Evaluation of demand-side management programs

Over the past few years, the attention accorded to demand-side management (DSM) measures has called into question the traditional cost minimization approach for evaluating such programs. Two broad approaches to DSM seem to be generally used: one examining the problem from multiple perspectives and the other including various practical methods used in-house by utility planners. Whatever the standard used to evaluate DSM, there remains at least one problem which cannot be quantified. The customers who participate in a DSM program cannot only take into account the effects of DSM on their electricity bills; their comfort can also be affected. This lowering of comfort constitutes a legitimate cost which can explain why some apparently sensible DSM measures are not adopted. A method is proposed to incorporate this cost. It establishes a way to evaluate DSM program tradeoffs that, from the perspective of standard economic theory, maximizes social welfare; explains why at least one of the perspectives in the multiple perspective approach needs to be modified to incorporate all customer costs; and outlines how the proposed standard can be implemented. 8 refs