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Source of Cost Reduction in Solar Photovoltaics

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  • Pillai, Unni
  • Cruz, Kyle
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    Abstract

    The price of solar panels has fallen rapidly over the last few decades. Using an extensive dataset of prices, costs, output, sales and technical characteristics of firms in the solar industry during 2005-2011, this paper investigates the factors that have contributed to the decline in costs and prices. While previous studies have attributed learning-by-doing and static scale economics as the main drivers of cost reduction, we find that these do not have any significant effect on cost once four other factors are taken into account, namely, (i) reduction in the cost of a principal raw material, (ii) increasing presence of solar panel manufacturers from China, (iii) technological innovations, and (iv) increase in investment at the industry level. Together, these suggest that innovations in the upstream industries that supply the solar panel industry with raw materials and capital equipment have been important drivers of technological progress in the solar panel industry.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46657.

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    Date of creation: May 2013
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    Handle: RePEc:pra:mprapa:46657

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    Keywords: Solar; Photovoltaics; Technological Change; Learning;

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    1. Peter Thompson, 2001. "How Much Did the Liberty Shipbuilders Learn? New Evidence for an Old Case Study," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(1), pages 103-137, February.
    2. Ronald S. Jarmin, 1994. "Learning by Doing and Competition in the Early Rayon Industry," RAND Journal of Economics, The RAND Corporation, vol. 25(3), pages 441-454, Autumn.
    3. van der Zwaan, Bob & Rabl, Ari, 2004. "The learning potential of photovoltaics: implications for energy policy," Energy Policy, Elsevier, Elsevier, vol. 32(13), pages 1545-1554, September.
    4. Frondel, Manuel & Ritter, Nolan & Schmidt, Christoph M. & Vance, Colin, 2010. "Economic impacts from the promotion of renewable energy technologies: The German experience," Energy Policy, Elsevier, Elsevier, vol. 38(8), pages 4048-4056, August.
    5. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, Elsevier, vol. 34(17), pages 3218-3232, November.
    6. Gavin Sinclair & Steven Klepper & Wesley Cohen, 2000. "What's Experience Got to Do With It? Sources of Cost Reduction in a Large Specialty Chemicals Producer," Management Science, INFORMS, INFORMS, vol. 46(1), pages 28-45, January.
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