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

41 Pages Posted: 18 Oct 2016

See all articles by David Brown

David Brown

University of Alberta - Department of Economics

David E. M. Sappington

University of Florida - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 17, 2016

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.

Keywords: Maximum Demand Charges, Distributed Generation, Time-Of-Use Prices, Electricity Regulation

JEL Classification: D47, L50, L94, Q40

Suggested Citation

Brown, David and Sappington, David E. M., On the Role of Maximum Demand Charges in the Presence of Distributed Generation Resources (October 17, 2016). USAEE Working Paper No. 16-280, Available at SSRN: https://ssrn.com/abstract=2853620 or http://dx.doi.org/10.2139/ssrn.2853620

David Brown (Contact Author)

University of Alberta - Department of Economics ( email )

8-14 Tory Building
Edmonton, Alberta T6G 2H4
Canada

David E. M. Sappington

University of Florida - Department of Economics ( email )

224 Matherly Hall
Gainesville, FL 32611-7140
United States
352-392-3904 (Phone)
352-336-1420 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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