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Making the least active pay: A simulation of rewards and penalties under demand side participation programs

Torriti, J and Leach, M (2012) Making the least active pay: A simulation of rewards and penalties under demand side participation programs International Journal of Green Energy, 9 (7). pp. 584-596.

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Abstract

The orthodox approach for incentivizing Demand Side Participation (DSP) programs is that utility losses from capital, installation and planning costs should be recovered under financial incentive mechanisms which aim to ensure that utilities have the right incentives to implement DSP activities. The recent national smart metering roll-out in the UK implies that this approach needs to be re-assessed since utilities will recover the capital costs associated with DSP technology through bills. This paper introduces a reward and penalty mechanism focusing on residential users. DSP planning costs are recovered through payments from those consumers who do not react to peak signals. Those consumers who do react are rewarded by paying lower bills. Because real-time incentives to residential consumers tend to fail due to the negligible amounts associated with net gains (and losses) for individual users, in the proposed mechanism the regulator determines benchmarks which are matched against responses to signals and caps the level of rewards/penalties to avoid market distortions. The paper presents an overview of existing financial incentive mechanisms for DSP; introduces the reward/penalty mechanism aimed at fostering DSP under the hypothesis of smart metering roll-out; considers the costs faced by utilities for DSP programs; assesses linear rate effects and value changes; introduces compensatory weights for those consumers who have physical or financial impediments; and shows findings based on simulation runs on three discrete levels of elasticity. Copyright © Taylor & Francis Group, LLC.

Item Type: Article
Divisions : Faculty of Engineering and Physical Sciences > Centre for Environmental Strategy
Authors :
AuthorsEmailORCID
Torriti, JUNSPECIFIEDUNSPECIFIED
Leach, MUNSPECIFIEDUNSPECIFIED
Date : 1 October 2012
Identification Number : 10.1080/15435075.2011.625582
Additional Information : "This is an Author's Accepted Manuscript of an article published in Making The Least Active Pay: A Simulation of Rewards and Penalties Under Demand Side Participation Programs Jacopo Torriti, Matthew Leach International Journal of Green Energy Vol. 9, Iss. 7, 2012, copyright Taylor & Francis, available online at: http://www.tandfonline.com/10.1080/15435075.2011.625582."
Depositing User : Symplectic Elements
Date Deposited : 11 Feb 2013 15:52
Last Modified : 23 Sep 2013 19:59
URI: http://epubs.surrey.ac.uk/id/eprint/749466

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