Managing R&D Risk in Renewable Energy

Gordon C. Rausser and Maya Papineau

No 1058, Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: Federal renewable energy R&D spending is intended, at least in part, to achieve path-breaking commercial breakthroughs in ethanol, hydrogen, solar and wind energy. Recently, the private sector has begun to respond to market opportunities generated by the spike in oil prices and governmental support with significant increases in renewable energy investment. As firms increase their exposure in renewable energy markets, the public sector will be increasingly be pulled in the direction of insuring against the downside risks of clean energy investments. A central question arises in this context: what is the optimal ex-ante allocation of renewable energy R&D investment across the emerging technologies? From the standpoint of societal welfare, the optimal allocation of such support is fundamentally a problem of ex-ante portfolio analysis under risk and uncertainty. This paper presents the components of an ex-ante portfolio analysis of both public and private sector R&D risks in renewable energy.

Keywords: energy; research; development; renewable resources; risk (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-pbe
Date: 2008-06-25
Note: oai:cdlib1:are_ucb-1234
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Working Paper: Managing R&D risk in renewable energy (2008)
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