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Demand-Side Management Programs Under Retail Electricity Competition

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  • Brennan, Timothy

    (Resources for the Future)

Abstract

Demand-side management programs comprise subsidies from franchised electric utilities for the purchase of high-efficiency appliances, e.g., air conditioners. Competition in power generation threatens the viability of these programs. However, it should also reduce the warrant for them. Under regulation, the justification for such programs depends, somewhat paradoxically, on below marginal-cost pricing. Eliminating regulation should permit pricing flexibility to discourage excessive on-peak energy use. It should also eliminate the assurance of returns that may have encouraged overbuilding of generation capacity. Entrants and incumbent utilities should find it easier to offer "energy services," i.e., to bundle electricity with appliances, if consumers are too myopic to realize the benefits of increasing energy efficiency. Environmental degradation remains a problem, but competition can improve the performance of incentive-based regulations (e.g., permit trades), reducing the value of DSM as a supplemental, second-best alternative.

Suggested Citation

  • Brennan, Timothy, 1998. "Demand-Side Management Programs Under Retail Electricity Competition," RFF Working Paper Series dp-99-02, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-99-02
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-99-02.pdf
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    Cited by:

    1. Palmer, Karen L. & Burtraw, Dallas & Bharvirkar, Ranjit & Paul, Anthony, 2001. "Restructuring and the Cost of Reducing NOx Emissions in Electricity Generation," Discussion Papers 10549, Resources for the Future.
    2. Brennan, Timothy J. & Palmer, Karen L. & Martinez, Salvador A., 2001. "Implementing Electricity Restructuring: Policies, Potholes, and Prospects," Discussion Papers 10508, Resources for the Future.
    3. Toshi H. Arimura, Shanjun Li, Richard G. Newell, and Karen Palmer, 2012. "Cost-Effectiveness of Electricity Energy Efficiency Programs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    4. Gillingham, Kenneth & Newell, Richard G. & Palmer, Karen L., 2004. "Retrospective Examination of Demand-Side Energy Efficiency Policies," Discussion Papers 10477, Resources for the Future.
    5. Jiang, Bo & Farid, Amro M. & Youcef-Toumi, Kamal, 2015. "Demand side management in a day-ahead wholesale market: A comparison of industrial & social welfare approaches," Applied Energy, Elsevier, vol. 156(C), pages 642-654.
    6. Brennan, Timothy J., 2010. "Optimal energy efficiency policies and regulatory demand-side management tests: How well do they match?," Energy Policy, Elsevier, vol. 38(8), pages 3874-3885, August.
    7. Alex Y. H. Lo, 2008. "Achieving Environmental Goals in a Competitive Electricity Market?: Post-Colonial Hong Kong, Public Choice and the Role of Government," Energy & Environment, , vol. 19(7), pages 959-978, December.
    8. Jiang, Bo & Muzhikyan, Aramazd & Farid, Amro M. & Youcef-Toumi, Kamal, 2017. "Demand side management in power grid enterprise control: A comparison of industrial & social welfare approaches," Applied Energy, Elsevier, vol. 187(C), pages 833-846.

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