As more households use backup generators or batteries during power outages, utilities will likely invest less to ensure the electric grid is reliable. That potentially means lower utility costs for all, including those who can’t afford backup power, but those who depend on high reliability might be negatively impacted.

Researchers from Oberlin College in Ohio and the University of Wisconsin–Madison analyzed the potential impacts of increased use of generators and batteries in their paper, “Backup Power: Public Implications of Private Substitutes for Electric Grid Reliability,” published in the November 2024 issue of the Journal of the Association of Environmental and Resource Economists.

Currently 14% of U.S. households own a backup generator, and more are buying home storage batteries as prices become more affordable, according to the study. Higher-income households are more likely to own a generator or a battery, while households in rural areas that use backup power are likely to prefer generators over batteries.

The increasing use of backup power will likely affect decisions made by public utility commissions (PUCs) on whether to grant approval to utilities to invest more to increase reliability of the electric grid, as PUCs must balance high-quality service with reasonable prices.

“Ensuring high levels of grid reliability is expensive,” according to the report. “For approved investments, utilities are allowed to pass the cost on to consumers in the form of higher rates.”

When more households use backup power, PUCs will likely determine that the marginal benefit from spending on reliability would be lower, thereby also lowering “the efficient level of reliability” they will accept for the grid.

This, in turn, will affect households differently, according to the study.

“Households who do not value reliability highly benefit from cost savings on their electric bill,” the authors wrote. “The reduced reliability hurts other households who were served well by the prior level of grid reliability. A small group of households who value reliability very highly purchase substitutes and are better off despite the lower level of grid reliability.”

As more governmental entities enact mandates for households to use electricity for heating and transportation to reduce carbon emissions, the need for grid reliability potentially increases, according to the study.

“As long as the households buying substitutes continue to use and pay for the grid, those that cannot afford these substitutes are unlikely to be left behind,” the authors wrote. “Yet not all households will benefit, and substitutes’ distributional effects are likely to increase.”