The future of DSM in a restructured US electricity industry

Abstract

During the past several years, more and more electric utilities have been running demand-side management (DSM) programmes. These programmes improve the efficiency with which customers use electricity and affect the timing of that use (eg to shift it away from high-cost times). Utilities run such programmes for two primary reasons. One is to improve customer service. The second is to acquire resources that, just like power plants, can meet customer energy service needs. DSM programmes often are less expensive and environmentally cleaner than power plants. By 1994, US utility DSM programmes had cut potential summer peak demand by 7% and annual electricity use by 2%. We examine the economics of DSM in the late 1990s, reviewing current estimates of avoided supply costs and the cost of conserved electricity for DSM programmes. We review the environmental effects of electricity production and the environmental benefits of DSM programmes. Finally, we consider alternative electric industry structures and how DSM can operate within these alternatives.