To keep power affordable, regulators must rethink who pays — and when – Utility Dive

Report on Grid Modernization and its Alignment with Sustainable Development Goals

Introduction: The Electrification Era and Sustainable Development

The United States power system is undergoing a period of significant load growth, driven by data centers, new manufacturing, and the electrification of transport and buildings. This transition presents a critical opportunity to advance several United Nations Sustainable Development Goals (SDGs). However, it also poses risks to energy equity and affordability. This report analyzes how strategic grid investment and equitable cost allocation are essential to ensuring this transition supports sustainable and inclusive outcomes, with a particular focus on the following goals:

• SDG 7: Affordable and Clean Energy
• SDG 9: Industry, Innovation, and Infrastructure
• SDG 10: Reduced Inequalities
• SDG 13: Climate Action

The central challenge is to modernize regulatory and planning practices to ensure that the benefits of electrification are broadly shared and do not exacerbate existing inequities, thereby aligning the energy transition with the core principles of the SDGs.

Opportunities for Advancing SDGs through Beneficial Electrification

When managed proactively, the growth in electricity demand can create a beneficial dynamic that supports key sustainable development objectives. By increasing electricity sales at a rate faster than system costs, electrification can spread fixed infrastructure costs over more kilowatt-hours, creating economies of scale. This process directly contributes to multiple SDGs.

Key Contributions to Sustainable Development Goals:

• SDG 7 (Affordable and Clean Energy): Widespread adoption of electric vehicles (EVs) and heat pumps, when paired with managed charging and demand flexibility, can lower average electricity rates for all consumers. This enhances energy affordability while facilitating the integration of low-cost renewable generation.
• SDG 9 (Industry, Innovation, and Infrastructure): The need to accommodate new load from data centers and manufacturing spurs investment in resilient, modern, and sustainable infrastructure, which is a core target of this goal.
• SDG 11 (Sustainable Cities and Communities): Electrification of transport and heating improves urban air quality, creating healthier and more sustainable communities.
• SDG 13 (Climate Action): Shifting energy consumption to an increasingly clean electricity grid is a primary strategy for reducing national greenhouse gas emissions.

The Critical Challenge: Cost Allocation and its Impact on SDG 10 (Reduced Inequalities)

The realization of these benefits is contingent upon the equitable allocation of costs for grid upgrades. Current regulatory models often defer these decisions, posing a significant threat to SDG 10 (Reduced Inequalities).

The primary risk is that if infrastructure costs are socialized uniformly across all customers, households that cannot afford to adopt new electric technologies may be forced to cross-subsidize the grid upgrades required by early adopters. This dynamic would exacerbate energy affordability issues for low- and middle-income families, widening the inequality gap.

Achieving the objectives of SDG 7 requires a cost allocation framework that explicitly aligns costs with the beneficiaries of new investments. Without such a framework, the energy transition could become a vehicle for greater economic disparity rather than shared prosperity.

Recommendations for Modernizing Regulatory Frameworks to Achieve SDG Alignment

To ensure the energy transition is both sustainable and just, regulatory practices must be modernized to prioritize equity and transparency. Cost allocation must be addressed proactively during the planning stages, not retroactively in rate cases.

An ordered approach to regulatory reform includes:

1. Front-load Cost Allocation Discussions: Integrate cost allocation principles into the earliest phases of grid and resource planning. This allows stakeholders to assess investments against shared criteria for need, benefit, and fairness, ensuring alignment with SDG 10.
2. Adopt “Cost-Causer Pays” Principles: Implement frameworks that ensure parties driving the need for new infrastructure bear a proportionate share of the costs. This prevents the socialization of costs onto non-participating ratepayers.
3. Establish Ratepayer Protection Mechanisms: Implement strong cost caps, annual bill impact limits, and other safeguards to protect all customers, particularly the most vulnerable, from bearing an undue financial burden.

State-Level Models for Progress:

• Minnesota: The Public Utilities Commission has adopted a collaborative, modular approach to grid planning that emphasizes “cost-causer pays” principles while concurrently addressing affordability in separate dockets to protect vulnerable customers.
• Massachusetts: The Department of Public Utilities is advancing a long-term system planning program that includes a proactive hosting-capacity fee to more equitably distribute upgrade costs, moving away from less equitable models.

Conclusion: Ensuring an Equitable and Sustainable Energy Future

The current era of load growth is a pivotal moment for aligning the U.S. energy sector with the Sustainable Development Goals. Proactive planning and modernized regulation are essential for achieving a future consistent with these global objectives. Equitable cost allocation is the key mechanism to unlock the potential of electrification as an engine for affordability, sustainability, and shared prosperity. By confronting the question of “who pays, and when?” at the outset, regulators and utilities can ensure that the benefits of a clean energy transition, as envisioned by SDG 7 and SDG 13, are accessible to all, fulfilling the core principle of SDG 10 to leave no one behind.

Analysis of SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

   The article discusses issues related to energy affordability, infrastructure modernization, and social equity, which directly connect to several Sustainable Development Goals (SDGs). The following SDGs are addressed:

   • SDG 7: Affordable and Clean Energy: The central theme of the article is ensuring electricity remains affordable during a large-scale transition to electrification. It explores how proactive planning can lead to “lower average electricity costs” and warns that poor planning could result in “higher bills,” directly engaging with the goal of affordable energy for all. The mention of “low-cost renewable generation” also connects to the clean energy aspect of this goal.
   • SDG 9: Industry, Innovation, and Infrastructure: The article focuses on the need for significant investment in and modernization of the U.S. power system to handle an “era of load growth.” It discusses “grid upgrades,” “generation and transmission costs,” and the development of “proactive grid planning” frameworks, all of which fall under the goal of building resilient and sustainable infrastructure.
   • SDG 10: Reduced Inequalities: A primary concern raised in the article is the fairness of cost distribution. It warns of “widening inequities” and the risk of new load being “cross-subsidized by families not benefiting from electrification.” The call to ensure that the “benefits of electrification reach everyone, not just those who can afford to move first” is a direct appeal to reduce inequality.
   • SDG 13: Climate Action: Although not the main focus, the context of the article—the “rapid adoption of electric vehicles and heat pumps”—is a fundamental strategy for climate change mitigation. The discussion of integrating “low-cost renewable generation” and modernizing the grid to support this transition aligns with integrating climate action into national energy policies and planning.

2. What specific targets under those SDGs can be identified based on the article’s content?

   Based on the article’s discussion, several specific SDG targets can be identified:

   • Target 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services. The article’s entire premise revolves around this target, questioning “Who pays, and when?” to keep power affordable amidst rising demand and ensure “affordable energy bills in the future.”
   • Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix. The article supports this target by noting that “long-term rate reductions from low-cost renewable generation were the primary driver for rate reductions,” implying that increasing the share of renewables is key to achieving affordability.
   • Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure… with a focus on affordable and equitable access for all. The article calls for proactive investment and planning for “grid upgrades” to handle new demand, emphasizing the need for “modernizing regulatory practices” to ensure the resulting infrastructure is both affordable and equitable.
   • Target 10.2: By 2030, empower and promote the social, economic and political inclusion of all. The article addresses this by advocating for fair “cost allocation frameworks that align costs with benefits.” This is intended to prevent a scenario where lower-income households or those slower to adopt new technologies are financially disadvantaged, ensuring “all families benefit from residential electrification.”

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

   The article implies several indicators that can be used to measure progress towards the identified targets:

   • Average residential electricity rates (cents per kilowatt-hour): This is a direct indicator for Target 7.1. The article repeatedly refers to the potential for “lower average electricity costs” or, conversely, “higher bills,” making this a central metric for success.
   • Annual bill impact limits: Mentioned in the context of Massachusetts’ plan, this serves as a specific policy indicator for Target 7.1. It measures the protection afforded to consumers against sudden and large rate increases, ensuring affordability.
   • Implementation of equitable cost allocation frameworks: This is a key qualitative indicator for Target 10.2. The article highlights models like Minnesota’s “cost-causer pays” principle and Massachusetts’ “proactive hosting-capacity fee” as examples of policies designed to ensure fairness and prevent cross-subsidization. Progress could be measured by the number of states or utilities that adopt such frameworks.
   • Investment in grid modernization and upgrades: This is an indicator for Target 9.1. The article stresses the need for utilities to “invest proactively” to manage load growth. Tracking financial investment in distribution, transmission, and generation infrastructure would measure progress in building a resilient grid.

4. Create a table with three columns titled ‘SDGs, Targets and Indicators” to present the findings from analyzing the article. In this table, list the Sustainable Development Goals (SDGs), their corresponding targets, and the specific indicators identified in the article.

   SDGs	Targets	Indicators
   SDG 7: Affordable and Clean Energy	7.1: Ensure universal access to affordable, reliable and modern energy services.	Average residential electricity rates (cents per kWh). Adoption of annual bill impact limits for consumers.
   SDG 9: Industry, Innovation, and Infrastructure	9.1: Develop quality, reliable, sustainable and resilient infrastructure… with a focus on affordable and equitable access for all.	Level of investment in proactive grid modernization and upgrades.
   SDG 10: Reduced Inequalities	10.2: Empower and promote the social, economic and political inclusion of all.	Implementation of equitable cost allocation frameworks (e.g., “cost-causer pays” models).
   SDG 13: Climate Action	13.2: Integrate climate change measures into national policies, strategies and planning.	Adoption of regulatory and planning practices that support electrification and integration of renewables.

Source: utilitydive.com