Regulatory risk assessment of research & development in the Brazilian electrical sector

This paper presents a methodology of R&D&I project ex-ante evaluation for the Brazilian electric power sector using a multi-criteria tool focused on risk. The R&D process in the Brazilian electric power industry is regulated by the National Electric Energy Agency (ANEEL), and requires companies to invest part of Net Operating Income (NOI) in R&D&I. This pushed firms to structure management routines for technological innovation efforts that simultaneously mitigate market and regulatory risk. One way to achieve this issue is to perform an ex-ante evaluation project selection methodology able to deal with somewhat antagonistic multiple-element analysis. PiTech (Prioritization in Technology) is a very flexible and conducive tool for performing such a weighted parametric multivariate analysis. The case presented in this article was performed with PiTech working with operational, market and regulatory criteria in multiple combinations for 19 projects for a key holding group in the Brazilian power market. The tool proved to be very useful by allowing decision makers to verify the appropriateness of investment in R&D projects totaling R$61 million in 2010, minimizing regulatory risks and preserving adherence to corporate interests.

R&D&I in the electrical sector; economic regulation; risk assessment