Editing IPCC:AR6/WGIII/Chapter-16 (section)

=== Box 16.4 | Sources of Cost Reductions in Solar Photovoltaics ===

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'''No single country persisted in developing solar photovoltaic (PV): five countries each made a distinct contribution, with each leader relinquishing its lead. The free flow of ideas, people, machines, finance, and products across countries explains the success of solar PVs. Barriers to knowledge flow de''' '''lay innovation.'''

Solar PV has attracted interest for decades, and until recently was seen as an intriguing novelty, serving a niche, but widely dismissed as a serious answer to climate change and other social problems associated with energy use. Since the IPCC’s Fifth Assessment Report (AR5), PV has become a substantial global industry – a truly disruptive technology that has generated trade disputes among superpowers, threatened the solvency of large energy companies, and prompted reconsideration of electric utility regulation rooted in the 1930s. More favourably, its continually falling costs and rapid adoption are improving air quality and facilitating climate change mitigation. PV is now so inexpensive that it is important in an expanding set of countries. In 2020, 41 countries, in six continents, had each installed at least 1GW of solar ( [[#IRENA--2020a|IRENA 2020a]] ).

The cost of generating electricity from solar PV is now lower in sunny locations than running existing fossil fuel power plants ( [[#IEA--2020c|IEA 2020c]] ) (Chapter 6). Prices in 2020 were below where even the most optimistic experts expected they would be in 2030.

The costs of solar PV modules have fallen by more than a factor of 10,000 since they were first commercialised in 1957. This four orders of magnitude cost reduction from the first commercial application in 1958 until 2018 can be summarised as the result of distinct contributions by the USA, Japan, Germany, Australia, and China – in that sequence ( [[#Green--2019|Green 2019]] ; [[#Nemet--2019|Nemet 2019]] ). As shown in Box 16.4, Figure 1, PV improved as the result of:

i. scientific contributions in the 1800s and early 1900s, in Europe and the USA, that provided a fundamental understanding of the ways that light interacts with molecular structures, leading to the development of the p-n junction to separate electrons and holes ( [[#Einstein--1905|Einstein 1905]] ; [[#Ohl--1941|Ohl 1941]] );

ii. a breakthrough at a corporate laboratory in the USA in 1954 that made a commercially available PV device available and led to the first substantial orders, by the US Navy in 1957 ( [[#Ohl--1946|Ohl 1946]] ; [[#Gertner--2013|Gertner 2013]] );

iii. a government R&amp;D and public procurement effort in the 1970s in the USA, that enlisted skilled scientists and engineers into the effort and stimulated the first commercial production lines ( [[#Christensen--1985|Christensen 1985]] ; [[#Blieden--1999|Blieden 1999]] ; [[#Laird--2001|Laird 2001]] );

iv. Japanese electronic conglomerates, with experience in semiconductors, serving niche markets in the 1980s and in 1994 launching the world’s first major rooftop subsidy programme, with a declining rebate schedule, and demonstrating there was substantial consumer demand for PV ( [[#Kimura--2006|Kimura and Suzuki 2006]] );

v. Germany passing a feed-in tariff in 2000 that quadrupled the market for PV, catalysing development of PV-specific production equipment that automated and scaled PV manufacturing ( [[#RESA--2001|RESA 2001]] ; [[#Lauber--2016|Lauber and Jacobsson 2016]] );

vi. Chinese entrepreneurs, almost all trained in Australia and using Australian-invented passivated emitter rear cell technology, building supply chains and factories of gigawatt scale in the 2000s. China became the world’s leading installer of PVs from 2013 onward ( [[#Quitzow--2015|Quitzow 2015]] ; [[#Helveston--2019|Helveston and Nahm 2019]] ); and

vii. a cohort of adopters with high willingness to pay, accessing information from neighbours, and installer firms that learnt from their installation experience as well as that of their competitors, to lower soft costs ( [[#Ardani--2015|Ardani and Margolis 2015]] ; [[#Gillingham--2016|Gillingham et al. 2016]] ).

As this evolution makes clear, no individual country persisted in leading the technology, and every world-leading firm lost its lead within a few years ( [[#Green--2019|Green 2019]] ). Solar followed an overlapping but sequential process of technology creation, market creation and cost reduction (comparable to emergence, early adoption, diffusion and stabilisation in Cross-Chapter Box 12 in this chapter). In the technology creation phase, examples of central processes include flows of knowledge from one person to another, between firms, and between countries as well as US and Japanese R&amp;D funding in the 1970s and early 1980s. During market creation, PVs modular scale allowed it to serve a variety of niche markets from satellites in the 1950s to toys in the 1980s, when Germany transformed the industry from niche to mass market with its subsidy programme that began in 2000 and became important for PV in 2004. The dramatic increase in size combined with its 20-year guaranteed contracts reduced risk for investors and created confidence in PV’s long-term growth. Supportive policies also emerged outside Germany, in Spain, Italy, California, and China, which spread the risk, even as national policy support was more volatile. Rapid and deep cost reductions were made possible by: learning by doing in the process of operating, optimising, and combining production equipment; investing and improving each manufacturing line to gradually scale up to massive sizes; and incremental improvements in the PV devices themselves.

Central to PV development has been its modularity, which provided two distinct advantages: access to niche markets, and iterative improvement. Solar has been deployed as a commercial technology across nine orders of magnitude: from a 1W cell in a calculator to a 1GW plant in the Egyptian desert, and almost every scale in between. This modular scale enabled PV to serve a sequence of policy-independent niche markets (such as satellites and telecoms applications), which generally increased in size and decreased in willingness to pay, in line with the technology cost reductions. This modular scale also enabled a large number of iterations, such that in 2020 over three billion solar panels had been produced. Compared to, for instance, approximately 1000 nuclear reactors that were ever constructed, a million times more opportunities for learning by doing were available to solar PV: to make incremental improvements, to introduce new manufacturing equipment, to optimise that equipment, and to learn from failures. More generally, recent work has pointed to the benefits of modularity in the speed of adoption ( [[#Wilson--2020|Wilson et al. 2020]] ) and learning rates ( [[#Sweerts--2020|Sweerts et al. 2020]] ).

While many technologies do not fit into the solar model, some – including micro nuclear reactors and direct air capture – also have modular characteristics that make them suitable for following solar’s path and benefit from solar’s drivers. However, it took solar PV 60 years to become cheap, which is too slow for addressing climate change if a technology is now still at the lab scale. A challenge in learning from the solar model is therefore how to use public policy to speed up innovation over much shorter time frames, for example, 15 or fewer years.

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'''Box 16.4, Figure 1 | Milestones in the development of low-cost solar photovoltaics. Source :''' [[#Nemet--2019|Nemet (2019)]] .

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