Evaluating R&D Projects in Regulated Utilities: the Case of Power Transmission Utilities

Abstract

R&D project selection is essential for many organizations; however, it is a complex decision since it is affected by many factors. These factors vary among organizations because of their different objectives and conditions. There are limited budgets for the investments, and the current R&D project selection methods are focused on financial analysis or complex mathematical probabilistic calculations. Therefore, the main motivation of this research is to create a method to help improve the ex-ante selection of R&D projects in regulated organizations. More importantly, the case application is the electric transmission utilities sector, which plays one of the most critical roles in the entire electric power system. The main objective of this research is to develop a model to select R&D projects based on a holistic approach aligned to strategies, utility objectives, and market conditions in the electric transmission sector. At the same time, it identifies, categorizes, and quantifies the factors associated with R&D projects in the power sector. The analysis is framed into a multi-criteria model (Hierarchical Decision Model-HDM [1]), which considers all the aspects associated with R&D projects. The model and the application are potentially applicable to non-profit and regulated organizations around the world. Moreover, the flexibility of the model allows it to be adopted by electric transmission utilities with similar characteristics to utilities in the United States. This study provides an extensive literature review about regulated organizations, and more specifically about electric transmission utilities. Additionally, a complete analysis of criteria and sub-criteria ii has been done. There are gaps in the literature that have been identified and that support the idea of using a multi-criteria analysis to evaluate R&D projects. The methodology is described, and the application of the model is provided. iii DEDICATION This dissertation is dedicated to the memory of my father Huberto and sister Roxana. I also dedicate it to my family for their unconditional support. iv ACKNOWLEDGEMENTS To develop and complete this thesis would not be possible without the contribution and support of the people around me. I consider myself fortunate for having these wonderful people that always will own my eternal gratitude. I wish to acknowledge the support and love of my family, my mother Irma, my sister Lizzia and my late sister Roxana who lives forever in my heart. I would like to express my deepest gratitude to my advisor Dr. Tugrul Daim, who has supported me throughout my studies and this thesis research. I am grateful for his advice and how he shares his academic knowledge, his pragmatic advice, for teaching us and driving us to be part of the academic world. Thank you to Dr. Daim for his encouragement and advice in completing this thesis. I would like to thank and recognize the invaluable assistance of my committee members, Dr. Judith Estep, Dr. Marina Dabic, and Dr. Loren Lutzenhiser. Thank you for providing guidance and feedba...