Equity and Distributional Impacts

Can new electricity demand from data centers, electrification, and other sources actually lower average retail electricity prices? Despite widespread concerns, the answer is sometimes yes. This paper synthesizes economic theory, recent empirical and modeling evidence, and emerging tariff designs to clarify the conditions under which load growth can support affordability for existing customers while enabling investments in clean, reliable infrastructure.

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Decarbonization and supporting policies can have important implications for household expenditures on energy services with distributional impacts across different customers. Recent policies and incentives have included carveouts and other considerations of distributional impacts, environmental justice, and equity. This analysis investigates one dimension of equitable decarbonization for the transport sector—namely, how household vehicle purchasing decisions can vary across income classes. Using detailed survey data and EPRI’s U.S. Economy, Greenhouse Gas, and Energy (US-REGEN) model, which has been modified to include income classes, this analysis illustrates the effects of income on vehicle electrification and associated implications for costs and energy burdens. Electric vehicle adoption increases for higher-income households due to characteristics such as their higher driving intensities and lower effective discount rates. However, these income effects are small relative to other considerations, as electric vehicle shares are high across all household incomes (60–80% of new sales are electric by 2050).