The multiplier effect of endogenous technical change accelerates the transition to photovoltaic cells
Date
2022
DOI
Authors
Tendler, Anita C.
Kaufmann, Robert K.
Version
OA Version
Citation
Abstract
Abating emissions of carbon dioxide depends in part on how quickly the levelized cost of
electricity (LCOE) from photovoltaic cells (PV) achieves grid parity without policy interventions.
Reaching this threshold is accelerated by learning by doing, which reduces the LCOE generated
by PV and increases installed capacity. Here, we expand previous estimates of unidirectional
(Capacity → Price) learning curves to include the effect of prices on capacity by estimating a
cointegrating vector autoregression (CVAR) model, which can capture a simultaneous relation
between price and capacity. Results indicate that the simultaneous relation between price and
capacity increases the estimate for the learning rate and creates a multiplier that amplifies static
effects by nearly a factor of ten. This same multiplier effect enhances the ability of policies, such
as a carbon tax, to lower the costs of PV, increase capacity, and lower carbon emissions. Together,
these results suggest that grid parity is closer than indicated by unidirectional learning curves.
Description
Data sources for this dataset: Annual observations for global cumulatively installed solar PV capacity and the annual unsubsidized global price for PV modules was obtained from the Bloomberg New Energy Finance Summit (M. Liebreich, 2016). Annual observations for global GDP were compiled by the World Bank and OECD National Accounts (BEA, 2021). Annual observations of the export price for Australian coal were obtained from the World Bank Commodity Price Data (The World Bank Group, 2021). The original code will be available on OpenBU.
REFERENCES:
BEA, 2021. GDP Price Deflator | U.S. Bureau of Economic Analysis (BEA) [WWW Document]. URL https://www.bea.gov/data/prices-inflation/gdp-price-deflator (accessed 5.30.21).
M. Liebreich, 2016. Bloomberg New Energy Finance Summit 2016.
The World Bank Group, 2021. Commodity Markets Outlook: Causes and consequences of metal price shocks. World Bank, Washington, DC.