Renewable and Sustainable Energy Reviews 46 (2015) 88–99

Contents lists available at ScienceDirect

Renewable and Sustainable Energy Reviews

journal homepage: www.elsevier.com/locate/rser

Quantitative study on long term global solar photovoltaic market

Peck Yean Gan a,n, ZhiDong Li b
a
Energy Conservation Group, Global Environment and Sustainable Development Unit, The Institute of Energy Economics, Japan, Inui Bldg., Kachidoki 13-1,
Kachidoki 1-chome, Chuo-ku, Tokyo 104-0054, Japan
b
Department of Management and Information System Science, Nagaoka University of Technology, 1603-1 Kamitomioka, Nagaoka, Niigata 940-2188, Japan

art ic l e i nf o a b s t r a c t

Article history: This paper analyzes the relationship between the declines in solar photovoltaic (PV) module costs and
Received 20 August 2013 cumulative production, silicon prices, supply
demand imbalance and the presence of lower-cost
Received in revised form Chinese products in global PV market using learning curve model. State of market development and
10 December 2014
its connection with learning is also examined. Results indicate that learning effect is best measured
Accepted 8 February 2015
when supplementing output with silicon prices in the analysis. Learning rate (LR) diminishes over the
Available online 9 March 2015
time periods examined, thereby suggesting the declining of progress as market reaches maturity. The
Keywords: outcomes from the learning curve analysis are subsequently applied to project future uptake of PV
Learning curve worldwide, module and electricity costs till 2035. Demand for PV is anticipated to remain robust with
Solar photovoltaic
cumulative installed capacity worldwide projected to reach 659 GW by 2035. At the same time, module
Module costs
cost is estimated to decline from $3.8/W in 2006 to $1.78/W in 2035, a reduction of over 50% relative to
2006 level. Unit cost of electricity from PV is predicted to be in the range of $0.13/kWh to $0.17/kWh by
2035 for the three scenarios analyzed.
& 2015 Elsevier Ltd. All rights reserved.

Contents

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
2. Methodology and data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
2.1. Model structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
2.2. Data descriptive and sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
3. LR of global PV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
3.1. Dependent and independent variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
3.2. Approach in the learning curve analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
3.3. Results and discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
3.3.1. LR estimates for 1988–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
3.3.2. LR and technology development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
3.3.3. Variations in LR due to price term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
3.3.4. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
3.4. Comparison with other studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
4. Global PV market outlook to 2035 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
4.1. Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
4.2. Results and discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

n
Corresponding author. Tel.: þ 81 3 5547 0231; fax: þ 81 3 5547 0227.
E-mail address: pyean@tky.ieej.or.jp (P.Y. Gan).

http://dx.doi.org/10.1016/j.rser.2015.02.041
1364-0321/& 2015 Elsevier Ltd. All rights reserved.
 P.Y. Gan, Z. Li / Renewable and Sustainable Energy Reviews 46 (2015) 88–99 89

4.2.1. Global PV deployment to 2035 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

4.2.2. Module cost reduction pathway to 2035 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
4.2.3. Cost of PV electricity to 2035 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

1. Introduction
predict module cost reduction and future deployment of PV world-
wide till 2035. Our results make a significant contribution to the
The global PV market has seen impressive growths in installa-
debate concerning the omitted variable bias in a single-factor
tion during the last decade, with an average annual growth rate of
learning rate analysis and confirm the existence of learning deprecia-
more than 50% owing to government policy support and other
tion over time as market develops. This study also contributes to the
financial incentives encouraging its installation. In 2012, the cumu-
learning rate literature as this appears to be one of the few studies
lative installed capacity of PV worldwide was more than 136 giga-
[23,24] to incorporate input factor in the learning curve analysis
watt (GW), up from 1.8 GW in 2000, and provided for 0.85% of
which extends the analysis to cover also other relevant factors such
global electricity requirements [1,2]. While still a dwarf compared
as market condition and the presence of lower-cost Chinese products
to fossil energy, the PV industry is expanding very rapidly due to
in global PV market that are not analyzed in previous works.
dramatic cost reductions as a results of significant technology
The first part of this paper presents learning curve analysis of
improvements and economies of volume and scale [3]. The gen-
global PV module and analyzes variations in LR due to the
eration costs for large scale PV systems currently ranged from US
choice of variables, use of datasets in different price terms and
dollar 0.38–0.57 per kilowatt hour ($/kWh), while upfront invest-
time period of study. From the discussion, some criteria
ment ranged from US dollar 4375–6875 for every kilowatt ($/kW)
which are not considered in past study yet important in the
installed (Table 1). Although still economically less competitive than
learning curve analyses of energy technology, are suggested and
fossil fuels and some other renewable energy such as wind, the PV
incorporated in our results which are subsequently applied to
industry is rapidly changing, with advances to minimize silicon
project into the future module prices and global PV market
wasted during manufacturing, producing thinner wafers and the
outlook up to 2035.
emergence of new technologies promising further cost declines.
This paper is structured as follows. Section 2 gives an overview of
Under the right policy and market conditions, electricity from solar
the model structure, methodology and datasets used for the analysis.
may achieve grid parity within a few years in some leading market
Section 3 explains our approaches in estimating the LR for global PV
countries [4]. Long-term scenario studies projected an increased
module and outlines some important LR estimation issues, while
role of PV in global electricity generation and positioned solar
Section 4 presents the outcomes of global PV supply and demand
energy as one of the realistic future energy mix options [5,6].
projections until 2035. Module cost reduction trend through 2035
The introduction of learning curve or experience curve for new
and cost of PV electricity estimation are also delivered. Finally,
energy technologies into energy system models has become
Section 5 gives the conclusion.
increasingly common as the application of renewable energy across
all sectors has accelerated over the last decade pursuant to global
effort to reduce greenhouse gas emissions from fossil energy. Over
2. Methodology and data
the past decades, a considerable number of studies have been
carried out on learning curve analysis, in particular on new and
2.1. Model structure
emerging energy technologies [8–13]. Explanations supporting
learning curve theory indicate that it is a relevant approach for
Fig. 1 shows the model structure of this study. Global annual
simulating technological changes and useful in an integrated
demand for PV is strongly driven by policy supports in the form of
assessment of climate change and policy scenario studies. Many
incentives and feed in tariffs (FiT) and responds to changes in module
projections nowadays employ experience curve to project future
costs and oil prices. The production of PV is essentially market driven
trends of new technologies in the context of energy supply and
and increases in cumulative production affect the degree of module
demand position and greenhouse gas emissions. With this, energy
cost declines as explained by the learning curve model. Module cost
policy makers can gain insight into how energy technology costs
per watt is determined using the learning curve analysis with
may change over time, thereby providing the basis for energy policy
modification to the traditional single-factor learning curve formula-
planning and analysis [5,14–20]. These forecasts, however, are
tion by incorporating other factors such as input prices to assess
extremely sensitive to the assumptions made on the deployment
whether these factors have played an essential role in affecting the
and technological progress of new technologies and extra caution is
module costs over the time period under study.
required when applying experience curves to technologies at early
Endogenous variables are either defined or econometrically
stages. Neij [21] and van Sark [22] indicated that relatively small
estimated using the ordinary least squares method with datasets
changes in the LR used will lead to significant changes in electricity
showed in Table 2. Whereas silicon prices, supply
demand gap of
costs and thus overall projections. This suggests that if energy
global PV market, share of Chinese products in global production
system models are to generate meaningful and policy-oriented
and oil prices are treated as exogenous variables.
results, reliable estimates of the LR are needed.
Global demand for PV is estimated as a function of policy
The objective of this paper is two-fold; first it attempts to explore
supports and incentives, module costs and oil prices are presented
the quantitative relationship between historical cost declines and
in Eq. (1). Total installed PV capacity, as defined in Eq. (2), is the
other factors such as silicon prices, supply
demand imbalance and
sum of cumulative capacity in the preceding year and new
Chinese influence in global PV market on top of output growth using capacity added in current year, taking into account depletion of
the learning curve model, and, second, having identified the factors old PV system. Production is fundamentally driven by its demand
which best explain cost reductions, the results are then applied to as showed in Eq. (3). Cumulative production is defined as the sum
90 P.Y. Gan, Z. Li / Renewable and Sustainable Energy Reviews 46 (2015) 88–99

Nomenclature Units

PV photovoltaic $/kWh US dollar per kilowatt hour

LR learning rate $/kW US dollar per kilowatt
GW gigawatt % percentage
FiT feed-in tariffs CO2 carbon dioxide
PR progress rate gCO2/kWh gram carbon dioxide per kilowatt hour
R&D research and development $2007/kgconstant 2007 US dollar per kilogram
MW megawatt $2007/W constant 2007 US dollar per watt
sc-Si single crystal silicon Yen/kWh Japanese Yen per kilowatt hour
mc-Si multi-crystalline silicon $/KG US dollar per kilogram
a-Si amorphous silicon g/W gram per watt
CdTe cadmium telluride R2 correlation coefficient
CIGS copper–indium–gallium–diselenide $/W US dollar per watt
Si silicon
O&M operations and maintenance
LCOE levelised cost of electricity

Table 1
Initial investment, power generation cost and carbon dioxide (CO2) emissions by source.

Electricity generation by source Initial investment Generation cost CO2 emissions

US dollar per US dollar per kilowatt hour ($/kWh) gram CO2 per kilowatt hour (gCO2/kWh)
kilowatt ($/kW)

Nuclear 4375 0.11 20

Renewable energy Mini hydro 10,000–12,500 0.24–0.28 11
Mega solar 4375–6875 0.38–0.57 38
Wind – Onshore 2500–4375 0.12–0.22 25
Geothermal 8750–11,250 0.12–0.15 13
Thermal Oil 2375 0.26–0.28 738
Liquefied natural gas 1500 0.13–0.14 474
Coal 2875 0.12 943

Source: Matsuo [7].

Silicon prices, Module cost Global cumulative Global annual

other factors per watt production production

Global annual
demand

Oil prices Policy

support and
incentives

Keys : Endogenous variable Exogenous variable

Fig. 1. Model structure.

of annual production over the time period under study as given where PVANNt is global annual demand for PV at time period t; GOVt is
in Eq. (4). policy support and incentives at time period t; MDCOSTt is the global
average PV module cost per watt in constant 2007 price at time period t;
PVANN t ¼ β0 þ β 1 GOV t þ β2 MDCOST t þ β3 POILt þ β 4 PVTOLt
1
POILt is oil prices at time period t; PVTOLt–1 is global installed capacity of
t ¼ 1; 2; …; T; β1 4 0; β2 o 0; β3 4 0; 0 o β4 o1 ð1Þ
PV in the preceding time period t–1; PVTOLt is global installed capacity
of PV at time period t; WPVANt is global annual PV production at time
PVTOLt ¼ αPVTOLt
1 þ PVANN t
period t; WPVCUMt is global cumulative PV production at time period t;
t ¼ 1; 2; …; T; 0 o α o1 ð2Þ WPVCUMt–1 is global cumulative PV production in the preceding time
period t–1; TIME is time, t is time period, β0, β1, β2, β3, β4, α, λ0, λ1 and λ2
WPVAN t ¼ λ0 þ λ1 PVANNt þ λ2 PVANN t nTIME
are parameters to be estimated.
t ¼ 1; 2; …; T; λ1 4 0; λ2 o0; ðλ1 þ λ2 nTIMEÞ 4 0 ð3Þ Module cost is estimated using the learning curve concept, a
theory widely applied to measure the degree of cost reductions with
WPV CUM t ¼ WPV CUM t
1 þ WPVAN t each doubling of cumulative production of a technology [25]. The
t ¼ 1; 2; …; T ð4Þ most commonly employed formulation of the single-factor learning
 P.Y. Gan, Z. Li / Renewable and Sustainable Energy Reviews 46 (2015) 88–99 91

Table 2
Dataset used in this study.

a
Data Silicon prices Annual production of Cummulative production World average PV module Annual PV capacity Cummulative installed
PV worldwide b of PV worldwide b cost per watt b, c installed globally d global PV capacity d
Unit Constant 2007 US dollar per Megawatt (MW) Megawatt (MW) Constant 2007 US dollar Megawatt (MW) Megawatt (MW)
kilogram ($2007/KG) per watt ($2007/W)

1975 – 1.8 1.9 99.6 2 2

1976 – 2.0 3.9 78.4 2 4
1977 – 2.2 6.1 58.9 2 6
1978 – 2.5 8.6 41.2 3 9
1979 – 4.0 12.6 32.9 4 13
1980 – 7.0 19.6 27.8 7 20
1981 – 8.0 27.6 21.2 8 28
1982 – 9.0 36.6 17.9 9 37
1983 – 17.0 53.6 14.8 17 54
1984 – 22.0 75.6 12.9 22 76
1985 – 23.0 98.6 10.7 23 99
1986 – 26.0 124.6 8.7 26 125
1987 – 29.0 153.6 6.7 29 154
1988 118.7 34.0 187.6 7.3 34 188
1989 108.0 40.0 227.6 7.4 40 228
1990 117.3 47.0 274.6 7.5 47 275
1991 113.4 55.0 329.6 7.2 55 330
1992 109.3 58.0 387.6 6.3 58 388
1993 91.8 60.0 447.6 5.8 60 448
1994 95.0 69.0 516.6 5.3 69 502
1995 99.0 77.6 594.2 5.3 78 580
1996 87.0 88.6 682.8 5.1 89 669
1997 78.0 126.0 808.8 5.3 126 795
1998 71.4 155.0 963.8 4.7 153 948
1999 67.3 201.0 1164.8 4.3 202 1150
2000 59.8 276.8 1441.6 4.2 277 1425
2001 54.2 371.3 1812.9 3.8 328 1753
2002 55.2 542.0 2354.9 3.7 468 2220
2003 52.5 749.4 3104.3 3.7 578 2798
2004 53.9 1198.8 4303.1 3.5 1114 3911
2005 67.8 1782.4 6085.5 3.7 1429 5340
2006 84.7 2458.5 8544.0 3.8 1575 6915
2007 99.5 3801.3 12,345.3 4.0 2529 9443
2008 103.2 7125.9 19,471.2 3.9 6330 15,772
2009 82.1 11,314.9 30,786.1 3.1 7437 23,210
2010 72.9 24,046.7 54,832.8 2.7 16,817 40,019
2011 – – – – 29,665 69,684

a
Averages for mono- and multi-crystalline silicon [37].
b
Represents the averages over all PV technologies [38].
c
Data for 2007–2010 are our own estimates.
d
EPIA [39–40]. Note that total installed capacity is defined as the sum of cumulative capacity in the preceding year and new capacity added in current year, taking into
account depletion of old PV system throughout the analysis.

curve in which cost is related only to cumulative production is
described by the following mathematical expression.
C x ¼ expðαÞnX
b
where Cx is the cost required to produce the xth unit of production; α
is a constant equal to the cost required to produce the first unit; X is
the cumulative production up to and including the xth unit of
production; b is the (positive) experience parameter which charac-
terizes the slope of the curve where large values of b indicate a steep
curve with a high learning rate. The parameter b is used to calculate
the progress rate (PR) which expresses the percent changes in cost
with each doubling of cumulative production as follows:


C x2 αX 2
b
PR ¼ ¼ ¼ 2
b ; for x2 ¼ 2x1
C x1 αX 1
Another frequently used term, LR can be defined as
LR ¼ 1
PR
Both the PR and LR are used to measure the relationship between
cost decrease and output growth. For example, a PR of 85% also means
a LR of 15% where cost reduced by 15% with each doubling of
production volume.
Most empirical learning curve studies employ the single-factor
ð5Þ learning curve to describe cost changes as a result of cumulative
production. A summary of surveyed literature quantifying one-
factor experience curves in the energy sector is available in
Kahouli–Brahmi [26]. Yet, this approach has become the center
of criticism [27–29]. Studies advise that there is a problem of
omitted variable bias and output is not the unique factor that
determines cost changes. A much broader set of influences which
include input costs, research and development (R&D) expendi-
tures, economies of scale, entry of new competitors, changes in
industry concentration, and policy supports in the form of invest-
ment grants and FiT also induce cost declines [23,30–36]. A
ð6Þ
number of studies attempt to incorporate both cumulative pro-
duction and a measure of the knowledge stock such as accumu-
lated expenditure on R&D in a two-factor learning model
ð7Þ [8–11,28], only a few try to account the effect of input price to
cost changes [23].
In this study, we extended the traditional single-factor learning
model by integrating, among other, silicon prices as an additional
92 P.Y. Gan, Z. Li / Renewable and Sustainable Energy Reviews 46 (2015) 88–99
variable to examine its empirical relationship with changes in
production costs1:
X (2) Early commercialization (1997–2001): A period which was
C x ¼ expðα þ λi OTHi ÞnX
b ð8Þ
where OTHi represents other factors tested; λi is the corresponding
regression coefficient; i is other factors which include silicon prices,
supply
demand gap in global PV market, Chinese share in global
PV production. Other parameters are as previously defined.
2.2. Data descriptive and sources
Table 2 showed the dataset used in our analysis. Silicon prices
were collected from Annual Trade Statistics of Japan [37]. Data on
global PV production (annual and cumulative) and the average
module cost per watt (with the exception to data from 2007 to
20102) are available from the Earth Policy Institute [38]. Time
series data of global installed capacity of PV (annual and cumula-
tive)3 have been drawn from the reports by European Photovoltaic
Industry Association [39,40]. All prices and costs have been
adjusted to constant 2007 US dollars using gross domestic pro-
duction deflator from the U.S. Bureau of Economic Analysis [41].
3. LR of global PV
3.1. Dependent and independent variables
For dependant variable, we used the average PV module cost
per watt instead of system prices as a proxy for accuracy [3,30,31].
For independent variable, silicon price is incorporated as an
additional variable in addition to cumulative production. The
influences from the influx of lower-cost Chinese module into the
global market and the supply
demand gap of PV market were
examined in order to establish if these factors induce cost declines
during the time period under study.
3.2. Approach in the learning curve analysis
The learning curve analysis is performed in two parts. The first
part estimates the LR of PV module for the complete data period
1988–2006 using firstly a single-factor learning curve model
where changes in costs are measured against output alone as
practiced in previous works [42–44]. Subsequently, the single-
factor learning curve was extended to incorporate other factors
including silicon prices as additional variable to examine the effect
these factors has on cost reduction. Simulations were carried out
using dataset in both current and real price terms.
The second part of the analyses is fundamentally similar to
what was done in the first part with the exception to the time
period of study where it is now divided into three shorter time
period with the objective to examine if technological progress
declines as market develops. The following describes briefly each
of these three time periods with details given in Table 3:
(1) Preparation for take-off (1988–1996): A time of low interest in
renewable energy. Terrestrial applications began to increase
1
By incorporating R&D factor to Eq. (8), we could define the R&D based
P
variable in the following way.C x ¼ expðα þ λi OTH i ÞnX
b nRD
d (9) where RD
represents the R&D-based knowledge stock, d is learning-by-searching index. Other
parameters are as previously defined. As there is a lack of data which accounts for
worldwide R&D expenditures on PV, this is excluded from our analysis.
2
Data for 2007–2010 are our own estimates.
3 4
Given the lack of adequate data, we assumed here that installed capacity
equals its production between 1975 and 1994 as demand was often limited to niche
applications and production was often custom-made during this period of time.
and dominate the market over niche applications. Nonethe-
less, installations were mostly on stand-alone basis.
characterized by a rapid deployment of PV systems in member
countries of the European Union, in particular Germany, Spain
and Italy, following the implementation of FiT and other govern-
ment incentives. PV applications were primarily grid-connected
with large-scale installation increasing in the market.
(3) Commercialization (2002–2006): A high growth period with
mass production of PV in a highly competitive global market.
High material costs prompted a faster development in new PV
technologies such as thin film.
3.3. Results and discussions
Table 4 summarizes the estimated LR assuming that cost reduc-
tions are a function of experience measure specified in each equation.
Correlation coefficient is also given. Simulation results for data period
1988–2006 are presented and discussed in Section 3.3.1 whereas
Section 3.3.2 delivers the outcomes for three shorter time periods.
Variations in the LR estimates obtained with dataset in different price
terms are discussed in Section 3.3.3. The last part, Section 3.3.4
summarizes our observations.
3.3.1. LR estimates for 1988–2006
3.3.1.1. Cumulative production. A single-factor learning curve analysis
based on cumulative output yields the highest LR estimates at 7.6% and
14.2% respectively as given in Table 4 by Eq. S1-a and Eq. S1-b. The
correlation coefficient4 (R2) for the estimated learning rates ranged
from 0.6844 to 0.8652, which essentially indicate the presence of so-
called omitted variable bias as commented in McDonald and
Schrattenholzer [30], Soderholm and Sundqvist [29] and van Sark
[22]. Omitted variable bias may pose a problem since costs clearly are
influenced by other variables than output, most notably input prices
and scale effects. Results could be seriously biased as output parameter
may capture the influence of other drivers [24].
3.3.1.2. Silicon prices. Silicon factor was introduced to the originally
one-factor learning curve to address the omitted variable bias issue.
LR values ranged from 5.2% to 8.1%, depending on the price term of
the dataset. Associated R2 values improve, which denote a better fit
of data than when output is the only experience measure. Results
demonstrate that leaving out of silicon effects will cause bias in the
parameter estimates where a higher estimate of LR will be obtained
than if one includes the silicon variable.
Historical trends show that module prices fluctuate as a result
of imbalance between silicon supply and demand. Between 1988
and 1990, PV prices had experienced an increase as the supply of
PV module diminished because of a limitation in the availability of
silicon wafers. An acute shortage of polysilicon supply worldwide
around 2004 to mid-2008, which resulted from the sustained high
growth of the PV industry especially in Europe, has led to module
price increases in the corresponding period. A survey on Chinese
market reported that silicon feedstock constitutes approximately
56% to the module cost [63]. A learning curve analysis by Nemet in
2006 [3] accounted that 12% of module cost declines was induced
by a reduction in silicon feedstock prices. A more recent study in
2011 reported that silicon prices accounted for 32% to 50% of cost
reduction between 1976 and 1997, while a period of nearly
constant module prices occurred from 1998 to 2006, which
coincide with a period of relatively unstable silicon supply,
R2 expresses the quality of fit of the experimental data. A value of R2 close to
one usually shows an excellent fit, while a value near zero shows a failure of the
estimated regression.
 P.Y. Gan, Z. Li / Renewable and Sustainable Energy Reviews 46 (2015) 88–99
Table 3
Overview of global PV market.
Period Demand market
Before Initially developed to provide reliable Supply of customized modules
1970 power for satellites in late 1950 [45]. and limited to niche market
application [45].
1970s Shift from space to terrestrial
applications [46].
1980s Terrestrial application become
dominant over spaced-based
applications [46].
1990s Applications were mainly off-grid
basis up until mid of 1990s. Since
then, grid connected applications
started to increase rapidly following
the introduction of support and
incentive schemes [50].
2000s Demand for PV increased
dramatically at an annual growth rate
of close to 40%, with European market
accounted for close to 80% of this
demand [52].
Target/ IEA in its Word Energy Outlook 2014
Projection projected global cumulative installed
PV capacity in the range of 636GW
(Current Policy Scenario) to 930GW
(New Policies Scenario) by 2040 [6].
Source: compiled from [5,6,45–62].
Supply market
Changes in production processes,
quality of modules and cost
following a shift to terrestrial
application [46].
Silicon prices peaked in 1988 due
to stronger demands from the
aluminium, iron and steel, and
silicon-base chemical industries
[48].
In the 1990s, most polysilicon
was used to produce hyperpure
silicon wafers for semiconductor
and electronic industries [49].
Beginning in the late 1990s, the
manufacturing of PV grows
rapidly following a series of
government support programs in
European countries [51,52].
Global production of solar
modules and demand for
polysilicon increased at double-
digit rates [49].
New manufacturers emerged in
Germany, China and other Asian
countries driven by huge market
demand [49].
2004–2008: Acute global
shortages of polysilicon. Spot
market prices of polysilicon
climbed from $30/kg - $400/g
[56,57].
Global polysilicon capacity (in
million tons): 26,700 (2003) -
31,360 (2005) - 96,250 (2008)
[58].
Worldwide over capacity with
countries began to cut back on
domestic funding and subsidies
for PV [57].
93
Technology, efficiency Government programs,
incentives
1974–1992: “The Sunshine
Project” in Japan [47].
The conversion efficiency of PV cell 1980: Japan subsidized
steadily improved at research centers and commercial PV applications [46].
universities, yet manufacturing costs
remained high [49].
Efficiency of single crystal silicon: 13–18% 1991–1995: “1000 Roof Program”
[49]. in Germany [49].
1992–2000: Japan introduced
“The New Sunshine Project”, and
started support program for PV
installed at household, public and
industrial facilities [47,53].
Development and commercialization of 2000/4: FiT commenced in
thin film technology, accelerated by Germany [54].
shortages of silicon supply in the
beginning of 2004. Market share of thin
film increased from 5.5% (2004) to 11.4%
(2007), and 13.4% (2010) [49,52].
2003: European Union mandates
12% of renewable energy by 2010
[55].
Module efficiency: single crystal silicon 2005/08/05: FiT commenced in
(sc-Si) 14–20%; multicrystalline silicon Italy [54,59].
(mc-Si) 13–15%; Thin film (a) amorphous
silicon (a-Si) 6–9%; (b) cadmium telluride
(CdTe) 9–11%;
(c) copper
indium
gallium
diselenide
(CIGS) 10
12% [5].
2012/7/01: Japan started FiT for
solar PV at 42yen/kWh [61].
2013/3/11: Reduced to 37.8yen/
kWh for financial year 2013 [62].
Silicon consumption (grams per watt,
g/W): 12g/W (2005)-7g/W (2011) [60].
Target for module efficiency [5]:

sc-Si 21% (2015), 23% (2020),
25% (2030)

mc-Si 17% (2015), 19% (2020),
21% (2030)

thin film Si 10% (2015), 12% (2020),
15% (2030)

CdTe 12% (2015), 14% (2020),
15% (2030)

CIGS 14% (2015), 15% (2020),
18% (2030)
 94
Table 4
LR estimates of this study.

Variables Region Time period Correlation t-value Learning rate (LR), % Dependant variable
coefficient (R2)
Cumulative Silicon Supply– Chinese share in 1988– 1997– 2002–
production prices demand global PV output 1996 2001 2006
gap

P.Y. Gan, Z. Li / Renewable and Sustainable Energy Reviews 46 (2015) 88–99

At current prices P1-a Cumulative production World 1988–1996, 1997– 0.7076 –2.78 7.3 7.9 7.2 module cost per watt
2001, 2002–2006 at current price
P2-a Cumulative production, silicon prices World 1988–1996, 1997– 0.9306 –6.17 7.01 9.3 8.2 7.7 module cost per watt
2001, 2002–2006 at current price
S1-a Cumulative production World 1988–2006 0.6844 –6.33 7.6 module cost per watt
at current price
S2-a Cumulative production, silicon prices World 1988–2006 0.9122 –7 6.72 5.2 module cost per watt
at current price
S3-a Cumulative production, silicon prices, World 1988–2006 0.9073 –3.72 5.37 –0.38 5.7 module cost per watt
supply–demand gap at current price
S4-a Cumulative production, silicon prices, World 1988–2006 0.9072 –2.72 2.65 0.35 5.9 module cost per watt
Chinese share in global PV output at current price

At constant price P1-b Cumulative production World 1988–1996, 1997– 0.8858 –5.62 15.5 16.2 14.9 module cost per watt
2001, 2002–2006 at constant price
P2-b Cumulative production, silicon prices World 1988–1996, 1997– 0.9771 –7.38 7.8 11.8 10.7 10.2 module cost per watt
2001, 2002–2006 at constant price
P3-b Cumulative production, silicon prices, World 1988–1996, 1997– 0.9755 –5.2 6.68 0.26 11.6 10.4 9.9 module cost per watt
supply–demand gap 2001, 2002–2006 at constant price
P4-b Cumulative production, silicon prices, World 1988–1996, 1997– 0.9754 –3.2 3.56 0.06 12.0 10.9 10.4 module cost per watt
Chinese share in global PV output 2001, 2002–2006 at constant price
S1-b Cumulative production World 1988–2006 0.8652 –10.79 14.2 module cost per watt
at constant price
S2-b Cumulative production, silicon prices World 1988–2006 0.9688 –7.53 7.57 8.1 module cost per watt
at constant price
S3-b Cumulative production, silicon prices, World 1988–2006 0.9671 –4.14 5.64 -0.43 8.9 module cost per watt
supply–demand gap at constant price
S4-b Cumulative production, silicon prices, World 1988–2006 0.9668 –2.81 3.14 0.28 8.9 module cost per watt
Chinese share in global PV output at constant price
 P.Y. Gan, Z. Li / Renewable and Sustainable Energy Reviews 46 (2015) 88–99 95

Table 5
Comparison with other studies.

Study Time period Learning rate (%) Correlation coefficient (R2) Dependant variable Independent variable

IEA, 2000 [25] 1976–1992 18 n.a. module price cumulative sales

This study 1976–1992 31.8 0.9741 module cost cumulative production
Nemet, 2006 [3] 1980–2001 21.62 n.a. module price cumulative sales
This study 1980–2001 24.9 0.9498 module cost cumulative production
Kersten et al, 2011 [42] 1976–1988 30 n.a. module price/cost cummulative production
This study 1976–1988 34.8 0.9924 module cost cumulative production
Kersten et al, 2011 [42] 1988–2010 17 n.a. module price/cost cummulative production
This study 1988–2006 14.2 0.8652 module cost cumulative production

700
658.6
WEO2014
600 Current IEA PV
Year New policies 450
policies roadmap
scenario scenario
scenario
500 2020 333 364 371 210
2030 495 647 856 872
400 2040 636 930 1,396 -
415.6
GW

300

163.8
200

100 40.0

0
2000 2005 2010 2015 2020 2025 2030 2035

Fig. 2. Estimates of global installed PV capacity to 2035 in comparisons with other studies.

4.50

4.21
4.04
4.00

period of
3.50 over supply
polysilicon
$2007/W

shortages
3.00

2.50
2.48 2.19
1.91
2.00 1.78

1.50
2000 2005 2010 2015 2020 2025 2030 2035

Fig. 3. Module cost reductions pathway to 2035.

although learning is still taking place [23]. The evidences illustrate
that silicon feedstock supply has had, and will continue to have a
large influence on module price. It is fair to conclude that silicon
prices have played an essential role in affecting the cost structure
of PV systems over the time period under study and therefore
need to be included in the analysis.
3.3.1.3. Chinese influence and supply
demand imbalance in global
PV market. China alone accounted for 64% of global PV module
production in 2013 and has been at the top for the past seven
years. Given its dominance in PV manufacturing, it is not
surprising that five of the top ten PV producers are Chinese
firms [64]. A study by Seel et al. [65] in 2014 suggests that
average residential PV systems in Germany and United States
have fallen significantly over the last decade as less costly
Chinese and Taiwanese module becomes available in both
countries. A PV module originating from China is reported to
cost only one third of a best priced Japanese module [66,67].
We hypothesize that module prices is inversely correlated with
an increasing proportion of Chinese products in the market and
influenced by supply and demand, where prices rise when
demand exceeds supply and vice versa. These hypotheses are
tested in the learning curve analysis to examine if such empirical
relationship exists between the experimental data. Results pre-
sented in Eq. S3-a, S4-a, S3-b and S4-b, however lack the apparent
evidence which enable us to relate price changes with the
variables tested.
These results nonetheless asked for careful interpretation as
literatures illustrate that learning is often the outcome
from a set of effects, making it difficult to distinguish the sources
of technical change in practice. For instance, the influence from a
dominating presence of Chinese products in the market may have
been captured by silicon factor. Also, a measure of Chinese
presence in global market on capacity basis is most preferable
for the analysis. Nonetheless, this was not possible given the lack
of adequate data.
96 P.Y. Gan, Z. Li / Renewable and Sustainable Energy Reviews 46 (2015) 88–99
3.3.2. LR and technology development
Literatures suggest that LR can be different depending on the
stages of the product lifecycle. LR is normally higher during the
early research and development stages, reduces as technologies
reach later stage of development and eventually saturates when a
technology reaches maturity [30,68]. In this section, the time
period of study is divided into three shorter periods namely
1988–1996, 1997–2001 and 2002–2006 for the analysis in order
to examine if LR changes as technology matures.
Cumulative production. LR results with respect to the classical
experience curve in which output is the key variable yield similar
trends as in earlier analysis using a longer data period where a low
R2 values are observed.
Gap in supply
demand and Chinese share in global PV market.
Again, there is no evidence to prove the empirical relationship
between these variables and cost declines, as denoted by Eq. P3-b
and P4-b in Table 4. Nonetheless, these results need to be
interpreted with care as previously discussed in Section 3.3.1.3.
Silicon prices. In Eq. P2-b, where cumulative output is supplemen-
ted with silicon prices, LR was close to 12% during 1988 to 1996. It
declined to 10.7% in 1997 till 2001 and slowed to 10.2% from 2002
onward to 2006. The R2 of the regression yielding the parameter
values equals 0.9771, which suggests a good fit of the estimated
equation with the historical data. Results are also in line with theory
where LR is not constant but diminishes over time as the product
matures [25,44,69], thereby suggesting that it is meaningful to
examine LR of a technology with consideration to the stages of its
development to adequately predict changes in costs as market evolves.
3.3.3. Variations in LR due to price term
Learning curve analysis using constant price data generally yields a
higher LR by approximately 3 percentage point than that of current
price, which suggests the influence of inflation where actual cost
decline could be larger than is evident. It is therefore appropriate to
suggest the use of data in constant price to effectively remove the
price terms from the estimation of technology progress.
3.3.4. Summary
The following summarizes our observations from the discus-
sions presented in Section 3.3.1, Section 3.3.2 and Section 3.3.3:
 LR estimated using conventional experience curve which
quantify the relationship between cumulative production and
per unit cost indicates possible omission of important factors in
the estimation as expressed by a low R2 value. The assumption
that experience, as represented by cumulative production, is
the only determinant of cost reductions ignores the effect from
other sources, such as input prices.
 Supplementing output with silicon prices in the learning curve
model resulted in an improved R2 value. An indication of a
better fit of experimental data which also suggests the neces-
sity to include silicon prices in the analysis.
 Constant price data is more suitable for learning curve analysis
to exclude influential but exogenous factors such as inflation.
 Technology progress declines as market reaches maturity. This
emphasizes the need to look into learning effects with full
consideration to market development.
The above represents the outcomes within the framework of
this analysis and current level of technology. With innovation and
a change in the product mix, for example a larger share of less
costly module such as thin film in the market, a faster cost declines
hence a higher LR than indicated in this analysis is achievable [70].
The LR may vary somewhat when key parameters are changed. For
example, studies illustrate that technical progress is highly
sensitive to the selection of time period of study where LR differs
substantially depending on the data points that are chosen [3,30].
One recent source estimates a 20.1% of technology progress for PV
module which covers a time period from 1990 to 2011 [24].
Variations in the choices of experimental variables in most
instances often lead to different outcomes as observed in previous
works which either utilize knowledge stock or other factors such
as input prices and scale effect or a combination of both in their
analysis [8–11,23,28].
3.4. Comparison with other studies
Table 5 compares our estimates with selected past studies. At a
glance, our results are in line with results presented in other
studies where a higher LR is generally recorded at earlier stage,
with successively lower progress at a more mature development
stage. Specifically, LR was between 30% and 34% for the period
1976–1988, declining to 22–25% for 1980–2001, and slowed to 14–
17% for 1988–2010.
4. Global PV market outlook to 2035
Having now established the criteria important to the learning
curve analysis, we conclude that supplementing production with
silicon price best expresses technical progress of PV module in the
past decades as given by Eq. P2-b in Table 4. This is subsequently
applied to our econometric model as explained in Section 2.1 to
Table 6
Cost of PV electricity to 2035: assumptions.
a
Assumptions 65-Case 60-Case 50-Case
Share of module cost to total system costs (%) b
65 60 50
Capacity factor (%) c 12
Lifetime of PV system (years) d 20
Annual operating hour (h) 365 days  24 h
Discount rate (%) e 0%
Operations and maintenance (%) f Not considered
Note:
a
This analysis is derived using our own module cost estimates as presented
and discussed in Section 4.2.2. Discount rate, operations and maintenance (O&M)
costs, which are often included in calculating the levelized cost of electricity (LCOE)
are not considered in this calculation.
b
Worldwide, module cost typically constitutes 40
60% of PV system costs
[45]. Assumptions vary widely across sources. Poponi [14] assumed 60% for a global
scale analysis. In United States it is in the range of 55
61% depending on scale and
types of installation [73] while in China, it is much lower at 48% [74]. In Japan,
module cost accounts for up to 66% of total system costs with the rest from balance
of system and installation [75].
c
Assumptions about capacity factor significantly affect the results. Literatures
used a wide range of capacity factor. For example NPU assumed 12% [76], whereas
IEA recommended 17–20% [77]. A much wider range of 15–23% was applied in an
analysis by Poponi [14]. A recent study which focuses on China assumed that
capacity factor varies between 11.4% and 14.8% depending on sunlight availability
[17].
d
Lifetime of PV system was reported to be in the range of 20–40 years in
literatures. Studies generally assumed a constant lifetime throughout the study
period such as in Poponi [14], IEA [77] and Hernandez-Moro [78] whereas others
allocated a longer lifespan for future time frame [5,24,76].
e
NPU [76] considered four levels of discount rate namely 0%, 1%, 3% and 5% in
its LCOE estimates for large and household scale PV systems in Japan. The results
indicate that LCOE for household PV system is anticipated to be in the range of
$0.12/kWh to $0.23/kWh in 2030. It is important to note that LCOE estimates and
relative competitiveness of different power generation technologies are highly
sensitive to the discount rate applied in the calculation according to a recent study
by IEA [79].
f
O&M costs were assumed to be $0.002/kWh in Poponi [14], $0.02/kWh–$0.1/
kWh in Neij [21], 1–1.5% of system price in IEA [5] and Hernandez-Moro et al [78],
6% of system cost in de La Tour et al [24].
 P.Y. Gan, Z. Li / Renewable and Sustainable Energy Reviews 46 (2015) 88–99
0.45
0.40
Cost of PV electricity,
0.35
$2007/kWh
0.30
0.25
0.20
0.15
0.10
2000
forecast global PV supply and demand, and module cost reduction
pathway till 2035.
4.1. Assumptions
For the simulation, silicon price is assumed to remain constant
throughout the projection period, whereas oil prices till 2035 are
adopted from Gan [71].
4.2. Results and discussions
4.2.1. Global PV deployment to 2035
Future PV market is anticipated to remain robust; a shift to
markets outside the EU, in particular major economies like China,
India, Japan, Brazil and countries in Africa and the Middle East is
foreseen. PV capacity installed worldwide is predicted to reach
about 164 GW by 2020, increase to 416 GW by 2030 and exceed
650 GW by 2035 as showed in Fig. 2. These estimates are close to
the deployment levels envisioned in the New Policies scenario of
World Energy Outlook 2014 [5,6].
4.2.2. Module cost reduction pathway to 2035
The accelerated deployment of PV in the past decade has been
triggered by the adoption of PV incentive and supporting schemes in
an increasing number of countries. Under a favorable market outlook,
module costs in constant 2007 dollar are anticipated to decrease over
the projection period from $3.8/W in 2006 to $2.19/W in 2020 and
$1.78/W in 2035 as showed in Fig. 3. Such decrease in module costs
improves the relative competitiveness of PV and spurs additional
market growth.
Still, these projections should be regarded as indicative of a
possible pathway of cost reductions. With technology break-
throughs and further expansion of less costly PV modules such
as thin film into the market, module costs may drop even faster
than indicated by the estimated LR for the same deployment level.
4.2.3. Cost of PV electricity to 2035
Electricity prices from PV have fallen substantially in the past
decade along with module cost reductions. Between 1993 and 2007,
cost of electricity from a household scale PV system in Japan has
decreased over 5-fold, dropping from $2.96/kWh5 in 1993 to $0.55/
kWh in 2007 [72]. To illustrate how the competitiveness of solar
electricity will evolve over time, we calculated the cost of PV
electricity till 2035 based on a set of assumptions as given in Table 6.
5
1 US dollar ¼ 87.78 Yen, average exchange rate for 2010.
97
65% 60% 50%
Year
Case Case Case
2010 0.20 0.21 0.25
2020 0.16 0.17 0.21
2035 0.13 0.14 0.17
2005 2010 2015 2020 2025 2030 2035
65% Case 60% case 50% case
Fig. 4. Cost of PV electricity to 2035.
Total PV system costs consist of the sum of module cost and
balance of system, which covers all the additional equipments
needed. Three scenarios were considered for the analysis where
module cost accounts for 50%, 60% and 65% of system costs.
Results indicate that cost of PV electricity in constant price is
anticipated to be in the range of $0.13/kWh to $0.17/kWh by 2035
for the three cases analyzed as given in Fig. 4.
5. Conclusion
The learning curve analysis indicates that technology progress
derived from experience is only one of the explanations for cost
reductions in PV. Changes in input factor, such as silicon prices also
played an important role in cost reduction. LR diminishes gradu-
ally during the three time periods examined, thereby confirming
to earlier theory which suggests the declining of progress as
technology reaches maturity. Still, these results are valid within
the research scope and time period covered in this analysis as LR is
found to be prone of changes depending on the choice of
parameters and time period covered. Applying these results to
our econometric model, we obtained the long term projection of
global PV market and module cost reductions pathway till 2035.
Global PV market is anticipated to remain robust on account of
sustained government supports and a mounting need for a switch
to low carbon emitting alternatives. Cumulative installed capacity
of PV worldwide is projected to reach 659 GW by 2035. At the
same time, module cost is anticipated to fall by more than half
relative to 2006 level to $1.78/W by 2035. Cost of electricity from
PV is anticipated to fall within the range of $0.13/kWh to $0.17/
kWh by 2035 for the three scenarios analyzed.
Acknowledgements
We sincerely thank three anonymous referees and Rejean
Casaubon for valuable comments on the draft version of this
paper.
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