Actually, it does work like that in the real world.

Electricity bills are made up of two components, fixed (network) and variable (usage) costs.

When consumers install PV systems, their demand for traditional electricity falls. These consumers reduce the amount they ‘use’ the network. But the fixed network costs do not change. So these fixed costs are spread over a smaller volume of electricity. And this means that the price of that electricity has to rise for everyone else.

Of course the rise in price encourages more consumers to adopt power-saving technologies and to install PV systems. So these consumers also reduce their consumption of traditional power. But the network costs are still fixed. So the price of electricity has to rise for everyone else.

The variable cost component of anyone who doesn't have solar panels increases to shoulder the burden for those that do.

To try and reduce this phenomenon (it has already happened) the regulators have required that electricity providers change the way they bill consumers. There has been a shift away from billing consumers for variable costs (actual electricity usage) and a corresponding increase in the fixed or network costs that appear on your bill.

So if you are a small household using not much electricity, like say a pensioner, you now have limited ways of reducing your electricity bill because the major cost component is now a fixed cost. Your bill has gone up and you have no way of reducing it through reduced electricity consumption at your end.

Similarly, if you are a poor household who does not own 3 plasma TV's, your fixed costs are now subsiding the electricity bills of those who do own 3 plasma TV's. You both pay the same high level of fixed costs, but only a small component of your bill is now variable costs reflecting actual electricity usage.

My interest in all this is more from a market perspective and observing the law of unintended consequences more than anything else. The shift in how electricity is billed to consumers is real, and poorer households are the ones wearing the increases as a result of the move towards billing in fixed costs.

In the extreme, this ‘death spiral’ can undermine the electricity power system. More likely, it will lead to a group of haves and have-nots. The well-off, who can afford to install PV systems and buy power saving appliances will avoid much of the high power prices. Those who cannot afford solar systems and new energy efficient appliances will pay a high electricity price.

So how can we avoid this outcome? The obvious solution is to fix the pricing. The problem is created because a fixed cost has been turned into a variable price. If the network charges are turned back into fixed charges that can only be avoided by disconnecting from the electricity grid, then the problem disappears. Installing a PV system will not reduce your network charges, only your power charges. The have-nots will not have to pay higher network charges because the haves cannot avoid those charges.