Optimal Procurement of Distributed Energy Resources

47 Pages Posted: 29 Aug 2017

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: August 27, 2017

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.

Keywords: distributed energy resources, procurement, regulation

JEL Classification: L51, L94

Suggested Citation

Brown, David and Sappington, David E. M., Optimal Procurement of Distributed Energy Resources (August 27, 2017). USAEE Working Paper No. 17-318, Available at SSRN: https://ssrn.com/abstract=3027705 or http://dx.doi.org/10.2139/ssrn.3027705

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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