We’re now four months into a worldwide trade war, and the economic data confirms it’s Americans who are paying the price. A growing body of surveys and forecasts indicate that inflation will be a persistent, wallet-draining reality for U.S. households. Voters now expect inflation to hit 7.3% next year, and as of March, the Organisation for Economic Co-operation and Development projects that tariffs and trade tensions could help drive U.S. inflation up by 0.3 percentage points in 2025.
But there are solutions for whipping inflation. One is unleashing an abundance of clean energy.
Clean energy can have a powerful deflationary ripple effect, lowering prices across the economy. Solar has for years been the cheapest form of new energy around the world, and recent research from Goldman Sachs shows that prices of clean technologies like large-scale solar power and battery storage are falling. These lower costs are helping to keep electricity prices more stable, even as demand rises due to the growing number of data centers, the return of U.S. manufacturing, and the electrification of transport and heating.
As a thought experiment, my team gathered data on the U.S. energy market to estimate the potential deflationary effect that accelerating clean energy development could have on the American economy. At the end of our analysis, we found that accelerating renewable energy development nationwide could reduce inflation by 0.58 percentage points — meaning that if inflation were running at 4%, widespread clean energy would bring it down to 3.42%. This would save the average American family approximately $441 each year, or nearly three months’ worth of electricity bills.
While our model doesn’t completely capture all of America’s regional complexities regarding energy policy or resource availability, it shows what’s possible. Call it the “Clean Energy Dividend” — a measurable financial return Americans receive when renewable deployment expands.
These numbers are based on something that’s already happening in Texas, where building new clean energy projects is relatively easy. Since 2019, Texas has expanded its solar capacity by 729% and wind power by 49%, faster than any other state in the nation. These developments have added approximately 39,000 gigawatt-hours of solar, 41,000 gigawatt-hours of wind to the Texas grid. In that same time, Texas has also added 9,300 megawatts of battery capacity — a 8,941% increase.
To match Texas’ success, the rest of America would need to significantly ramp up its clean energy production. According to our analysis, the other 49 states combined would need to produce nearly 73% more renewable electricity than currently planned for 2025. That means that instead of adding 66,300 gigawatt-hours of clean power to the grid this year as projected, they’d need to add 114,700 gigawatt-hours. It’s an ambitious target, but one that would help keep costs down for consumers and businesses.
The deflationary impact would hit in two ways: from direct reductions in electricity bills and from lower costs for goods and services.
First, on direct reductions: The Electric Reliability Council of Texas market, otherwise known as ERCOT, is projected to experience a 12% decrease in wholesale electricity prices from 2024 to 2025; the rest of the United States, meanwhile, is expected to see a 3% increase in retail electricity prices during the same period. This creates a 15% gap between Texas and the national average.
The average American household uses about 10,791 kilowatt-hours of electricity annually, which currently costs approximately $1,779 per year. With a projected 3% national increase, this would rise to $1,828 in 2025. If prices fell by 12% as in Texas, however, the cost would decrease to $1,571, resulting in a direct savings of about $258 per household.
Second, beyond direct savings: Our analysis found that electricity costs constitute about 2.4% of all business expenses in the economy. When businesses pay less for electricity, they typically pass about 70% of those savings to consumers through lower prices. This translates to an additional $183 in annual savings per household on everyday goods and services.
Combining these figures, the total benefit per household would be $441 annually. In terms of inflation, the direct effect on electricity bills contributes 0.34%, and the indirect effect through price decreases on other goods contributes 0.24%. Together, they account for a 0.58% reduction in inflation.
Far more than the U.S. would like to admit, its economy remains highly susceptible to oil shocks. Nearly every economic recession in the U.S. since the 1940s has been preceded by a large increase in the price of fossil fuels. Similarly, all but three oil shocks have been followed by a recession. And while the price of oil is low now, this doesn’t guarantee it will be in the future. When energy costs rise sharply — whether from conflicts, production cuts, or supply chain disruptions — the effects cascade through every sector of our economy.
Renewable energy serves as a powerful buffer against these inflationary pressures. That said, expanding renewable energy faces challenges. Some communities oppose projects such as wind and solar farms due to concerns about land use, aesthetics, and environmental impacts, leading to delays or cancellations. At the national level, the Trump administration is doing everything it can to hinder investment and slow the growth of renewable energy infrastructure. These obstacles can impede progress toward a more stable and affordable energy future — even in Texas.
There, Republican lawmakers have introduced a wave of legislation aimed at imposing new fees and regulatory hurdles on renewable energy projects, restricting further development, and mandating costly backup power requirements. These measures could raise wholesale electricity prices by 14%, according to an analysis by Aurora Energy Research. Just as the rest of America should be emulating Texas’ success, Texas is busy unraveling it to resemble the rest of America.
Still, there are several factors that can speed renewable deployment nationwide: streamlining permitting processes, developing competitive electricity markets, ensuring sufficient transmission infrastructure, and passing supportive regulatory frameworks. While geography will always affect which resources are viable, every region has significant untapped potential — from geothermal in the West to solar in the South.
No matter where you stand on decarbonization and the fight against climate change, we should pay attention to any idea that can fight inflation, put money back in Americans pockets, create jobs, make our energy more secure, and help the environment all at once. The Clean Energy Dividend may not solve everything—but it’s about as close to a win-win-win as we’re going to find.
