The first problem is that providing access to new technologies of this sort requires a great deal of costly infrastructure. And from the pure self-interested analysis of actors on the free market, the costs of extending that access to lower-income customers or geographically remote ones exceeds the benefits. The second problem is that as new technologies become available — in this case, residential solar, energy efficient infrastructure, better battery storage, and other ways to save or self-generate power — it’s the economically privileged that first take advantage of them. It’s called the “utility death spiral.” As richer customers disconnect from the old technology — in this case, the established electrical grid — they leave less privileged customers behind to fund an increasingly expensive infrastructure.
As the paper notes, the history of telephone and internet communication provides an example of what happens next: From 2008 to 2012, wireless-only subscribers jumped 77 percent to encompass 35.8 percent of the American population, while landline-only customers dropped from 17.4 percent to 9.4 percent. Since then, some California customers have seen landline rate hikes of up to 50 percent over the past two years alone. The resulting digital divide — which exists along class, race, and geographic lines — has left households earning less than $30,000 per year 35 percent less likely to have Internet access than households earning $75,000 or more.
To avoid a similar divide emerging in coming decades as solar generation, smart grid technology, and other advancements continue to disrupt the traditional electricity grid, the paper recommends a number of policies:
Repurpose existing electric service programs. The federally funded Low Income Home Energy Assistance Program (LIHEAP) already provides home energy-bill assistance to low-income households. It could be expanded to include renewable-energy funding. The Rural Utilities Service (RUS) is another federal program that provides financing for electric systems across rural America. It’s in the process of approving a new program providing loans for households to install distributed generation and energy-efficiency tools. It could also be expanded to address any future electrical divide.
Bring regulatory changes to the electric industry. This would treat new energy and grid technology companies the same way as the utilities that previously served the same customers. This would come with practical problems, so an new version of the approach Duke Energy is trying out would mandate that existing utilities offer the technologies that allow customers to disconnect from the grid.
Give companies incentives to address the electrical divide. This could be done through the tax code. For example, a tax credit could encourage distributed generation companies to put solar panels on low-income households. As the paper notes, existing tax incentives for renewable energy have been a tremendous success.
Create a federally owned provider of new energy resources. Decades ago, the U.S. government established the Tennessee Valley Authority (TVA) to bring electricity to those aforementioned Americans the free market was leaving behind. As a result, electricity by the end of the 20th Century electricity was universally accessible to Americans. The government could do the same thing for the emerging market in renewable energy and grid technologies.
As the paper notes, just because the free market, when left to its own devices, would fail to provide universal access does not mean such reticence is best for the economy as a whole. The benefits to economic and job growth of providing universal access are big but often overlooked. Access to these new electricity technologies would bring efficient lighting and cooking options, new opportunities to work, communication tools, educational resources, modern health care services, and increased productivity and competitiveness to tens of millions of poor and underprivileged Americans. It would also help build a broad middle class and customer based for the more advanced products — from appliances to modern computing and communications tools — that are still manufactured in the U.S.
This post has been edited for clarity.