favorability of economic and policy conditions—to derive the three columns of its matrix. The first column of the matrix (Figure D-1), “realized benefits,” is reserved for benefits that are almost certain: those for which the technology is developed and for which the economic and policy conditions are favorable for commercialization of the technology. The second column of the matrix, “options benefits,” is reserved for benefits that might be derived from technologies that are fully developed but for which economic and policy conditions are not likely to be, but might become, favorable for commercialization. All other benefits, to the extent they exist, the committee designated “knowledge benefits.” Knowledge benefits thus form a very broad category, including knowledge generated by programs still in progress, programs terminated as failures, and technological successes that will not be adopted because economic and policy conditions will never become favorable.

Realized Net Benefits

Realized net benefits are economic, environmental, or security net benefits that flow from technologies for which R&D has been completed, that have been or are ready to be commercialized on an economic basis, under current economic, regulatory, and tax conditions.

Options Net Benefits

Options net benefits are economic, environmental, or security net benefits that could come from technologies for which R&D has been completed and that are ready to be commercialized were they not constrained by current economics or other circumstances. These technologies could be adopted under some plausible future economic, regulatory, and tax conditions.

Knowledge Benefits

Knowledge benefits are economic, environmental, or security net benefits that flow from technology for which R&D has not been completed or that will not be commercialized. The benefits stem from possibilities for future uses of the knowledge. Figure D-2 shows the mapping from the status of technology development and from economic and policy conditions to the columns in Figure D-1.


Economic Net Benefits
Estimating 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 total market value can be increased as a result of technologies because a technology may cut the cost of producing a given output or it may allow additional valuable outputs to be produced by the economy. Economic benefits are characterized by changes in the valuations based on market prices, relative to the next-best feasible alternative. These could either be changes in asset values (e.g., owing to increases in the amount of petroleum that could be economically recovered) or changes in life-cycle costs (e.g., owing to reductions in energy used for home lighting) reflecting market penetrations expected for the technologies.

The benefit must be estimated net of costs in all cases: Implementing technologies has costs, and the measure of benefits must be net of these costs. Further, this estimation must be computed on the basis of comparison with the next-best alternative, not some standard or average value. For example, the benefit of a new coal power technology must be estimated on the basis of a comparison with a state-of-the-art coal plant or a natural gas combined-cycle plant, not on the basis of a comparison with an “average” existing coal plant.

Thus, the economic benefits must be truly net, and all economic benefits and costs must be explicitly accounted for. This requires consideration of all impacts, desirable and undesirable.

The net benefits are estimated using life-cycle costs or benefits, including the life-cycle costs or benefits over the entire future life of all installations. Typically, it may be easiest to estimate net benefits on a per-installation basis and multiply by the estimated number of new installations or to add up over these installations if they are of substantially different scales. In the discussion that follows it is assumed that such a procedure is used.

The benefits include the following:

  • Past and current benefits that are already in place—the benefits resulting from all capital stock installed through 2000. For the committee’s analysis, the estimates of this additional capital stock are obtained, when possible, from independent Energy Information Administration (EIA) forecasts, not from unsupported DOE program estimates or DOE contractor data. Although sources other than EIA could be used, it is important that a consistent set of reasonable, unbiased estimates is used, such as those developed through EIA.

  • Future/forecast benefits—benefits resulting from capital stock expected to be put in place from 2001 through 2005. The committee used the year 2005 cutoff as a rough rule of thumb consistent with its belief that, absent DOE involvement, some private sector entity would have developed the economically attractive new technologies that were, in fact, aided by DOE research efforts. To that end, the committee also adopted a conservative 5-year rule presuming that the DOE R&D or demonstration program accelerated the introduction of the technology to the market. Thus, the commit-

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