Economic Net Benefits

Economic net benefits are based on changes in the total market value of goods and services that can be produced in the U.S. economy under normal conditions, where “normal” refers to conditions absent energy disruptions or other energy shocks. The benefit must be measured net of all costs. The total market value can be increased as a result of technologies because a technology may cut the cost of producing a given output or allow additional valuable outputs to be produced by the economy. Economic benefits are characterized by changes in the valuations based on market prices. This estimation must be computed on the basis of comparison with the next best alternative, not some standard or average value.

Environmental Net Benefits

Environmental net benefits are based on changes in the quality of the environment that will (or may) occur as a result of the technology. These changes are possible because the technology may allow regulations to change or it may improve the environment under the existing regulations. Environmental net benefits are typically not directly measurable by market prices but instead by some measure of the valuation society is willing to place on changes in the quality of the environment.

Security Net Benefits

Security net benefits are based on changes in the probability or severity of abnormal energy-related events that would adversely impact the overall economy or the environment, although traditionally, economic impacts have been the primary security issue. Typically, the events would be transient energy disruptions or transient large price increases, but they might also be low-probability, nontransient events. Security net benefits are a special class of economic net benefits or environmental net benefits, differentiated from those categories of benefits by their low likelihood or their infrequency of occurrence.

The Columns: Realized Net Benefits, Options Net Benefits, and Knowledge Benefits

The three columns in the framework matrix (Figure D-1) reflect different degrees of uncertainty about whether the particular benefits will be realized or not. The committee derived them by considering two fundamental sources of uncertainty—technological uncertainties and uncertainties about economic and policy conditions (see Figure D-2).

Technological uncertainties can be differentiated as follows: (1) the technology has been developed, (2) the technology development is still in progress, or (3) the technology development has terminated in failure. All else being equal, a technology still under development is less likely to result in benefits than a technology that has already been successfully developed. And until a technology is fully developed, there is some uncertainty about whether it will be successful. However, even if the technology is never successfully developed, the knowledge gained in the program could lead to another beneficial technology.

Similarly, if a technology is fully developed and the economic and policy conditions are favorable for its commercialization, there is a reasonable degree of confidence that future benefits will be obtained. However, it may be that economic and policy conditions are not expected to be favorable but might become favorable under plausible circumstances. In this case, the benefits may come about, but the probability is lower. Finally, it may be virtually certain that the economic and policy conditions will never become favorable and that the technology itself will never be adopted but that the knowledge associated with the technology development can be applied in other ways, possibly resulting in benefits, but these future benefits are very uncertain.

Rather than attempting to fully characterize the uncertainty of benefits, the committee used the two kinds of uncertainties—the state of technology development and the

Economic/Policy Conditions\Technology Development

Technology Developed

Technology Development in Progress

Technology Development Failed

Will be favorable for commercialization

Realized benefits

Knowledge benefits

Knowledge benefits

Might become favorable for commercialization

Options benefits

Knowledge benefits

Knowledge benefits

Will not become favorable for commercialization

Knowledge benefits

Knowledge benefits

Knowledge benefits

FIGURE D-2 Derivation of columns for the benefits matrix.

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