The Economic Impacts of Clean Power

In this paper we assess the economic impacts of moving to a renewable-dominated grid in the US. 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% and 80%, depending on local solar resources, leading to an aggregate real wage gain of 2-3%. Over the longer term, we show how moving to clean power represents a qualitative change in the aggregate growth process, alleviating the “resource drag” that has slowed recent productivity growth in the US.