The U.S. Economy Is Bigger Than We Thought — Thanks in Part to Renewables
The government was undercounting renewable investment by 45%.
The American economy is even bigger than we thought — and the booming renewables industry is part of the reason why.
On Thursday, the government’s economic-statistics keeper published a big update of the country’s most important economic indicators. For the first time since 2018, the Bureau of Economic Analysis used the newest research tools to comprehensively revise the country’s gross domestic product, inflation, and other national data.
This update covered the period from 2013 to the first quarter of this year.
The big news is that America’s $27 trillion economy is doing better than economists thought. From 2017 to 2022, the economy grew at a 2.2% annual rate — which was 0.1% better than we previously thought. And as the Harvard economist Jason Furman noted, the update doesn’t change one of the most important facts about the past few years: that in GDP terms, the American economy has fully recovered from the COVID-19 recession and is now growing as if the pandemic never happened. In fact, the economy is growing so vigorously that it seems to be returning to its pre-2009 baseline trajectory of growth.
Which — cool. But the update is interesting because it reveals the larger role that renewable energy and other climate-friendly technologies are playing in America. Over the past few years, for instance, economists have realized that the Bureau of Economic Analysis was using a flawed and proprietary data source to estimate investment in the electricity sector. That data showed that the cost of building new electricity capacity in the U.S. was rising — which was weird because, as Neil Mehrota, the assistant vice president of the Minneapolis Fed, observed, the actual cost of wind and solar have plunged over the past decade.
Now, the statistics bureau has updated its data to use actual price information from the wind and solar industry. And it found that over the past decade, America’s real investment in electricity was 45% higher than we previously thought:
To be clear, this doesn’t mean that there are more wind turbines and solar panels out there than we thought. (That kind of data is tracked by a different agency.) It means that the government was mismeasuring the economic impact of those solar panels and wind turbines: Its official economic statistics were undercounting the amount of real growth happening for each dollar of investment, and therefore missing at least part of the ongoing green boom.
This wasn’t the only climate-savvy update to the government’s methods. The newest GDP data also reflects more accurate costs for the National Flood Insurance program. Sadly, the effect of that program on the economy is far more mixed.