Self-Sabotage in the Procurement of Distributed Energy Resources
44 Pages Posted: 2 Nov 2017
Date Written: October 2017
We analyze the regulatory procurement of electricity infrastructure that can take the form of either a traditional core investment or non-traditional distributed energy resources (DERs). We identify conditions under which a regulated utility will engage in self-sabotage (i.e., intentionally increase its own costs) in order to elicit more favorable procurement terms. We also demonstrate how the implementation of standard policies (e.g., cost reimbursement or a simple cost-sharing plan) or the adoption of a traditional core project rather than a potentially less-costly DER project can reduce procurement costs by deterring self-sabotage.
Keywords: self-sabotage, distributed energy resources, regulation, procurement
JEL Classification: L51, L94, Q28, Q40
Suggested Citation: Suggested Citation