Economic Consequences of Wildfire Adaptation : Public Safety Power Shutoffs in California

Wildfires pose a significant risk to the state of California, causing capital stock destruction and broader economic impacts. Many of the most destructive fires have been ignited by electricity infrastructure. To reduce ignition risk, electric utilities have begun a program of Public Safety Power Shutoffs in which they cut off customers’ power during high wildfire risk weather. These too impose costs on the customers and broader economy, but the impacts are not yet quantified. In this paper, we develop an analytical general equilibrium model to assess the trade-offs between the cost of wildfires and that of an adaptation measure used to avoid them. We process datasets on wildfire occurrence, power shutoffs, and simulations of wildfires that may have occurred if there had not been shutoffs in 2019 as input to the model. We find that power shutoffs are effective at avoiding wildfire damage but that the net impact to economic output and household welfare depends on the economic structure, targeting off shutoffs, and magnitude of wildfire risk