Civil Engineering Faculty Publications
Document Type
Article
Publication Date
12-2025
Abstract
The adoption of rooftop photovoltaic (PV) systems can create upward pressure on retail electricity rates as utilities are forced to spread their fixed costs of generation and transmission across a smaller customer base. Since high-income households are more likely to purchase PV systems, low-income households may be disproportionately impacted by these rate increases. Using a novel combination of agent-based computational economic modeling and a choice experiment of rooftop solar adoption, we show how this pecuniary externality between low- and high-income customers increases low-income electricity bills by 10% in an area with some of the highest poverty rates in the United States. Since high-income solar adoption is less sensitive to electricity bills than low-income adoption, this pecuniary externality also reduces PV adoption inequity by nearly 1 percentage point. However, the reduction in PV adoption inequity, and the bill savings it generates, are not large enough to offset the $7.8 million ($9.86 per customer) annual increase in low-income electricity bills. Low-income assistance programs will likely fail to fully internalize the pecuniary externality due to horizontal and within-income-group vertical equity concerns.
Recommended Citation
Sims, Charles, Gasser G. Ali, J. Scott Holladay, Tim Roberson, Chien-fei Chen, and Islam H. El-Adaway. "The equity implications of pecuniary externalities on an electric grid." PNAS nexus 4, no. 12 (2025): pgaf356. https://doi.org/10.1093/pnasnexus/pgaf356
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Publication Title
PNAS Nexus
DOI
10.1093/pnasnexus/pgaf356
Comments
© The Author(s) 2025. Published by Oxford University Press on behalf of National Academy of Sciences. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.