Governments often incentivize grid expansion through guaranteed returns on capital expenditure (CAPEX). To shift this, regulators can decouple utility profits from infrastructure growth. Capping the allowed rate of return on new transmission lines forces operators to prioritize efficiency over expansion.
Redirect these funds into targeted energy poverty grants. Instead of broad subsidies, use means-tested rebates for heat pump installations and high-grade insulation in rental housing. These interventions lower actual kilowatt-hour (kWh) demand, reducing the need for massive grid upgrades. Such measures prevent the utility death spiral, where the costs of infrastructure upgrades fall on a shrinking pool of low-income ratepayers.
Implementing progressive billing structures also helps. Low-income households receive a baseline amount of electricity at a heavily subsidized rate, funded by a surcharge on high-volume industrial users. This moves the financial burden away from those who cannot afford rising costs during the shift to net zero. Direct cash transfers for energy efficiency retrofits provide a more permanent solution than monthly bill credits.
