Impact of Energy Efficiency Incentives on Electricity Distribution Companies

Abstract

An analysis is made of the impact of diverse regulatory mechanisms and financial incentives that aim at conciliating the interests of the regulating entity and distribution companies, while tending towards the implementation of energy efficiency policies on the power distribution sector. To assess the outcome of the power distributors on a given regulatory scenario, a production-possibility model based on data envelopment analysis is developed. The methodology used adapts results gathered from international case-studies in order to ascertain the efficiency degree achieved by each regulating scheme. The analysis is subsequently applied on four representative companies of the Chilean power distribution sector, undergoing different energy efficiency levels required by the regulator. The results reveal that the introduction of white certificates of energy efficiency outperforms the other methods considered, as it succeeds on eliminating the disincentives at a minimal economic impact. Comparing the energy production-revenue decoupling mechanisms with the investment of the 1% in energy efficiency programs yields that the first method achieves betters results, provided that the regulator sets energy efficiency goals below 4% a year, whereas the second method is more effective concerning the global impact on the distributors.