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On the Role of Maximum Demand Charges in the Presence of Distributed Generation Resources

Author

Listed:
  • Brown, David P.

    () (University of Alberta, Department of Economics)

  • Sappington, David E. M.

    () (University of Florida, Department of Economics)

Abstract

We examine the role that maximum demand charges (MDCs) can play in avoiding the death spiral that some utilities may otherwise face as the distributed generation (DG) of electricity proliferates. We find that MDCs generally secure gains for consumers that do not undertake DG, and often secure gains for consumers that undertake DG. However, the welfare gains tend to be modest in plausible settings. Furthermore, time-of-use pricing often secures larger welfare gains than do MDCs.

Suggested Citation

  • Brown, David P. & Sappington, David E. M., 2016. "On the Role of Maximum Demand Charges in the Presence of Distributed Generation Resources," Working Papers 2016-16, University of Alberta, Department of Economics.
  • Handle: RePEc:ris:albaec:2016_016
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    References listed on IDEAS

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    Cited by:

    1. David P. Brown & David E. M. Sappington, 2017. "Optimal policies to promote efficient distributed generation of electricity," Journal of Regulatory Economics, Springer, vol. 52(2), pages 159-188, October.

    More about this item

    Keywords

    maximum demand charges; distributed generation; time-of-use prices; electricity regulation;

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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