A regulatory model for resource parity between supply and demand.
Brian Hedman is an executive director at the Cadmus Group and Jill Steiner is a principal.
To be truly effective, integrated resource planning must give equal play (“comparable” treatment) to both supply- and demand-side resources. But that task can prove difficult. Direct comparisons can pose challenges, owing to the sometimes counter-intuitive nature of demand-side management (DSM), versus the more conventional notions of what such resources truly are.
We use the term DSM to refer to both energy efficiency and demand response programs. These programs provide incentives for customers to use energy more efficiently or to shift the time period in which they use it. In so doing, they can reduce the utility’s future obligation either to provide energy or to stockpile capacity to meet demand. But DSM’s characteristics differ from supply-side alternatives.
One key difference concerns the physical attributes of a supply resource, versus the virtual nature of its demand-side counterpart.
Supply-side resources are tangible. They typically take the form of a large-scale asset. The utility frequently owns the plant and earns a return on investment supplied by shareholders. That large-scale investment typically is sufficient to trigger a general rate case to roll the costs into the utility’s prices.