Self-Sabotage in the Procurement of Distributed Energy Resources

44 Pages Posted: 2 Nov 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: October 2017

Abstract

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

Brown, David and Sappington, David E. M., Self-Sabotage in the Procurement of Distributed Energy Resources (October 2017). USAEE Working Paper No. 17-323, Available at SSRN: https://ssrn.com/abstract=3063235 or http://dx.doi.org/10.2139/ssrn.3063235

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

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
34
Abstract Views
1,404
PlumX Metrics