Estimating spillover benefits of large R&D projects: Application of real options modelling approach to the case of thermonuclear fusion R&D programme

This paper is focused on the analysis of spillover benefits of the ongoing R&D programme on thermonuclear fusion technology. The spillover effects are understood here as positive externalities of publicly funded R&D, demonstration and deployment (RDDD) activities that may be revealed at the companies' level in the form of newly created knowledge stock; development of innovative products/processes with broader market applications; strengthening of R&D, manufacturing and marketing capabilities; etc. An integrated compound real options model is proposed that allows to estimate the strategic net social present value of fusion RDDD programme taking into account the different types of spillover benefits along with the hidden real options value arising due to uncertainty and managerial flexibility. It was found that the value of spillover effects, modelled as ‘expansion option’, could represent a significant proportion of the overall socio‐economic value of fusion RDDD programme (nearly 20%). This paper clearly demonstrates that, besides a high‐level mission to assure sustainable energy supply, fusion RDDD programme may yield substantial net socio‐economic benefits that may be at least two times higher compared to the expected RD&D costs, and hence the pursuit of even more ambitious programme is economically justified.