Use and limitations of learning curves for energy technology policy: A component-learning hypothesis

In this paper, we investigate the use of learning curves for the description of observed cost reductions for a variety of energy technologies. Starting point of our analysis is the representation of energy processes and technologies as the sum of different components. While we recognize that in many cases "learning-by-doing" may improve the overall costs or efficiency of a technology, we argue that so far insufficient attention has been devoted to study the effects of single component improvements that together may explain an aggregated form of learning. Indeed, for an entire technology the phenomenon of learning-by-doing may well result from learning of one or a few individual components only. We analyze under what conditions it is possible to combine learning curves for single components to derive one comprehensive learning curve for the total product. The possibility that for certain technologies some components (e.g., the primary natural resources that serve as essential input) do not exhibit cost improvements might account for the apparent time dependence of learning rates reported in several studies (the learning rate might also change considerably over time depending on the data set considered, a crucial issue to be aware of when one uses the learning curve methodology). Such an explanation may have important consequences for the extent to which learning curves can be extrapolated into the future. This argumentation suggests that cost reductions may not continue indefinitely and that well-behaved learning curves do not necessarily exist for every product or technology. In addition, even for diffusing and maturing technologies that display clear learning effects, market and resource constraints can eventually significantly reduce the scope for further improvements in their fabrication or use. It appears likely that some technologies, such as wind turbines and photovoltaic cells, are significantly more amenable than others to industry-wide learning. For such technologies we assess the reliability of using learning curves at large to forecast energy technology cost reductions.