Letters
Demand-Side Measures
Discussion of demand-side measures is bedeviled by the fact that the term is not used consistently. Some authors use it to mean "energy-efficiency measures". I should like its use to be restricted to measures undertaken by utilities. Giving a grant or loan to a customer for an energy-efficient lighting system would then be a "demand-side measure" but installation of the new system would simply be an "energy-efficiency measure".The problem is well-illustrated by the statement in your article "Britain: Barriers and Opportunities " (IAEEL Newsletter 1/93) that "A consultancy report to Offer (Office of Electricity Regulation) concluded that DSM was more profitable than new electricity supply in each case examined."
This suggests that the electricity utilities could supply electricity more cheaply (and so more profitably) by investing in demand-side measures rather than new supply capacity. The report actually compares costs and benefits to society as a whole for four energy-efficient technologies and concludes (unsurprisingly) that the benefits are greater when energy efficiency is chosen. No consideration is given to what DSMs (in my sense of the term) might be implemented to achieve the energy savings discussed.
John A Feather
Dr., Energy Policy Consultant
London, UK
Reply: The term "demand-side management" (DSM) is normally used to refer to utility programs for energy efficiency or load management. The authors of the report to Offer created some confusion by using the term demand-side measures and the abbreviation DSM, meaning utility demand-side management.
The threat of short-term revenue losses is one of the reasons why utilities don't regard investments in increased end-use efficiency as profitable, even if such investments would provide energy-services more cheaply to the society than would investments in electricity supply. In many other countries, utilities are allowed to recover their program costs and any lost revenues through changes in the rates. However, even making this possible would not be a remedy in the case of the UK, since utilities would fear rate increases when competing with other utilities for their customers. The challenge is to find a sound regulatory strategy for a competitive utility market like the UK. This strategy must help bridge the gap between the utility perspective and the societal perspective.
Editors
The discussion continues...: DSM and UK deregulation