A Model for Sustaining New Technology Based on Government Incentives

The diffusion of new technology that provides environmental benefits may require government incentives for a duration of time, especially when the technology is expensive. The Center of Systems Research and Education (CASRE) model is developed that analyzes the impact of incentives in sustaining new technologies to allow their social acceptance. The CASRE model includes both demand and supply variables associated with incentive policy to sustain new technology. The key to market dissemination and sustainability is the Investment Tax Credit (ITC) levels provided by the government. The level of ITC is based on the current cost to the customer and the customer acceptance of the cost. The cost of the technology decreases over time due to the effect of learning, scale, and technological progress impacting the level the market demand and therefore the tax credit investments required to sustain the technology. A sensitivity analysis is utilized to predict the impact of cost reductions on tax incentives required. The CASRE model is applied to a case study on non-automotive Proton Exchange Membrane Fuel Cells (PEMFCs) for the Backup Power (BuP) and Material Handling Equipment (MHE) applications. The termination of ITC in 2018 is projected to cause a sharp sales reduction of PEMFCs for BuP but minimum impact on MHE. The gradual phase-out policy of ITC seems to be provide greater probability of sustaining PEMFCs for both applications.