A Monte Carlo knowledge gradient method for learning abatement potential of emissions reduction technologies

Suppose that we have a set of emissions reduction technologies whose greenhouse gas abatement potential is unknown, and we wish to find an optimal portfolio (subset) of these technologies. Due to the interaction between technologies, the effectiveness of a portfolio can only be observed through expensive field implementations. We view this problem as an online optimal learning problem with correlated prior beliefs, where the performance of a portfolio of technologies in one project is used to guide choices for future projects. Given the large number of potential portfolios, we propose a learning policy which uses Monte Carlo sampling to narrow down the choice set to a relatively small number of promising portfolios, and then applies a one-period look-ahead approach using knowledge gradients to choose among this reduced set. We present experimental evidence that this policy is competitive against other online learning policies that consider the entire choice set.