The Bureau of Economic Analysis (BEA) has made revisions to the U.S. economy over the past few years in its latest update of the national economic accounts.
Prompted by economists, BEA has also revised up significantly the investment in electric power capacity and revised down, also significantly, the price index for power structures. The BEA economists worked in collaboration with the Energy Information Administration (EIA) and the U.S. Census Bureau to incorporate the impact of the clean energy boom into the U.S. national economic accounts.
The revisions for the past decade showed that renewables are becoming an increasingly larger part of the U.S. economy and that statistics bureaus and analysts need to take a closer look at how the contribution of clean energy is being measured.
Research by Bloomberg’s Nathaniel Bullard showed that the U.S. renewables sector has been contributing to the U.S. economy over the past decade, but that contribution has not been adequately measured until now.
The updates to the U.S. economy saw for the first time price indexes for wind and solar power investments incorporated directly into estimates of power investment. That raised estimates for total real power investment by 45%, economist Joseph Politano noted.
Prior to the publishing of the updates, another economist, Neil Mehrotra, contacted BEA to ask about the methodology of the price index for electric power structures and why it showed increases over the 2010s while the EIA’s construction cost data implied otherwise.
Mehrotra is Assistant Vice President and Policy Advisor at the Minneapolis Fed and former Deputy Assistant Secretary for Macroeconomics at the U.S. Treasury.
After Mehrotra’s query, BEA worked with the EIA and the Census Bureau to separately break out estimates of solar and wind investment from other power investments.
“The upshot of this change is that the price index for power structures has been revised significantly lower and real investment significantly higher for the previous decade,” Mehrotra wrote in a thread on X.
More upward revisions could be coming in the years ahead amid a rise in U.S. clean energy investments and the incentives in the Inflation Reduction Act (IRA) passed last year.
The IRA is spurring a land rush for development sites and giving impetus to clean energy equipment manufacturing in the United States, which could see annual renewable capacity additions triple to 110 gigawatts (GW) in ten years, according to Wood Mackenzie.
Despite supply-chain and tariff challenges unrelated to the IRA and despite the fact that developers are still waiting for clarity on some of the IRA provisions, the benefits of the landmark climate law have started to manifest themselves, clean energy associations say.
“The US markets for wind and solar PV contracted last year due to restrictive trade measures and supply chain constraints, but annual additions for both technologies are set to increase by around 40% in 2023, with solar PV setting a new record,” the International Energy Agency (IEA) said in its Renewable Energy Market Update report in June.
“The current forecast is underpinned by existing tax incentives, while the Inflation Reduction Act will show its full effect after 2024, providing unprecedented certainty for renewable energy projects until 2032,” the agency added.
The solar industry in the United States expects to install a record-high 32 GW of new capacity this year, with additions surging by 52% from 2022, the Solar Energy Industries Association (SEIA) and Wood Mackenzie said last month. Total operating solar capacity in the U.S. is expected to rise from 153 GW today to 375 GW by 2028, Wood Mackenzie predicts.
Between August 2022 and July 2023, more than $270 billion in capital investment was announced for utility-scale clean energy projects and manufacturing facilities in the United States, the American Clean Power Association (ACP) said in a recent report. This exceeds the combined clean energy investments made over the previous eight years.
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In the year since the IRA was passed, $271 billion in investment and nearly 185 GW worth of projects were announced, as well as 83 new or expanded utility-scale clean energy manufacturing facilities, the association noted.
Moreover, U.S. developers added 5,597 megawatt hours (MWh) of energy storage installations in the second quarter of 2023, setting a new quarterly record and putting the American energy storage market on track for a record year in 2023, a new by Wood Mackenzie and the ACP showed in September.
By Tsvetana Paraskova for Oilprice.com
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