Cost Evolution Mechanisms of Renewable Energy Technologies: Onshore Wind Power and Photovoltaics in China

The unit costs of power generation of onshore wind and photovoltaics in China have dropped rapidly and significantly since 2010. Recent studies have indicated that the learning effect on cost reduction could have been overestimated due to the exclusion of the equipment-level installed capacity and the price of capital. To address this estimation bias, we constructed a research framework comprising a one-factor analysis model (OFAM), a two-factor analysis model (OFAM), and a multi-factor analysis model (MFAM) based on the Cobb–Douglas function and the cost minimization problem. This framework examines the determinants of unit costs in renewable energy generation in consideration of learning effects, scale effects, and price effects. This paper uses data from institutions such as IRENA and the World Bank to empirically analyze the contributions of these factors to reductions in the cost of onshore wind and photovoltaic power generation in China from 2010 to 2022. The results indicate that the learning-by-doing (LBD) effect has been overestimated, with scale effects accounting for a significant portion of the cost reduction. Moreover, the price of capital exerts a more pronounced influence on the levelized cost of electricity (LCOE) for photovoltaics. After factoring in equipment scale and capital costs, LBD continues to significantly reduce the LCOE of photovoltaics, with the LBD learning rate declining from 23.85% to 6.30%. Meanwhile, the impact of LBD on the LCOE of onshore wind technology ceases to be significant. Both technologies exhibit economies of scale, with scale effects accounting for 41.60% and 34.12% of the LCOE reductions for onshore wind and photovoltaics, respectively. Capital costs accounted for 32.50% of the LCOE reduction for photovoltaics. Therefore, future large-scale deployments of other costly renewable energy technologies may also benefit from the equipment-level scale and favorable bank interest rates in addition to learning-by-doing.