Analysis of Electricity Price Variance and its Alignment with Sustainable Development Goals

Executive Summary: Energy Policy and SDG 7

An analysis of electricity generation sources reveals a significant correlation between the energy mix and electricity price stability, directly impacting the achievement of Sustainable Development Goal 7 (Affordable and Clean Energy). The findings indicate that a strategic shift towards renewable energy sources, supported by robust policy frameworks, is essential for ensuring affordable, reliable, and sustainable energy for all, while also advancing SDG 13 (Climate Action) and SDG 8 (Decent Work and Economic Growth).

Key Findings on Price Volatility

The investigation contrasts electricity price variance in regions with differing dependencies on natural gas generation. The results present a clear trend that directly informs strategies for achieving SDG 7.

• Low Natural Gas Dependency: States with a lower fraction of natural gas in their energy mix exhibit significantly lower electricity price variance. In a clean energy scenario, these states show a median price variance of 0.01. This stability is fundamental to the “affordable” component of SDG 7.
• High Natural Gas Dependency: Conversely, states with a higher reliance on natural gas generation experience substantially higher price variance, with a median of 0.13. This volatility exposes consumers and industries to unpredictable costs, undermining economic stability and progress towards SDG 7 and SDG 11 (Sustainable Cities and Communities).

Scenario Analysis: Pathways to Sustainable Energy

Two primary future energy scenarios were modeled to assess the impact of policy on energy affordability and sustainability, aligning with the targets of SDG 7 and SDG 13.

1. Clean Energy Scenario: This pathway, which incorporates clean energy production tax credits, demonstrates lower overall price variance. By promoting investment in renewable resources like wind and solar, this approach shields customers from the inherent price volatility of global fossil fuel markets. This model represents a direct and effective strategy for advancing SDG 7 and SDG 13.
2. Fossil Fuel-Dominant Scenario: A future without clean energy incentives or emissions regulations results in higher and more unpredictable electricity prices. This scenario not only increases costs for consumers but also moves away from the clean energy and climate action mandates of the Sustainable Development Goals.

Policy Implications for Achieving the SDGs

The Role of the Inflation Reduction Act (IRA)

Policy mechanisms such as the IRA’s clean energy production tax credits are critical instruments for de-risking investment in renewables and accelerating the transition to a sustainable energy grid. The successful implementation of these credits is projected to foster a grid with a higher fraction of low-cost, zero-volatility renewable resources, leading to lower consumer prices. This policy framework is a cornerstone for national efforts to meet SDG 7 and SDG 13 commitments.

Conclusion: Aligning Energy Policy with Global Goals

The analysis concludes that a policy approach emphasizing fossil fuel expansion is counterproductive to the goal of affordable and clean energy. Such a strategy increases both retail electricity rates and cost uncertainty for consumers. In contrast, a grid fortified with renewable generation capacity offers a clear path toward meeting key Sustainable Development Goals.

• SDG 7 (Affordable and Clean Energy): Achieved through lower, more stable electricity prices and a transition away from carbon-intensive sources.
• SDG 13 (Climate Action): Advanced by reducing reliance on fossil fuels and curbing carbon pollution through federal regulations and clean energy incentives.
• SDG 12 (Responsible Consumption and Production): Supported by shifting production patterns towards sustainable and renewable energy sources.

Ultimately, federal clean energy tax credits and emissions regulations are not in conflict with energy affordability. They are essential tools for protecting consumers from fossil fuel market volatility and building a resilient, sustainable, and economically sound energy future in line with global development objectives.

Analysis of Sustainable Development Goals (SDGs) in the Article

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

• SDG 7: Affordable and Clean Energy
• SDG 13: Climate Action
• SDG 12: Responsible Consumption and Production

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

1. SDG 7: Affordable and Clean Energy

   • Target 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services. The article directly addresses this by analyzing how different energy policies impact “retail electricity rates” and the “uncertainty of electricity costs.” It argues that a grid with more renewables leads to “lower prices” and shields “customers from the volatility of fossil fuel prices,” which is central to energy affordability.
   • Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix. The article explicitly models and compares scenarios based on the energy mix, contrasting a “clean energy scenario” with “expanded renewable generation” (wind and solar) against a “fossil fuel energy future” dominated by natural gas.
   • Target 7.a: By 2030, enhance international cooperation to facilitate access to clean energy research and technology… and promote investment in energy infrastructure and clean energy technology. The article discusses domestic policy mechanisms like the IRA’s “clean energy production tax credits” which are designed to “promote investment in… clean energy technology” and encourage “renewable build-out.”

2. SDG 13: Climate Action

   • Target 13.2: Integrate climate change measures into national policies, strategies and planning. The article’s analysis revolves around national policies such as the “IRA clean energy tax credits” and “EPA’s carbon pollution standards.” It evaluates how these policies, which are climate change measures, affect the energy sector and consumer costs.

3. SDG 12: Responsible Consumption and Production

   • Target 12.c: Rationalize inefficient fossil-fuel subsidies that encourage wasteful consumption… The article advocates for policies that support clean energy (“clean energy tax credits”) over a “fossil fuel build-out.” This represents a shift in financial incentives away from fossil fuels, aligning with the goal of rationalizing support for them in favor of more sustainable production patterns.

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

1. For Target 7.1 (Affordable and Reliable Energy)

   • Indicator: Electricity price variance. The article explicitly uses this metric, stating that states with less natural gas have a “median price variance of 0.01” compared to “0.13 for states with high natural gas generation.”
   • Indicator: Retail electricity rates. The article suggests that a “fossil fuel build-out increases retail electricity rates.”

2. For Target 7.2 (Increase Share of Renewable Energy)

   • Indicator: Fraction of renewable/non-renewable generation. The analysis is based on comparing states with “less natural gas generation” versus those with “higher fractions of natural gas generation,” which directly measures the energy mix.
   • Indicator: Amount of renewable build-out. The article refers to the potential for “less renewable build-out” under more stringent rules, implying this is a key measure of progress.

3. For Target 13.2 (Integrate Climate Measures into Policy)

   • Indicator: Implementation of federal regulations and tax credits. The article names specific policies like “EPA’s carbon pollution standards” and the “IRA clean energy tax credits” as tangible examples of integrated climate measures.

4. Table of SDGs, Targets, and Indicators

Source: resources.org