Conference Agenda

While zero-marginal-cost renewable energy has reduced wholesale electricity prices, its effect on retail electricity prices remains uncertain. A common concern is that costly investments in renewable integration, such as transmission expansion, generate system-level costs that may offset or even exceed savings from lower generation costs. This paper tests this conjecture empirically using annual sales data from the EIA 861 and electricity generation data from the EIA 923 for the majority of the United States between 2004 and 2023. To address the inherent simultaneity between prices and energy generation, I leverage spatial variation in wind potential and time-varying levelized costs of wind energy to construct a Bartik-style instrument to predict renewable penetration. I find that a one percentage point increase in renewable penetration at the balancing authority level reduces real utility level yearly average retail prices by 0.3%, implying a 3.5% decrease in real retail prices at the mean change in renewable penetration. Crucially, OLS estimates that do not account for endogeneity are positively biased and insignificant. Even under alternate instruments and sample restrictions, the estimated effect is tightly bounded between - 0.7% and 0.7, suggesting that increased renewable penetration has had, at most, a modest impact on energy affordability.