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Employing cost sharing to motivate the efficient implementation of distributed energy resources

Author

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  • Brown, David P.
  • Sappington, David E.M.

Abstract

We consider the design of cost-sharing policies to motivate electricity distribution utilities to manage the costs of distributed energy resource (DER) projects. The optimal share of realized cost savings (s) that is awarded to the utility takes a relatively simple form in certain settings. More generally, s can vary with the prevailing environment in subtle and sometimes counterintuitive ways. For instance, s may increase as cost savings become less onerous for the utility to secure. Gains from affording the utility a choice among cost-sharing policies typically are minimal.

Suggested Citation

  • Brown, David P. & Sappington, David E.M., 2019. "Employing cost sharing to motivate the efficient implementation of distributed energy resources," Energy Economics, Elsevier, vol. 81(C), pages 974-1001.
    • Handle: RePEc:eee:eneeco:v:81:y:2019:i:c:p:974-1001
    DOI: 10.1016/j.eneco.2019.05.012
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    Cited by:

    1. Brown, David P. & Sappington, David E.M., 2020. "Motivating the optimal procurement and deployment of electric storage as a transmission asset," Energy Policy, Elsevier, vol. 138(C).

    More about this item

    Keywords

    Distributed energy resources; Procurement; Regulation;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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