Quantitative Financial Analysis of Alternative Energy Efficiency Shareholder Incentive Mechanisms

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Rising energy prices and climate change are central issues in the debate about our nation's energy policy. Many are demanding increased energy efficiency as a way to help reduce greenhouse gas emissions and lower the total cost of electricity and energy services for consumers and businesses. Yet, as the National Action Plan on Energy Efficiency (NAPEE) pointed out, many utilities continue to shy away from seriously expanding their energy efficiency program offerings because they claim there is insufficient profit-motivation, or even a financial disincentive, when compared to supply-side investments. With the recent introduction of Duke Energy's Save-a-Watt incentive mechanism and ... continued below

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Cappers, Peter; Goldman, Charles; Chait, Michele; Edgar, George; Schlegel, Jeff & Shirley, Wayne August 3, 2008.

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Rising energy prices and climate change are central issues in the debate about our nation's energy policy. Many are demanding increased energy efficiency as a way to help reduce greenhouse gas emissions and lower the total cost of electricity and energy services for consumers and businesses. Yet, as the National Action Plan on Energy Efficiency (NAPEE) pointed out, many utilities continue to shy away from seriously expanding their energy efficiency program offerings because they claim there is insufficient profit-motivation, or even a financial disincentive, when compared to supply-side investments. With the recent introduction of Duke Energy's Save-a-Watt incentive mechanism and ongoing discussions about decoupling, regulators and policymakers are now faced with an expanded and diverse landscape of financial incentive mechanisms, Determining the 'right' way forward to promote deep and sustainable demand side resource programs is challenging. Due to the renaissance that energy efficiency is currently experiencing, many want to better understand the tradeoffs in stakeholder benefits between these alternative incentive structures before aggressively embarking on a path for which course corrections can be time-consuming and costly. Using a prototypical Southwest utility and a publicly available financial model, we show how various stakeholders (e.g. shareholders, ratepayers, etc.) are affected by these different types of shareholder incentive mechanisms under varying assumptions about program portfolios. This quantitative analysis compares the financial consequences associated with a wide range of alternative incentive structures. The results will help regulators and policymakers better understand the financial implications of DSR program incentive regulation.

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  • Report No.: LBNL-2590E
  • Grant Number: DE-AC02-05CH11231
  • Office of Scientific & Technical Information Report Number: 973568
  • Archival Resource Key: ark:/67531/metadc932899

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Office of Scientific & Technical Information Technical Reports

Reports, articles and other documents harvested from the Office of Scientific and Technical Information.

Office of Scientific and Technical Information (OSTI) is the Department of Energy (DOE) office that collects, preserves, and disseminates DOE-sponsored research and development (R&D) results that are the outcomes of R&D projects or other funded activities at DOE labs and facilities nationwide and grantees at universities and other institutions.

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  • August 3, 2008

Added to The UNT Digital Library

  • Nov. 13, 2016, 7:26 p.m.

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  • Jan. 4, 2017, 5:45 p.m.

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Cappers, Peter; Goldman, Charles; Chait, Michele; Edgar, George; Schlegel, Jeff & Shirley, Wayne. Quantitative Financial Analysis of Alternative Energy Efficiency Shareholder Incentive Mechanisms, article, August 3, 2008; Berkeley, California. (digital.library.unt.edu/ark:/67531/metadc932899/: accessed October 19, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.