Topic updates
Experience Curves: Why expanding renewable energy output will lower the cost of supply

15th April 2021
For many products, increases in cumulative production are associated with decreasing unit cost as suppliers move down the experience curve.
New analysis of the military equipment economy during the Second World War shows that the boost in experience that producers gained during the war accounted for about half the equipment’s subsequent price drops.
This strong ‘learning by doing’ effect suggests we can make renewable energy significantly cheaper by boosting renewable technology production.
That is the conclusion of François Lafond, Diana Greenwald and Doyne Farmer at the Institute for New Economic Thinking at Oxford University in a research study presented to the 2021 RES conference that gathered and analysed an unprecedented amount of data on US military production during the war, covering over 500 products.
They find that experience accounted for about half of the price decline.
Although this relationship between experience and costs is unlikely to be the same across all goods, the findings are broad confirmation that investing in a specific product in order to boost experience will cause production costs to decrease.
You might also like
Returns to Scale in Long Run Production
Topic Videos

Supersized tankers - is scale going overboard?
21st October 2014
Why do businesses grow?
Study Notes
Conglomerate Integration
Study Notes
Reducing Contestability using the ‘sardines’ technique
15th May 2014
Long Run Average Cost (LRAC)
Study Notes
Internal Economies of Scale
Study Notes
Diseconomies of Scale
Study Notes