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Flexibility Benefits of Demand-Side Programsin Electric Utility Planning

Electric utilities face a variety of uncertainties that complicate their long-term resource planning and acquisition. Many utilities deal with these uncertainties by pursuing flexible strategies that allow changes to be made incrementally with little difficulty and at low cost. Thus, utilities today avoid construction of large, baseload power plants because of their long construction times and high capital costs. On the other hand, utilities view combustion turbines as flexible because they have small unit sizes, take only a few years to build, are inexpensive, and can later be converted to combined-cycle units (to increase capacity and improve performance). Energy-efficiency and load-management programs, because of their inherently small unit size and opportunities to adjust participation over time, are attractive for the same reasons.

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Energy Specializations: Energy Efficiency; Electricity – Policy and Regulation

JEL Codes:
Q55 - Environmental Economics: Technological Innovation
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Electric utilities, DSM programs, Flexibility benefits, Uncertainty

DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No1-13

Published in Volume 11, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.