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Price and Cost Impacts of Utility DSM Programs

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  • Eric Hirst

Abstract

Most of the debates about the appropriate economic tests to use in assessing utility programs do not address the magnitude of the impacts. As a result, questions remain about the relationships among utility DSM programs and acquisition of supply resources and the effects of these choices on electricity prices and costs. This study offers quantitative estimates on the tradeoffs between total costs and electricity prices. A dynamic model is used to assess the effects of energy-efficiency programs on utility revenues, total resource costs, electricity prices, and electricity consumption for the period 1990 to 2010. These DSM programs are assessed under alternative scenarios for three utilities: a "base" that is typical of U.S. utilities; a "surplus" utility that has excess capacity, few planned retirements, and slow growth in fossil-fuel prices and incomes; and a "deficit" utility that has little excess capacity, many planned retirements, and rapid growth infossil-fuel prices and incomes. Model results show that DSM programs generally reduce electricity costs and increase electricity prices. However, the percentage reduction in costs is usually greater than the percentage increase in prices. On the other hand, most of the cost benefits of DSM programs can be obtained without raising electricity prices.

Suggested Citation

  • Eric Hirst, 1992. "Price and Cost Impacts of Utility DSM Programs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 75-90.
    • Handle: RePEc:aen:journl:1992v13-04-a04
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    Cited by:

    1. Eyre, Nick, 2013. "Energy saving in energy market reform—The feed-in tariffs option," Energy Policy, Elsevier, vol. 52(C), pages 190-198.
    2. Kemppi, Heikki & Perrels, Adriaan, 2003. "Liberalised Electricity Markets - Strengths and Weaknesses in Finland and Nordpool," Research Reports 97, VATT Institute for Economic Research.
    3. Fahrioglu, Murat, 2016. "Effect of demand management on regulated and deregulated electricity sectors," Energy Policy, Elsevier, vol. 90(C), pages 115-120.
    4. Sayanti Mukherjee & Roshanak Nateghi, 2019. "A Data‐Driven Approach to Assessing Supply Inadequacy Risks Due to Climate‐Induced Shifts in Electricity Demand," Risk Analysis, John Wiley & Sons, vol. 39(3), pages 673-694, March.
    5. Wilson, Elizabeth J. & Plummer, Joseph & Fischlein, Miriam & Smith, Timothy M., 2008. "Implementing energy efficiency: Challenges and opportunities for rural electric co-operatives and small municipal utilities," Energy Policy, Elsevier, vol. 36(9), pages 3383-3397, September.
    6. Wirl, Franz, 2015. "White certificates — Energy efficiency programs under private information of consumers," Energy Economics, Elsevier, vol. 49(C), pages 507-515.
    7. Thoyre, Autumn, 2015. "Energy efficiency as a resource in state portfolio standards: Lessons for more expansive policies," Energy Policy, Elsevier, vol. 86(C), pages 625-634.
    8. Franz Wirl & Wolfgang Orasch, 1998. "Analysis of United States' Utility Conservation Programs," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 13(4), pages 467-486, August.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

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