Micro economics for demand-side management
This paper aims to interpret Demand-Side Management (DSM) activity and to point out its problems, adopting microeconomics as an analytical tool. Two major findings follow. first, the cost-benefit analysis currently in use has the following problems: (i) inconsistency in cost comparison between utili...
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| Format: | Working Paper |
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MIT Center for Energy and Environmental Policy Research
2009
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| Online Access: | http://hdl.handle.net/1721.1/50160 |
| _version_ | 1811087352376852480 |
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| author | Kibune, Hisao |
| author_facet | Kibune, Hisao |
| author_sort | Kibune, Hisao |
| collection | MIT |
| description | This paper aims to interpret Demand-Side Management (DSM) activity and to point out its problems, adopting microeconomics as an analytical tool. Two major findings follow. first, the cost-benefit analysis currently in use has the following problems: (i) inconsistency in cost comparison between utility costs on the supply-side and utility costs plus customer costs on the demand-side, (ii) inconsistency in price comparisons among different consumption levels, and (iii) arbitrary pricing after DSM implementation. Second, DSM programs can be recognized as a conventional economic activity, if we assume "energy service concept" as a definition for demand and also recognize the DSM program as a supply-side option. Concurrently, (i) DSM is justified, since it increases social welfare, and (ii) we are in a position to determine the amount of rebate to be paid. However, (iii) the utility bill of a DSM participant should not be reduced in the name of demand reduction, since the utility continues to provide energy service at the same volume, and must recover the DSM costs in order to avoid double payment to the participant. (iv) We note that the compensation method of DSM cost recover, which is applied in several states, has a limitation. (v) The interpretation of DSM activity proposed in this paper is also useful in the case of marginal cost supply-side decrease. |
| first_indexed | 2024-09-23T13:44:44Z |
| format | Working Paper |
| id | mit-1721.1/50160 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T13:44:44Z |
| publishDate | 2009 |
| publisher | MIT Center for Energy and Environmental Policy Research |
| record_format | dspace |
| spelling | mit-1721.1/501602019-04-12T23:30:59Z Micro economics for demand-side management Kibune, Hisao This paper aims to interpret Demand-Side Management (DSM) activity and to point out its problems, adopting microeconomics as an analytical tool. Two major findings follow. first, the cost-benefit analysis currently in use has the following problems: (i) inconsistency in cost comparison between utility costs on the supply-side and utility costs plus customer costs on the demand-side, (ii) inconsistency in price comparisons among different consumption levels, and (iii) arbitrary pricing after DSM implementation. Second, DSM programs can be recognized as a conventional economic activity, if we assume "energy service concept" as a definition for demand and also recognize the DSM program as a supply-side option. Concurrently, (i) DSM is justified, since it increases social welfare, and (ii) we are in a position to determine the amount of rebate to be paid. However, (iii) the utility bill of a DSM participant should not be reduced in the name of demand reduction, since the utility continues to provide energy service at the same volume, and must recover the DSM costs in order to avoid double payment to the participant. (iv) We note that the compensation method of DSM cost recover, which is applied in several states, has a limitation. (v) The interpretation of DSM activity proposed in this paper is also useful in the case of marginal cost supply-side decrease. Supported by The Institute for Energy Economics, Japan. 2009-12-15T23:55:08Z 2009-12-15T23:55:08Z 1991 Working Paper 91-004 http://hdl.handle.net/1721.1/50160 28596149 Working paper (Massachusetts Institute of Technology. Center for Energy Policy Research) ; MIT-CEPR 91-004. 24 application/pdf MIT Center for Energy and Environmental Policy Research |
| spellingShingle | Kibune, Hisao Micro economics for demand-side management |
| title | Micro economics for demand-side management |
| title_full | Micro economics for demand-side management |
| title_fullStr | Micro economics for demand-side management |
| title_full_unstemmed | Micro economics for demand-side management |
| title_short | Micro economics for demand-side management |
| title_sort | micro economics for demand side management |
| url | http://hdl.handle.net/1721.1/50160 |
| work_keys_str_mv | AT kibunehisao microeconomicsfordemandsidemanagement |