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

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