resources, and an imminent energy policy. We develop a risk-minimizing optimization model of an abridged global energy system to investigate the effects of uncertainties in technological learning on electricity capacity additions. Addressing the risks associated with uncertainties in technological learning is relevant to distill cost-effective decisions, and to develop risk-hedging strategies. We find that 1) the willingness to hedge against the inherent risks associated with uncertainty in energy technological learning is positively correlated with the risk premium; 2) near-term or early investments are required to achieve a mix of sustainable energy technological portfolios as a hedge against R&D uncertainty; and 3) the management of electricity generation capacities under learning uncertainty allows decision makers to chart a more prudent intermediate path for energy technological growth through the creation of a more diversified technological portfolio.
Keywords :
electric power generation; electricity; investment; research and development management; risk management; sustainable development; technology management; R&D investments; R&D portfolios; R&D uncertainty; abridged global energy system; diversified technological portfolio; early investment; electricity capacity additions; electricity generating technologies; electricity generation capacity management; energy technological capacity; energy technological change; energy technological learning; financial resources; imminent energy policy; learning rates; learning uncertainty; managerial strategic response; near-term investment; risk premium; risk-hedging strategies; risk-minimizing optimization model; sustainable energy technological portfolios; Electricity; Investment; Meteorology; Optimization; Production; Technological innovation; Uncertainty; Energy; investments; learning; research and development; risk; technological change; uncertainty;
Journal_Title :
Engineering Management, IEEE Transactions on
DOI :
10.1109/TEM.2013.2278623