The Multiplier Effect of Endogenous Technical Change Accelerates the Transition to Photovoltaic Cells

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 [[EQUATION]] 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