Study On The Incentive Mechanism Of Implementing DSM In Power Market

Demand side management (DSM) is an important action of practising the scientific development concept of power industry .It leads power consumers to use the electricity rationally by some incentives, which would improve the energy efficiency, realize the saving of electricity and electric consumption, improve and protect the environment , and realize the efficient allocation of the electric power resource. The effective implement of power demand side management can alleviate greatly the shortage of power supply in these days, and it is necessary for sustainable development of national economy. Traditionally, DSM is implemented by vertical integrated electric utilities, but the market reform of power industry has changed this situation. After the reform, the power grid companies become the implementer of DSM. At the same time the reform also has an influence on the allocation mechanism of DSM'benefits. And the change of the allocation mechanism impacts the realization of the profit maximization goal of power grid companies. And that restrains the enthusiasm of implementing DSM by power grid companies. Therefore it is necessary to analyse the DSM in power market, study the main reasons which are disadvantage for implementing DSM by power grid company, And to encourage the power grid companies to implement DSM through some incentives. Based on the reality of power market reform in China, this paper analyses the relation between market reform and the implement of power DSM from system, electric users and the implementers. It puts a key research on negative effect by the change of allocation mechanism. Then the paper studies all kinds of incentive mechanisms to improve the implement of power DSM in foreign countries,such as revenue cap mechanism and shareholder incentive mechanism. And it makes case analysis about shared saving mechanism and decoupling mechanism. The paper also applies the principal-agent and new regulatory economics theory to study the incentive mechanism to the power grid companies .It concludes that the incentive involves how to weight the intensity of encouraging and rents releasing .It also points out that asymmetric information has reduced the level of power grid companies'efforts. The researches are valuable for the government to make the incentive policy which improves the implement of DSM by the power grid company.