Evaluating the causes of cost reduction in photovoltaic modules

By Goksin Kavlak, James McNerney, Jessika E. Trancik. Energy Policy, 2018

371 citations recorded by the source corpus.

Photovoltaic (PV) module costs have declined rapidly over forty years but the reasons remain elusive. Here we advance a conceptual framework and quantitative method for quantifying the causes of cost changes in a technology, and apply it to PV modules. Our method begins with a cost model that breaks down cost into variables that changed over time. Cost change equations are then derived to quantify each variable's contribution. We distinguish between changes observed in variables of the cost model – which we term low-level mechanisms of cost reduction – and research and development, learning-by-doing, and scale economies, which we refer to as high-level mechanisms. We find that increased module efficiency was the leading low-level cause of cost reduction in 1980–2012, contributing almost 25% of the decline. Government-funded and private R&D was the most important high-level mechanism over this period. After 2001, however, scale economies became a more significant cause of cost reduction, approaching R&D in importance. Policies that stimulate market growth have played a key role in enabling PV's cost reduction, through privately-funded R&D and scale economies, and to a lesser extent learning-by-doing. The method presented here can be adapted to retrospectively or prospectively study many technologies, and performance metrics besides cost.

Subfields: Economics and Econometrics, Environmental Engineering, Finance

View Paper: https://www.semanticscholar.org/paper/5981f78d56e8ccd049f8461d35df77e693c8da40

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In Economics and Econometrics

1. Christian Breyer
2. Benjamin Sovacool
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4. Henrik Lund
5. Indra Overland

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2. Henrik Lund
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