Price regulation and the incentives to pursue energy efficiency by minimizing network losses

Resumo

This paper examines the incentives embedded in different regulatory regimes for investment by utilities in energy efficiency programs that aim to reduce network losses. In our model, a monopolist chooses whether to undertake an investment in energy efficiency, which is not observable by the regulator. We show that, in equilibrium, the monopolist chooses to exert positive effort more often under price cap regulation than under no regulation or mandated target regulation and that she exerts no effort under rate of return regulation. This result contrasts with an extensive literature that focuses on end-user energy conservation and shows that price caps are ineffective for achieving energy efficiency as utilities have an incentive to maximize sales volume. Thus, policies that are designed to promote demand-side energy conservation may diminish the utilities' incentives to pursue supply-side energy efficiency through minimizing network losses.. Copyright © 2016 by the IAEE. All rights reserved.

Ficha do documento

Tipo

Artigo científico

Ano

2016

Instituição

International Association for Energy Economics

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso restrito

DOI

10.5547/01956574.37.4.jdut

Identificador

oai:repositorio.fgv.br:10438/25484

Temas

Infraestrutura

Palavras-chave

Energy efficiencyRegulatory incentiveThe electricity sectorEnergia - Preços