Federal R&D and Scientific Innovation - American Chemical Society

10 Commercialization of R&D Results ROBERT J. CREAGAN

1

Downloaded by GEORGETOWN UNIV on February 19, 2015 | http://pubs.acs.org Publication Date: July 6, 1979 | doi: 10.1021/bk-1979-0105.ch010

Westinghouse Electric Corp., Gateway Center, Stanwix St., Pittsburgh, PA 15222

More than $44 billion will be spent in the U. S. for research and development during1978.The source of funds and implementers of R&D are indicated in figure 1 which shows that industry funds 43% of the R&D and performs 68%. Unfortunately, a high percentage of R&D results have a limited circulation, are carefully filed and their potential contribution to society is lost, or delayed to be reinvented in a later R&D program. The huge investment and potential benefits involved provide tremendous economic motivation for proper selection of R&D objectives, plus evaluation and commercialization of appropriate R&D results. The term commercialization is used to designate the transition from R&D results to a product or service sold and used in economically significant quantities. From a charter and funding standpoint no organization has more motive for commercializing R&D than the Department of Energy. DOE's commercialization committee has analyzed various R&D technologies for five months to determine which were ready for commercialization. The results are summarized in figure 2. T o quote " D a l e M y e r s " O c t o b e r 4 , 1978 m e m o to J i m S c h l e s i n g e r M

in part:

M

. . . In g e n e r a l w h e r e R & D f o r a t e c h n o l o g y i s C o m p l e t e ,

responsibility for marketing !

1

M

T

a c t i v i t y i s t r a n s f e r r e d to the A s s i s t a n t

Secretary responsible for commercialization.. . A Resource Manager i s a p p o i n t e d to p r o v i d e a D O E - w i d e p o i n t o f f o c u s f o r the i n t e g r a t i o n of a l l a c t i v i t i e s r e q u i r e d to a c h i e v e the e a r l i e s t date f o r c o m m e r c i a l i z a t i o n . . . . Where l a r g e technology demonstrations a r e still needed,

o r the

technology i s not ready f o r c o m m e r c i a l i z a t i o n because of cost o r other barriers,

w e h a v e not t r a n s f e r r e d the t e c h n o l o g y . "

A s e c o n d s e r i e s of t a s k f o r c e s w i l l e x a m i n e c o m m e r c i a l i z a t i o n p o t e n t i a l o f s i x t e c h n o l o g i e s i d e n t i f i e d b y the D o m e s t i c P o l i c y R e v i e w Group and l i s t e d i n figure 3. P r o j e c t i o n s b y D O E i n M a r c h o f 1978 f o r c o m m e r c i a l p r o d u c t s

Analysis

1

prepared October 1978 0-8412-0507-8/79/47-105-097$05.00/0 ©

1979 A m e r i c a n C h e m i c a l Society

In Federal R&D and Scientific Innovation; Ault, L., et al.; ACS Symposium Series; American Chemical Society: Washington, DC, 1979.


FEDERAL R&D AND SCIENTIFIC INNOVATION

Other Nonprofit Institutions $1.542 Billion 3.5%

Performance of R&D Figure 1.

Total U.S. RirD in 1978 $44,000,000


CREAGAN

Commercialization of R&D Results

Electric Market •Hydrothermal/Geothermal Generation *Low Head Hydro Generation •Small Wind Generation " C o m b i n e d Cycle with Integrated Gasifier for Utility Application "Fuel Cell Power Plants "Large Wind Generation "Atmospheric Fluidized Bed Combustion for Utility Application "Photovoltaics—to be resolved November 15, 1978


Liquid Fuels •Enhanced Oil Recovery *Oil Shale, Surface and In-Situ Retorting " C o a l Liquification Gaseous Fuels •Enhanced or Unconventional G a s Recovery *Low-BTU Coal Gasification *High-BTU Coal Gasification (first generation only) " H i g h - B T U Coal Gasification (Advanced Technology) " M e d i u m - B T U Coal Gasification Direct End Use Applications •Cogeneration •Conservation Products Marketing (oil burner retrofits, high high efficiency motors, air fuel ratio) •Electric and Hybrid Vehicles (first and second generation) "Electric and Hybrid Vehicle (third generation-hot batteries) •Passive and Hot Water Solar Heating •Urban Waste •Ready for commercialization, effective September 30, 1978, D O E "Not ready

Figure 2. R&D technology reviewed by DOE for commercialization

1. Wood Combustion (for both industrial and utility application) 2. Solar Industrial Process Heat (including use of solar energy to generate steam for enhanced oil recovery projects) 3. Non-Battery Storage Facilities for Utilities (including underground compressed air and underground hydro) 4. Annual Cycle Energy Systems (a planning system based on energy that could be derived from natural sources, such as wind or water, that change from season to season) 5. Lighting Efficiency 6. Thermally Activated Heat Pumps

Figure 3. R&D technologies to be reviewed by DOE for commercialization


100

FEDERAL R&D AND SCIENTIFIC INNOVATION

a v a i l a b l e i n 1985 and 2000 f r o m c o m m e r c i a l i z a t i o n of R & D r e s u l t s

are

g i v e n b e l o w i n t e r m s of t h o u s a n d s of b a r r e l s p e r d a y of o i l e q u i v a l e n t . DOE ENERGY PRODUCTION ESTIMATES (in t h o u s a n d s of b a r r e l s / d a y of o i l e q u i v a l e n t ) 1985

2000

Enhanced O i l Recovery

600-1,000

2,200-4,500

Enhanced Gas

500-1,600

1,400-3,700

500-1,000

1,500-3,000

Recovery

Heat E n g i n e s & Heat R e c o v e r y *


Low-Btu

Gasification

400-950

50-250

High-Btu Gasification

50-200

900-1,800

Direct Combustion

40-150

400-750

O i l Shale

40-130

8 0 0 - 2 , 000

Liquefaction

20-80

800-1,200

Fuel Cells

10-40

30-100

In S i t u C o a l G a s i f i c a t i o n

0-15

80-150

Advanced Power Systems

0

0-50

MHD

0

0-20

1,810-4,465

8,510-18,220

TOTAL •through conservation efficiency

A t $20 p e r b a r r e l the p r o d u c t i o n e s t i m a t e t o t a l i s w o r t h up to $33 b i l l i o n i n 1985 and $133 b i l l i o n i n the y e a r 2000 c o m p a r e d w i t h 1978 t o t a l R & D e x p e n d i t u r e s of $44 b i l l i o n w h i c h i n c l u d e s R & D f o r m a n y other i t e m s .

H e n c e i f the p r o j e c t i o n s a r e c o r r e c t , the i n v e s t e d R & D

funds w i l l b e e x c e e d e d b y c o m m e r c i a l s a l e s d u r i n g e a c h y e a r of p r o d u c t i o n a f t e r 1985. A n h i s t o r i c e x a m p l e i s the $2 b i l l i o n s p e n t e s s e n t i a l l y f o r R & D on the M a n h a t t a n P r o j e c t f r o m 1940 to 1945 and the r e s u l t i n g w o r l d w i d e nuclear power industry with 408,285 M W e operable, o r o n o r d e r as of J u n e 30, 1978.

under construction

These nuclear power plants,

at

$500/kwe r e p r e s e n t a c a p i t a l i n v e s t m e n t of o v e r $200 b i l l i o n , p l u s e x p e n d i t u r e s f o r f u e l , at 20 m i l l s / k w h , of $50 b i l l i o n p e r

year.

T h e s e e x a m p l e s i l l u s t r a t e huge p o t e n t i a l b e n e f i t / c o s t r a t i o s w h i c h c a n be o b t a i n e d f r o m c o m m e r c i a l i z a t i o n of R & D .

W h a t m a y not be

a p p r e c i a t e d i s that the c o s t s of c o m m e r c i a l i z a t i o n a r e u s u a l l y m u c h g r e a t e r t h a n the c o s t s o f R & D and h e n c e c o m m e r c i a l i z a t i o n r e q u i r e s m o r e d e c i s i o n s and e f f o r t s than R & D . F o r p e r s p e c t i v e the c u r v e s h o w n i n f i g u r e 4 c a n b e u s e d a s a t y p i c a l f i n a n c i a l f o r e c a s t of n e t c a s h flow a f t e r t a x e s r e s u l t i n g f r o m e x p e n d i t u r e s and i n c o m e a s s o c i a t e d w i t h p e r f o r m i n g R & D ,

and

e v e n t u a l l y m a k i n g a p r o f i t b y c o m m e r c i a l i z i n g the R & D r e s u l t s .

The

c a s h flow a m p l i t u d e and t i m e d i m e n s i o n s of the c u r v e c h a n g e but the shape i s s i m i l a r whether i t is a l a r g e p r o g r a m s u c h as c o m m e r c i a l i z i n g n u c l e a r p o w e r o r a s m a l l e r p r o j e c t s u c h as a s u p e r c o n d u c t i n g o r a high voltage bushing.


generator

CREAGAN

101


+


• Dollars

Figure 4. Cumulative cash flow after taxes


102

F E D E R A L R&D AND SCIENTIFIC

INNOVATION

C a s h flow t y p i c a l l y i s c o m p a r a t i v e l y s m a l l d u r i n g the R & D p e r i o d but i n c r e a s e s a s d e v e l o p m e n t a n d m a n u f a c t u r i n g h a r d w a r e and i n v e s t ment is involved. C r i t i c a l milestone decisions are: m o t i v a t e the R & D ?

(1) D o c o m p a n y

objectives

(2) A r e r e s e a r c h r e s u l t s f a v o r a b l e

e n o u g h to

justify continuing into a development phase d u r i n g w h i c h prototype p r o j e c t w i l l be m a n u f a c t u r e d and p r o v e n i n o p e r a t i o n ?

(3)

Do market

e v a l u a t i o n s s h o w that e n o u g h p r o d u c t c a n be s o l d at a p r o f i t a b l e

price

to w a r r a n t i n v e s t m e n t f o r m a n u f a c t u r i n g f a c i l i t i e s , m a r k e t i n g and o t h e r f i n a n c i a l c o m m i t m e n t s .

expenses

A d e c i s i o n to c o m m e r c i a l i z e the


R & D w i l l l e a d to a m a x i m u m n e g a t i v e c a s h p o s i t i o n i n d i c a t e d i n f i g u r e 4 as " r i s k " before cumulative profits are available f r o m

increased

p r o d u c t i o n to p a y b a c k i n v e s t m e n t and p o t e n t i a l l y m a k e a p r o f i t . T y p i c a l l y the net c a s h flow c u r v e i s d i s c o u n t e d at a t a r g e t r e t u r n o n - i n v e s t m e n t (ROI)

p e r c e n t a g e and w h e n the c u m u l a t i v e d i s c o u n t e d

c a s h c u r v e c r o s s e s the z e r o l i n e the b u s i n e s s w i l l h a v e a n R O I e q u a l to o b j e c t i v e .

(See f i g u r e s 4 a n d

9.)

E v a l u a t i n g a p r e d i c t e d d i s c o u n t e d net c a s h flow c u r v e w i l l

deter

m i n e to a l a r g e extent w h e t h e r a n R & D r e s u l t i s w o r t h c o m m e r c i a l ization.

U n c e r t a i n t i e s e x i s t and have been i n c o r p o r a t e d i n s o m e

a n a l y s e s b y i n c r e a s i n g the d i s c o u n t p e r c e n t a g e b y a n i n c r e m e n t p r o p o r t i o n a l to u n c e r t a i n t y .

However,

a prudent management

must

a c c e p t u n c e r t a i n t y r i s k s a n d p e r i o d i c a l l y r e e v a l u a t e the d e c i s i o n to proceed. A c a s h flow c u r v e f o r R & D p l u s c o m m e r c i a l i z a t i o n of a t r a n s m i s s i o n v o l t a g e b u s h i n g i s s h o w n i n f i g u r e 5. p r o j e c t s i n c e 1975.

E P R I has funded t h i s

Total R & D costs, including corporate cost sharing,

w i l l be about $ 7 0 0 , 0 0 0 w h e n the p r o j e c t i s c o m p l e t e t h i s y e a r . comparison, forecast c o m m e r c i a l i z a t i o n costs involve a n e g a t i v e c a s h flow of o v e r $5 m i l l i o n . t a b u l a t e d i n f i g u r e 6.

In

temporary

D e t a i l s of the c a s h flow

are

T h i s table i s p r o v i d e d only f o r i l l u s t r a t i o n

b e c a u s e r e a l i s t i c m a r k e t a n d c o s t e s t i m a t e s a r e not y e t

available.

N o n - r e c u r r i n g s t r a t e g i c c o m m i t m e n t s i n c l u d e funds f o r p l a n n i n g , engineering, marketing.

designing,

manufacturing,

land, building, m a c h i n e r y and

T h e n e g a t i v e c a s h f l o w s t a r t s t u r n i n g a r o u n d i n 1982

b e c a u s e of d e p r e c i a t i o n tax c r e d i t a d j u s t m e n t s w h i c h c a n be netted a g a i n s t p r o f i t s m a d e e l s e w h e r e i n the c o r p o r a t i o n e v e n b e f o r e a n y income is received from sales. a s s u m e d IB Τ of 24% on s a l e s , b y 1986.

S a l e s b i l l e d f r o m 1983 o n , w i t h a n provide potential for investment payback

R e t u r n o n i n v e s t m e n t f o r the p r o j e c t f o r the 10 y e a r s

1978 t h r o u g h 1987 i s 1 2 . 5 % i f R & D c o s t s a r e not i n c l u d e d , they w e r e p a i d b y E P R I . i s r e d u c e d to 1 0 . 4 % .

from

because

If R & D c o s t s of $ 7 0 0 , 000 a r e i n c l u d e d ,

ROI

Such a low ROI f o r e c a s t p r o v i d e s little incentive

f o r t a k i n g m u c h r i s k i n c o m m e r c i a l i z a t i o n b u t the 12. 5% R O I e x c l u s i v e



10.

CREAGAN

Commercialization of RirD Results

103

$ Millions Cash Flow

1975 1977 1979 1981 1983 1985 1987

Figure 5. Commercialization of R6-D cash flow



R&D 100

-656

-604 -3085

-2429 -5299

-2214

686

-5004

295

-3676

1328

-2387

1289

Figure 6. Commercialization of Rù-D (thousands of dollars)

-52

Cum Cash Flow (No R&D)

ROI (No R&D) 12.5% ROI (With R&D) 10.4%

-52

Net Cash Flow (No R&D)

521

+77

1213

183

952

1982

8400

1986

+1252

1175

145

952

1982

8400

1987

Terminal Value 3120

-1136

1251

298

48

221

259

Tax Adjustments

952

952

8400

1985

952

8400

1984

1RS 395

50

50

1983

1982

2000

500

50

300

50

1982

1982

2000

500

300

50

100

1981

1982

96

500

50

150

1980

8400

100

250

1979

IBT (Before Dep.)

250

100

1978

1977

Sales Billed

Machinery & Equipment

Building

Land

Marketing

Plans and Designs

Manufacturing

Engineering

1976

1975


10.

CREAGAN

105


of R & D m i g h t b e m a r g i n a l l y a c c e p t a b l e i f a p r o d u c t l i n e i s r o u n d e d out o r cost reduced with complete a s s u r a n c e of s u c c e s s .

The

difference

i n R O I i l l u s t r a t e s the b e n e f i t o f o u t s i d e f u n d i n g f o r R & D c o s t s w h i c h a r e w e i g h t e d m o s t h e a v i l y i n a d i s c o u n t e d c a s h flow b e c a u s e they a r e up-front costs.

E P R I o r D O E funds thus a l l o w a c o m p a n y to i n v e s t i g a t e

m o r e p o s s i b i l i t i e s o r c a r r y out m o r e t h o r o u g h a n a l y s i s b e f o r e a d e c i s i o n i s m a d e to c o m m i t the l a r g e r funds f o r c o m m e r c i a l i z a t i o n . F r o m an E P R I o r D O E investment viewpoint,

R&D

expenditures

c a n b e j u s t i f i e d i n m a n y c a s e s w h e r e a m a n u f a c t u r e r w o u l d not i n v e s t b e c a u s e the R O I c a l c u l a t e d b y E P R I o r D O E i s g r e a t e r .

EPRI s or T


D O E ' s m o r e f a v o r a b l e R O I m a y r e s u l t f r o m two f a c t o r s i . e . n o p a y m e n t f o r c o m m e r c i a l i z a t i o n c o s t s , a n d / o r the f a c t that a l l the b e n e f i t s

and

h e n c e i n c o m e to u t i l i t i e s o r s o c i e t y a c c r u e t o E P R I o r D O E w h i l e o n l y a f r a c t i o n a l m a r k e t c a p t u r e a c c r u e to the c o m p e t i t i v e Thus with a better ROI,

manufacturer.

E P R I o r D O E has m o r e m o t i v e to p a y f o r

R&D

t h a n the m a n u f a c t u r e r e v e n i f c o s t o f m o n e y w e r e the s a m e to b o t h .

In

a d d i t i o n m o n e y m a y b e l e s s c o s t l y to E P R I o r D O E than i t i s to the m a n u f a c t u r e r h e n c e a l o w e r d i s c o u n t c a n b e u s e d f o r c a s h flow and l o n g e r t i m e b e t w e e n i n v e s t m e n t and p a y o f f c a n b e a c c e p t a b l e .

Such

f i n a n c i a l f a c t o r s c a n e x p l a i n t o s o m e extent l o g i c w h i c h m a k e s ment investment i n fusion R & D tenable,

while a manufacturer

governcould

not e n d u r e the d e c a d e s o f n e g a t i v e c a s h flow b e f o r e a p r o f i t i s e v e n possible. In c o n s i d e r i n g w h a t R & D r e s u l t s s h o u l d b e c o m m e r c i a l i z e d , i t i s not e n o u g h f o r a m a n u f a c t u r e r to c o n s i d e r i n c o m e a f t e r t a x e s , high investment requirements in a capital intensive business

because may

r e q u i r e n e g a t i v e c a s h flow f o r a n e x t e n d e d p e r i o d e v e n w i t h a p o s i t i v e IAT,

especially i f rapid growth i s involved.

F o r example

f i n a n c i a l r a t i o s of 4% a f t e r tax p r o f i t s o n s a l e s , of s a l e s ,

using

and i n v e s t m e n t o f 37%

a g r o w t h r a t e g r e a t e r than 1 5 % i n s a l e s w o u l d r e s u l t i n a

negative c a s h flow. T h e effect o f i n v e s t m e n t r e q u i r e m e n t s f o r c o m m e r c i a l i z i n g a s u p e r c o n d u c t i n g g e n e r a t o r i s i l l u s t r a t e d i n f i g u r e 7 w h e r e the c u r v e o f c u m u l a t i v e I A T w h i c h i s a m e a s u r e o f a b i l i t y to g e n e r a t e c a s h , i s contrasted with investment c u r v e s based on different

investment

assumptions as follows: C a s e 1. A c o m p l e t e l y new b u s i n e s s i s a s s u m e d w i t h f i n a n c i a l r a t i o s o f w o r k i n g c a p i t a l p l u s i n v e n t o r y a t 29% o f s a l e s ,

and plant plus

e q u i p m e n t a t c o s t a s 42% o f s a l e s . C a s e 2. C a s e 1 a b o v e i s m o d i f i e d to r e d u c e c a p i t a l f o r p l a n t p l u s e q u i p m e n t to 2 1 % o f s a l e s a s s u m i n g that the s t a t o r , w h i c h i s a b o u t h a l f the c o s t o f the g e n e r a t o r ,

would be manufactured i n existing facilities

w h i l e new f a c i l i t i e s w o u l d b e r e q u i r e d o n l y f o r the

superconducting

r o t o r , h e n c e o n l y h a l f the i n v e s t m e n t f o r new p l a n t and e q u i p m e n t .


106

F E D E R A L R&D A N D SCIENTIFIC

INNOVATION


150 Γ

-10

-

-20

Ll 1975

I 1980

Figure 7.

I 1985

I 1990

I 1995

I 2000

Cumulative investment and IAT


10.


CREAGAN

C a s e 3.

107

C a s e 2 a b o v e i s m o d i f i e d to r e d u c e w o r k i n g c a p i t a l p l u s

i n v e n t o r y fund r e q u i r e m e n t s b y a s s u m i n g that s u c h funds p a r t i a l l y would be m a d e a v a i l a b l e as conventional g e n e r a t o r s a r e phased out and t h e i r a s s o c i a t e d i n v e s t m e n t funds a r e r e l e a s e d . C a s e 4.

C a s e 2 a b o v e i s m o d i f i e d s o that w o r k i n g c a p i t a l p l u s

i n v e n t o r y fund r e q u i r e m e n t s a r e a s s u m e d to b e z e r o b a s e d o n p r o g r e s s payments f r o m c u s t o m e r s . C u m u l a t i v e c a s h f l o w s w h i c h r e s u l t f r o m the a b o v e f o u r i n v e s t m e n t cases a r e given i n figure 8 respectively as follows: C a s e 1.

T h e n e g a t i v e c a s h flow c u m u l a t i v e l y i n c r e a s e s to $29


m i l l i o n i n 1998 a n d s t a r t s to t u r n a r o u n d b e c a u s e o f p o s i t i v e I A T i n 1999 a n d 2000 b u t i s s t i l l a p o o r b u s i n e s s p r o s p e c t b e c a u s e o f l a r g e i n v e s t m e n t r e q u i r e m e n t s c o m p a r e d to I A T . C a s e 2.

B a s e d on l o w e r investment r e q u i r e m e n t s because of use

of e x i s t i n g e q u i p m e n t and p l a n t f o r s t a t o r , the c u m u l a t i v e n e g a t i v e c a s h flow i n c r e a s e s to $15 m i l l i o n i n 1993, t u r n s a r o u n d a n d i s c u m u l a t i v e l y p o s i t i v e $5 m i l l i o n i n the y e a r 2000. C a s e 3.

A s s u m i n g u s e of c a p i t a l funds r e l e a s e d b y p h a s e - o u t o f

c o n v e n t i o n a l g e n e r a t o r s w h i c h i s what a c t u a l l y w o u l d h a p p e n , the c u m u l a t i v e n e g a t i v e c a s h f l o w i n c r e a s e s to $11 m i l l i o n i n 1991, t u r n s a r o u n d a n d i s c u m u l a t i v e l y $46 m i l l i o n p o s i t i v e b y 2 0 0 0 , w i t h a 10% R O I b y 1998 a n d a 15% R O I b y 2000 w i t h o u t t e r m i n a l v a l u e i n e i t h e r c a s e . C a s e 4.

C u s t o m e r p r o g r e s s p a y m e n t s to d e c r e a s e w o r k i n g c a p i t a l

p l u s i n v e n t o r y i n v e s t m e n t to z e r o , l i m i t c u m u l a t i v e n e g a t i v e c a s h flow to $6 m i l l i o n i n 1988 a n d p e r m i t s c u m u l a t i v e p o s i t i v e c a s h flow o f $58 m i l l i o n b y the y e a r 2000 f o r 10% R O I i n 1996 a n d a R O I of 15% b y the y e a r 1998 w i t h o u t t e r m i n a l v a l u e i n e i t h e r c a s e .

A turn around i n c a s h

flow o c c u r s i n 1988, t h r e e y e a r s a f t e r the f i r s t unit i s o n l i n e , a n d a b r e a k e v e n o n c u m u l a t i v e c a s h flow o c c u r s i n 1994.

This

example

m a k e s a s t r o n g c a s e f o r p r o g r e s s p a y m e n t s a n d d e v e l o p m e n t s i n the m a n u f a c t u r e r s e x i s t i n g f a c i l i t i e s i n o r d e r to m i n i m i z e i n v e s t m e n t requirements. F o r c o m m e r c i a l i z a t i o n i t i a n o t e n o u g h that a n R & D p r o g r a m b e a good t h i n g f o r the m a n u f a c t u r e r , customer.

i t m u s t a l s o p r o v i d e v a l u e to a

T h e c u r v e s i n f i g u r e 9 s h o w the c a s h flow f o r u t i l i t i e s i n

t e r m s of s u p p o r t i n g R & D ($24 m i l l i o n ) f o r a s u p e r c o n d u c t i n g g e n e r a t o r and the b e n e f i t s w h i c h they r e c e i v e .

Benefits a r e based on a capitalized

e v a l u a t e d w o r t h o f $25/kwe f o r a s u p e r c o n d u c t i n g g e n e r a t o r b e c a u s e of i t s g r e a t e r e f f i c i e n c y (. 8%) a n d the f a v o r a b l e

cost r e d u c t i o n f o r total

power plant c a p i t a l , fuel cost, plus operation and maintenance.

Utility

c a s h flow b e n e f i t s a r e b a s e d o n r e d u c e d r e v e n u e r e q u i r e m e n t s at 10% b a s e d o n r e d u c t i o n o f u t i l i t y c a p i t a l r e q u i r e m e n t s b e c a u s e of the $25 p e r K W e c a p i t a l i z e d b e n e f i t of the s u p e r c o n d u c t i n g g e n e r a t o r .

Return on

i n v e s t m e n t f o r the u t i l i t i e s i s 15% b y 1992 w i t h a n e x p e n d i t u r e of l e s s


108


INNOVATION

Millions of Dollars Γ

60

h


70

Figure 8.

Cash flow


CREAGAN



10.

Figure 9. Utility cash flow


109

110


INNOVATION

R & D Technology Reviewed by D O E for C o m m e r c i a l i z a t J o n Electric

Market

•Hydrothermal/Geothermal * L o w Head H y d r o * S m a l l Wind

Generation

Generation

Generation

• • C o m b i n e d C y c l e with Integrated G a s i f i e r for U t i l i t y Application • • F u e l Cell Power


• • L a r g e Wind

Plants

Generation

* * A t m o s p h e r i c F l u i d i z e d Bed Combustion for Utility Application • • P h o t o v o l t a i c s — t o be r e s o l v e d N o v e m b e r 15,

1978

Liquid Fuels •Enhanced Oil Recovery • O i l Shale, Surface and In-Situ R e t o r t i n g * * C o a l Liquification Gaseous

Fuels

* Enhanced o r Unconventional Gas * L o w - B T U Coal

Recovery

Gasification

* H i g h - B T U C o a l G a s i f i c a t i o n ( f i r s t g e n e r a t i o n only) * * H i g h - B T U C o a l Gasification (Advanced * * M e d i u m - B T U Coal D i r e c t End Use

Technology)

Gasification

Applications

•Cogeneration • C o n s e r v a t i o n P r o d u c t s M a r k e t i n g (oil b u r n e r r e t r o f i t s , efficiency m o t o r s ,

high

a i r fuel ratio)

• E l e c t r i c and H y b r i d V e h i c l e s ( f i r s t and s e c o n d g e n e r a t i o n ) • • E l e c t r i c and H y b r i d V e h i c l e s ( t h i r d g e n e r a t i o n - h o t •Passive

and Hot W a t e r S o l a r

batteries)

Heating

• U r b a n Waste

•Ready for commercialization,

effective September

3 0 , 1978,

DOE.

••Not ready.


10.

CREAGAN

Commercialization of Rà-D Results

111

R & D T e c h n o l o g i e s to b e R e v i e w e d b y D O E f o r C o m m e r c i a l i z a t i o n 1.

W o o d C o m b u s t i o n (for b o t h i n d u s t r i a l a n d u t i l i t y a p p l i c a t i o n )

2.

S o l a r Industrial P r o c e s s Heat (including use of s o l a r

energy

to g e n e r a t e s t e a m f o r e n h a n c e d o i l r e c o v e r y p r o j e c t s ) 3.

N o n - B a t t e r y Storage F a c i l i t i e s f o r Utilities (including underground c o m p r e s s e d a i r and underground

4.

hydro)

A n n u a l C y c l e E n e r g y S y s t e m s (a p l a n n i n g s y s t e m b a s e d o n e n e r g y that c o u l d b e d e r i v e d f r o m n a t u r a l s o u r c e s ,

s u c h as


w i n d o r w a t e r , that c h a n g e f r o m s e a s o n to s e a s o n ) 5.

Lighting Efficiency

6.

T h e r m a l l y Activated Heat P u m p s

than $25 m i l l i o n f o r R & D a n d i n r e t u r n b e n e f i t s w o r t h m o r e than a b i l l i o n b e f o r e the y e a r 2 0 0 0 .

T h i s i s a n e x a m p l e of a n R & D

project

that p r o v i d e s o v e r 15% r e t u r n o n i n v e s t m e n t t o b o t h m a n u f a c t u r e r a n d utility c u s t o m e r , i s b e n e f i c i a l f o r a l l p a r t i e s i n v o l v e d , and therefore undoubtedly w i l l be c o m m e r c i a l i z e d . C o m m e n t s and Conclusions 1.

C o m m e r c i a l i z a t i o n of r e s u l t s i s o n e of the m o s t i m p o r t a n t

objectives i n R & D 2.

management.

S e l e c t i o n of a p p r o p r i a t e R & D p r o j e c t s f o r c o m m e r c i a l i z a t i o n

i s not subject to exact a n a l y s i s b e c a u s e p r o b a b i l i t y f o r s u c c e s s i s not established. 3.

E v a l u a t i o n of R & D r e s u l t s f o r p o s s i b l e c o m m e r c i a l i z a t i o n

s h o u l d i n c l u d e c o n s i d e r a t i o n of I A T , c a s h f l o w , i n c r e m e n t a l i n v e s t m e n t r e q u i r e m e n t s a n d f i t to p r e s e n t c o m p a n y f a c i l i t i e s ,

markets,

technology, and management. 4.

T h e R & D r e s u l t s w h i c h offer g r e a t e s t opportunity f o r

c o m m e r c i a l i z a t i o n i n t e r m s o f R O I a r e i n the a r e a o f e x i s t i n g b u s i n e s s b e c a u s e of m a n a g e m e n t c a p a b i l i t y , c u s t o m e r c o n t a c t s , e x i s t i n g i n v e s t m e n t i n pertinent f a c i l i t i e s and equipment and e x p e r i e n c e d 5.

staff.

W o r k i n g b a c k w a r d s f r o m the m a r k e t p l a c e i n t e r m s of w h a t

y o u r c u s t o m e r s need o r want a r e useful c o n s i d e r a t i o n s i n s e l e c t i n g appropriate R & D for proposals o r for commercialization. 6.

F o r business p r o g r a m s with capital intensive investment

requirements, 7.

c u s t o m e r p r o g r e s s payments a r e highly desirable.

D e c i s i o n s a s to w h e t h e r a n R & D p r o j e c t c a n b e c o m m e r c i a l i z e d

s u c c e s s f u l l y s h o u l d b e e x p l o r e d d u r i n g the R & D p h a s e s o p e r t i n e n t technical and e c o n o m i c uncertainties c a n be studied and c o m m e r c i a l objectives can be established.


112

FEDERAL

8.

R&D

A N D SCIENTIFIC

INNOVATION

L o n g t e r m o r high r i s k R & D p r o g r a m s with vague payback

t i m e s s h o u l d b e funded b y D O E o r E P R I i f , a s s u m i n g s u c c e s s ,

they

p r o v i d e s i g n i f i c a n t b e n e f i t to s o c i e t y o r u t i l i t i e s . 9.

E x c e l l e n c e of i m p l e m e n t a t i o n i s often m o r e s i g n i f i c a n t to

e c o n o m i c s u c c e s s than m a r g i n a l t h e o r e t i c a l b e n e f i t s i n c o m m e r c i a l i z a t i o n of R & D 10.

March

14,

1979.


RECEIVED

results.

C o m m e r c i a l i z a t i o n i s often m o r e c o s t l y than the R & D i n v o l v e d .


Federal R&D and Scientific Innovation - American Chemical Society

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