Communications Project

Document Type:Master's Thesis
Name:Andhika Prastawa
Title:An Analysis of the Financial Incentives Impact on the Utility Demand-Side Management Programs
Degree:Master of Science in Electrical Engineering
Department:Electrical Engineering
Committee Chair: Saifur Rahman
Committee Members:Yilu Liu, Member
Lamine M. Mili, Member
Keywords:utility demand-side management, customer participation, participation modeling, financial incentive, cost benefit analysis
Date of defense:July 10, 1998
Availability:Release the entire work for Virginia Tech access only.
After one year release worldwide only with written permission of the student and the advisory committee chair.


An Analysis of the Financial Incentives Impact on the Utility Demand-Side Management Programs

Many utilities implement the financial incentive plans in promoting their Demand-Side Management (DSM) programs. The plans are intended to reduce the customer investment cost for a high efficiency equipment option, so that to make the investment more attractive. Despite its potential to increase customer participation, the financial incentives could cause a considerable increase in program cost to the utility.

An analysis of financial incentive impact on the utility DSM program is conducted in this thesis. The analysis uses the combination of the customer participation modeling and the cost-benefit analysis of a DSM program. A modeling of customer participation by a discrete choice model is presented. The model uses the logistic probability functions. The benefit and cost of DSM programs are explored to develop the analysis methodology. Two typical energy conservation options of DSM programs are taken for case studies to demonstrate the analysis. The analysis is also conducted to see the effect of financial incentives on the performance of DSM programs in a fluctuating marginal energy cost. The result of this research shows that the financial incentive could induce the customer participation, thus provide an increase of benefit and costs. However, this research also reveals that, in certain circumstances, the financial incentive may result in a decrease of net benefit due to significant increase of cost. These imply that utilities must carefully evaluate the financial incentive plan in their DSM programs, before the programs are implemented.

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