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Optimal Procurement of Distributed Energy Resources

Author

Listed:
  • Brown, David P.

    (University of Alberta, Department of Economics)

  • Sappington, David E. M.

    (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

  • Brown, David P. & Sappington, David E. M., 2017. "Optimal Procurement of Distributed Energy Resources," Working Papers 2017-5, University of Alberta, Department of Economics.
    • Handle: RePEc:ris:albaec:2017_005
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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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).
    2. Lamorlette, A., 2023. "A coupled model of global energy production and ERoEI applied to photovoltaic and wind, an estimation of net production," Energy, Elsevier, vol. 278(PB).
    3. Tooraj Jamasb and Manuel Llorca, 2019. "Energy Systems Integration: Economics of a New Paradigm," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    4. Milchram, Christine & Hillerbrand, Rafaela & van de Kaa, Geerten & Doorn, Neelke & Künneke, Rolf, 2018. "Energy Justice and Smart Grid Systems: Evidence from the Netherlands and the United Kingdom," Applied Energy, Elsevier, vol. 229(C), pages 1244-1259.
    5. Tangerås, Thomas, 2020. "Competition for Flexible Distribution Resources in a ’Smart’ Electricity Distribution Network," Working Paper Series 1351, Research Institute of Industrial Economics.
    6. Alexander Theisen & Lynne Kiesling & Michael Munger, 2022. "From Airbnb to solar: electricity market platforms as local sharing economies," Public Choice, Springer, vol. 193(3), pages 141-162, December.
    7. David P. Brown & David E.M. Sappington, 2018. "Optimal Procurement of Distributed Energy Resources," The Energy Journal, , vol. 39(5), pages 131-156, September.
    8. Butera, Giacomo & Jensen, Søren Højgaard & Clausen, Lasse Røngaard, 2019. "A novel system for large-scale storage of electricity as synthetic natural gas using reversible pressurized solid oxide cells," Energy, Elsevier, vol. 166(C), pages 738-754.
    9. David P. Brown & David E. M. Sappington, 2021. "On the profitability of self‐sabotage," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 68-91, February.
    10. Marques, Vítor & Costa, Paulo Moisés & Bento, Nuno, 2022. "Greater than the sum: On regulating innovation in electricity distribution networks with externalities," Utilities Policy, Elsevier, vol. 79(C).
    11. Lu-Miao Li, Peng Zhou, and Wen Wen, 2023. "Distributed Renewable Energy Investment: The Effect of Time-of-Use Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    12. Reda, Francesco & Fatima, Zarrin, 2019. "Northern European nearly zero energy building concepts for apartment buildings using integrated solar technologies and dynamic occupancy profile: Focus on Finland and other Northern European countries," Applied Energy, Elsevier, vol. 237(C), pages 598-617.
    13. Brown, David P. & Sappington, David E. M., 2018. "Employing Simple Cost-Sharing Policies to Motivate the Efficient Implementation of Distributed Energy Resources," Working Papers 2018-9, University of Alberta, Department of Economics.
    14. Brown, David P. & Sappington, David E. M., 2017. "Self-Sabotage in the Procurement of Distributed Energy Resources," Working Papers 2017-11, University of Alberta, Department of Economics.

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    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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