On the Economic Efficiency of Energy Conservation Programs

The efficiency of demand side management programs (abbreviated DSM) is one of the most topical and heavily debated issues in applied utility regulation. Although the aim of DSM is twofold (load management and conservation), this study, like most of the literature and the public debate concentrates on conservation. The basic idea of conservation dates back to seventies, presumably to Amory Lovins who insisted that “a kilowatt-hour saved is just like a kilowatt-hour generated…so that they should be treated alike.” This claim plus the promise of substantial profits, Lovins (1985), ‘making gigabucks with negawatts’ established conservation as legitimate intervention.