Optimal policy of energy innovation in developing countries: Development of solar PV in Iran

The purpose of this study is to apply managerial economics and methods of decision analysis to study the optimal pattern of innovation activities for development of new energy technologies in developing countries. For this purpose, a model of energy research and development (R&D) planning is developed and it is then linked to a bottom-up energy-systems model. The set of interlinked models provide a comprehensive analytical tool for assessment of energy technologies and innovation planning taking into account the specific conditions of developing countries. An energy-system model is used as a tool for the assessment and prioritization of new energy technologies. Based on the results of the technology assessment model, the optimal R&D resources allocation for new energy technologies is estimated with the help of the R&D planning model. The R&D planning model is based on maximization of the total net present value of resulting R&D benefits taking into account the dynamics of technological progress, knowledge and experience spillovers from advanced economies, technology adoption and R&D constraints. Application of the set of interlinked models is explained through the analysis of the development of solar PV in Iranian electricity supply system and then some important policy insights are concluded. (C) 2008 Elsevier Ltd. All rights reserved.