How Fast Do Solar Power Costs Actually Fall in Korea?

Sungjun Hong, Yanghon Chung, Chungwon Woo (Co-author: Chung-Won Woo)
Energy, 79(1), 80-89, 2015 · DOI: 10.1016/j.energy.2014.10.050

TL;DR — Learning-curve estimates for Korean photovoltaic generation. A conventional one-factor curve gives a 3.1% cost decline per doubling of cumulative generation. Adding R&D as a second factor splits this into 2.33% per doubling of cumulative generation and 5.13% per doubling of R&D investment — and the R&D effect only appears after about three years.

Key findings

1. One-factor learning rate: 3.1%. Generation cost falls by 3.1% each time cumulative photovoltaic generation doubles.
2. R&D does more per doubling than deployment. In the two-factor curve, cost falls 2.33% per doubling of cumulative generation but 5.13% per doubling of R&D investment.
3. R&D pays back with a lag. The effect of R&D investment on photovoltaic technology appears after roughly three years, and the depreciation rate of R&D investment is about 20%.

Method in one line

One-factor learning curve (1FLC, cumulative generation only) and two-factor learning curve (2FLC, adding R&D investment), applied to Korean photovoltaic power generation cost.

국문 요약

한국은 2013년 기준 세계 9위 에너지 소비국, 2011년 기준 7위 온실가스 배출국으로서 2008년 '저탄소 녹색성장'을 국가비전으로 제시하고 다양한 에너지 정책을 추진해 왔다. 본 연구는 학습곡선 이론으로 국내 태양광 발전단가의 하락을 추정했다. 누적 발전량만 고려하는 1FLC와 R&D 투자를 함께 고려하는 2FLC를 모두 적용한 결과, 1FLC에서는 누적 발전량이 두 배가 될 때 발전단가가 3.1% 하락했다. 2FLC에서는 누적 발전량 두 배당 2.33%, R&D 투자 두 배당 5.13% 하락했다. 또한 R&D 투자 효과는 약 3년 후에 나타났고, R&D 투자의 감가율은 약 20%였다.

FAQ

Q. What is a learning rate?
The percentage by which unit cost falls each time cumulative output doubles. It is the standard way to summarise how quickly a technology gets cheaper as it is deployed.

Q. Why use a two-factor curve?
A one-factor curve attributes all cost decline to deployment. Adding R&D separates learning-by-doing from learning-by-researching, which matters when policy has to choose between deployment subsidies and R&D funding.

Q. What does the three-year lag imply for policy?
R&D spending does not show up in cost figures immediately, so evaluating an R&D programme on its first- or second-year cost impact will understate it.

Full abstract

South Korea, as the 9th largest energy consuming country in 2013 and the 7th largest greenhouse gas emitting country in 2011, established 'Low Carbon Green Growth' as the national vision in 2008, and is announcing various active energy policies that are set to gain the attention of the world. In this paper, we estimated the decrease of photovoltaic power generation cost in Korea based on the learning curve theory. In order to estimate the learning rate of photovoltaic energy in Korea, both conventional 1FLC (one-factor learning curve), which considers only cumulative power generation, and 2FLC, which also considers R&D investment were applied. The 1FLC analysis showed that the cost of power generation decreased by 3.1% as the cumulative power generation doubled. The 2FCL analysis presented that the cost decreases by 2.33% every time the cumulative photovoltaic power generation is doubled and by 5.13% every time R&D investment is doubled. Moreover, the effect of R&D investment on photovoltaic technology took after around 3 years, and the depreciation rate of R&D investment was around 20%.

How to cite

APA: Sungjun Hong, Yanghon Chung, Chungwon Woo (2015). Scenario analysis for estimating the learning rate of photovoltaic power generation based on learning curve theory in South Korea. Energy, 79(1), 80-89. https://doi.org/10.1016/j.energy.2014.10.050

BibTeX:
@article{woophotovoltaiclearningcurve2,
  title={Scenario analysis for estimating the learning rate of photovoltaic power generation based on learning curve theory in South Korea},
  author={Sungjun Hong and Yanghon Chung and Chungwon Woo},
  journal={Energy},
  volume={79}, number={1}, pages={80--89},
  year={2015},
  doi={10.1016/j.energy.2014.10.050}}

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