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Optimal Procurement of Distributed Energy Resources

Author

Listed:
  • David P. Brown

    (University of Alberta, Department of Economics)

  • David E. M. Sappington

    (University of Florida, Department of Economics)

Abstract

We analyze the optimal design of policies to motivate electricity distribution companies to adopt efficient distributed energy resources (DER) and manage associated project costs. The optimal policy often entails a bias against new DER projects and implements considerable cost sharing when DER projects are undertaken in order to limit the utility's rent. Failure to adequately tailor the degree of cost sharing to the prevailing environment can raise procurement costs substantially. It can be optimal to reward a distribution company with more than the cost saving it achieves.

Suggested Citation

  • David P. Brown & David E. M. Sappington, 2017. "Optimal Procurement of Distributed Energy Resources," Working Papers 2017-05, University of Alberta, Department of Economics.
    • Handle: RePEc:ris:albaec:2017_005
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    References listed on IDEAS

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    Cited by:

    1. David P. Brown & David E. M. Sappington, 2018. "Employing Simple Cost-Sharing Policies to Motivate the Efficient Implementation of Distributed Energy Resources," Working Papers 2018-09, University of Alberta, Department of Economics.
    2. David P. Brown & David E. M. Sappington, 2017. "Self-Sabotage in the Procurement of Distributed Energy Resources," Working Papers 2017-11, University of Alberta, Department of Economics.
    3. Tooraj Jamasb & Manuel Llorca, 2019. "Energy Systems Integration: Economics of a New Paradigm," Working Papers EPRG 1903, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.

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    Keywords

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    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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