Who's Really Paying for the Power Grid?
Electricity bills are going up, and that has a real impact on Tennesseans’ household spending, especially when they’re already juggling groceries, rent, and other living expenses. Understanding why bills could rise as more households adopt rooftop solar, and who would bear the biggest burden, is exactly the kind of question economists should be answering for the people making decisions about energy in this region.
That's what drew me and colleagues from four other universities to study how changing patterns of electricity use are affecting costs across the Tennessee Valley. Our findings, published in PNAS Nexus, have direct implications for utility managers, state legislators, and the families across this region who are already feeling the pressure of rising energy costs.
The shared costs of keeping the lights on
Running an electric grid is expensive. TVA and its local utilities maintain power plants, transmission lines, and distribution infrastructure, and most of those costs are fixed regardless of how much electricity customers actually use. Utilities recover most of their costs by charging per kilowatt-hour. So when customers start buying significantly less power from the grid, those fixed costs get spread across fewer sales and everyone else's rate goes up.
Rooftop solar changes the math
When a household installs rooftop solar, particularly a battery-plus-solar system that lets them generate most of their own power, they dramatically reduce what they buy from the utility. The grid infrastructure is still there, but that household is no longer helping cover those costs the way they used to.
Spread this across thousands of households and the math starts to matter. Our 30-year modeling of the TVA service area projects that average residential electricity bills could increase 10% across the region as solar adoption grows, with some areas seeing increases as high as 20%. Those costs land on whoever is still buying power from the grid.
Industry analysts have a name for this feedback loop: the utility death spiral. As rates rise, more customers look for ways to reduce their grid dependence, which pushes rates higher still for those who remain.
The fairness problem
Rooftop solar requires a meaningful upfront investment. Despite falling costs, installing a system capable of covering a household's electricity needs remains a significant expense, one that favors homeowners with capital, good credit, and the financial flexibility to think long-term.
Across the TVA region, our estimates project that by 2051 roughly 35% of higher-income households will have adopted solar, compared to about 30% of lower- and middle-income households. Those estimates are grounded in a survey of more than 2,300 TVA customers about their actual solar adoption preferences. By 2051, that gap is projected to shift $7.8 million in additional electricity costs onto lower-income households who haven't adopted solar. That’s about $9.86 per customer annually. In a region that already includes some of the highest poverty rates in the country, that dynamic hits some households much harder than others.
Rising bills do nudge some lower-income households toward solar, but not enough
Higher electricity bills do improve the financial case for going solar, and our modeling found that rising rates pushed some additional lower-income households to adopt, narrowing the adoption gap slightly across most of the TVA region.
But the numbers don't balance out. The bill savings captured by those additional lower-income adopters totaled roughly $976,000, against that same $7.8 million in added costs for those who didn't or couldn't adopt. Rising rates alone aren't enough to offset the cost burden.
In Knoxville and Chattanooga specifically, the dynamic ran the other direction. Rising rates pushed higher-income households toward solar faster than lower-income ones, actually widening the divide.
What this means for utilities
The conventional response to energy affordability concerns is low-income assistance programs. Those programs do important work, but our research suggests they're an imprecise tool for this particular problem. The cost-shifting effect doesn't fall cleanly along income lines. Over 86% of solar adopters in the TVA service area meet our definition of lower- or middle-income, meaning the winners and losers aren't easily sorted by income alone.
More targeted options deserve consideration. Utilities could restructure how they recover fixed costs by shifting more of the burden to a flat grid access fee rather than a per-kilowatt-hour charge, ensuring solar adopters continue contributing to shared infrastructure costs rather than offloading them onto remaining customers. Adjusting the credits solar users receive for power they sell back to the grid is another mechanism worth examining.
The bottom line
As more households gain access to on-site power generation, the question of who pays for the shared infrastructure that everyone depends on becomes increasingly important, particularly in a region where many families are already stretched thin on household budgets.
The research makes clear that as energy markets evolve, the rules governing our shared grid will need to evolve with them, with an eye toward who bears the costs of that change.
Dr. Tim Roberson is an assistant professor of economics. His research explores strategic competition, electricity market design, renewable energy adoption, and policy mechanisms for managing emergent technologies and transitions in energy systems.
Yasmine Williams is the manager of marketing and partnership services.