The Economic Impacts of Clean Energy

ABSTRACT: In this paper we assess the economic impacts of moving to a renewable-dominated grid in the United States. We use projections of capital costs to develop price bounds on future wholesale power prices at the local geographic level. We then use a class of spatial general equilibrium models to estimate the effect on wages and output of prices falling below these bounds in the medium term. Power prices fall anywhere between 20 percent and 80 percent, depending on local solar resources, leading to an aggregate real wage gain of 2–3 percent. Over the longer term, we show how moving to clean energy represents a qualitative change in the aggregate growth process, alleviating the "resource drag" that has slowed recent productivity growth in the United States.