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Summary: Decreasing costs of distributed generation and storage, alongside increasing network charges, provide consumers with a growing incentive to defect from the main grid. On a large scale, this may lead to price inflation, hindrance of the energy transition, and even a “death spiral” – a domino effect of disconnections. Here, we develop a game-theoretic framework that demonstrates how conflicting interests among consumers — an aspect that previous studies overlooked — may lead to complex dynamics of grid defection. Our results reveal that although individual consumers benefit from staying connected at the distribution level, the defection of small energy communities from the grid may lead to the defection of larger communities. We also demonstrate that centralized design approaches may lead to inefficient outcomes, e.g., redundant grid expansions, because of the inherent inability to predict potential defections. However, we indicate how, by properly incorporating defection considerations into the grid’s design, social welfare can be improved.