The Danger Of A New Electricity Divide — And How To Solve It

(Credit: AP/Reed Saxon)

How we get and use electricity is undergoing a massive jump forward in technological sophistication — just like telephone communications, the internet, wireless and broadband access did before it. And while this advancement brings benefits, it also threatens to leave poorer and less privileged Americans behind. That’s the takeaway from a new paper by Richard Caperton and Mari Hernandez at the Center for American Progress, which also offers a few ideas to get out ahead of the problem.

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.

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5 Responses to The Danger Of A New Electricity Divide — And How To Solve It

  1. Superman1 says:

    The old phone company, in the days when it was a regulated utility, effectively subsidized the remote customers so they paid roughly the same as the high-density urban customers. In our present every-man-for-himself world, many people seem to have thrown their less fortunate neighbors overboard.

  2. Dr.A.Jagadeesh says:

    Excellent story.
    Yes. The less privileged should have access to Electricity as Urban people can have alternatives.
    Dr.A.Jagadeesh Nellore(AP),India

  3. I am in full agreement with the authors and the fast developing countries like China and India should seriously discuss this issue of the new “solar divide”. Such governments should device programs to invest one time in such low intensity energy service areas for the poor, with the benefit that the beneficiaries are not pegged with the problem of inability to pay the recurring energy charges. One time help puts them on the road!

  4. Paul Klinkman says:

    Producing electricity on a sunny day is no trouble at all these days. Supplying yourself with on-demand electricity is the first problem, and generating redundancy for 99.999% uptime is the second problem.

    On-demand renewable electricity is available using five methods:

    1. Hydropumping is the old standby. Pump water uphill to store electricity and let it down during peak demand periods. Hydropumping uses up 30% of the power put into it.

    2. Giant fuel cells separate hydrogen from water during times of peak power. The hydrogen is stored in a huge tank.

    3. A well-insulated box of rocks will hold heat from a solar collector. Rocks are cheap and have few maintenance problems. Generate the on-demand electricity with a Stirling Engine such as Dean Kamen’s Slingshot brand.

    4. My diagonal solar chimney, patent pending, search the web for my name and the patent application, stores heat for on-demand electric generation. I think that I can beat the other three candidates for the on-demand renewable electricity market, as soon as our governments wake up and realize the importance of on-demand renewables.

    5. For small power backups, use batteries.

    The second problem is probably solved with having two or more of these systems on the same mini-grid.

    So, at a certain point, entire neighborhoods will cut the wires on the local monopoly. Snip. Monopoly utilities charge too much and deliver too little, don’t they! Large industries will probably snip first (except when the government has given them ultra-low electric rates that average homeowners can never get).

    Inefficient and old nuclear plant owners will find ways to go bankrupt under our laws so that localities have to pay all of the cleanup costs forever. Be careful that you’re not the one stuck with the bill and the mess.

  5. Paul Klinkman says:

    Every village in India will soon have a village electric utility. The only difference will be in the amount of local usage. This “divide” is overrated. The food versus no food divide and the house versus plastic sheeting divide are bigger divides.