Customer-Side Energy Management: What Role Should Utilities Play?

Involving utilities in customer-side electricity management could reduce competition in managing customer energy use, but the idea may offer benefits as well.



Jan. 13, 2021


Tim Brennan


Working Paper

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1 minute


Decarbonization of the electricity grid implies more variable and intermittent solar and wind generation. Intermittency response is the strongest motivation for customer-side energy management (CSEM)—that is, technology that allows a third party to monitor electricity availability and adjusts use to balance supply and demand. The question is the role of utilities in providing CSEM. Antitrust and regulatory policy have reflected a principle that regulated businesses’ participation in unregulated markets creates opportunities to exploit market power. Tactics include excessive transfer pricing of unregulated inputs, cross-subsidization of unregulated services, and discrimination against unaffiliated rivals in obtaining the regulated service. Risks of utilities’ involvement in CSEM can probably be mitigated through vigilance and safeguards. Moreover, a utility may be well placed to undertake CSEM because of its supply and consumer use. In addition, adverse selection may inhibit a direct-to consumer CSEM market from developing. A likely outcome is that the utility procures CSEM technology from a competitive market and provides CSEM directly.

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