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Understanding and accounting for the effect of exchange rate fluctuations on global learning rates

Author

Listed:
  • Johan Lilliestam

    (Institute for Advanced Sustainability Studies (IASS)
    University of Potsdam)

  • Marc Melliger

    (Institute for Advanced Sustainability Studies (IASS))

  • Lana Ollier

    (Institute for Advanced Sustainability Studies (IASS))

  • Tobias S. Schmidt

    (ETH Zürich
    ETH Zürich)

  • Bjarne Steffen

    (ETH Zürich
    ETH Zürich)

Abstract

Learning rates are a central concept in energy system models and integrated assessment models, as they allow researchers to project the future costs of new technologies and to optimize energy system costs. Here we argue that exchange rate fluctuations are an important, but thus far overlooked, determinant of the learning-rate variance observed in the literature. We explore how empirically observed global learning rates depend on where technologies are installed and which currency is used to calculate the learning rate. Using global data of large-scale photovoltaic (≥5 MW) plants, we show that the currency choice can result in learning-rate differences of up to 16 percentage points. We then introduce an adjustment factor to correct for the effect of exchange rate and market focus fluctuations and discuss the implications of our findings for innovation scholars, energy modellers and decision makers.

Suggested Citation

  • Johan Lilliestam & Marc Melliger & Lana Ollier & Tobias S. Schmidt & Bjarne Steffen, 2020. "Understanding and accounting for the effect of exchange rate fluctuations on global learning rates," Nature Energy, Nature, vol. 5(1), pages 71-78, January.
    • Handle: RePEc:nat:natene:v:5:y:2020:i:1:d:10.1038_s41560-019-0531-y
    DOI: 10.1038/s41560-019-0531-y
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    Cited by:

    1. Apergi, Maria & Zimmermann, Eva & Weko, Silvia & Lilliestam, Johan, 2023. "Is renewable energy technology trade more or less conflictive than other trade?," Energy Policy, Elsevier, vol. 177(C).
    2. Gunther Glenk & Rebecca Meier & Stefan Reichelstein, 2021. "Cost Dynamics of Clean Energy Technologies," Schmalenbach Journal of Business Research, Springer, vol. 73(2), pages 179-206, June.
    3. Munir Ahmad & Gul Jabeen & Syed Ahsan Ali Shah & Abdul Rehman & Fayyaz Ahmad & Cem Işik, 2022. "Assessing long- and short-run dynamic interplay among balance of trade, aggregate economic output, real exchange rate, and CO2 emissions in Pakistan," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(5), pages 7283-7323, May.
    4. Renaldi, Renaldi & Hall, Richard & Jamasb, Tooraj & Roskilly, Anthony P., 2021. "Experience rates of low-carbon domestic heating technologies in the United Kingdom," Energy Policy, Elsevier, vol. 156(C).
    5. Damien Gatt & Charles Yousif & Maurizio Cellura & Francesco Guarino & Kenneth Scerri & Ilenia Tinnirello, 2024. "A Novel Approach to Determine Multi-Tiered Nearly Zero-Energy Performance Benchmarks Using Probabilistic Reference Buildings and Risk Analysis Approaches," Sustainability, MDPI, vol. 16(1), pages 1-33, January.
    6. Melliger, Marc, 2023. "Quantifying technology skewness in European multi-technology auctions and the effect of design elements and other driving factors," Energy Policy, Elsevier, vol. 175(C).
    7. Glenk, Gunther & Meier, Rebecca & Reichelstein, Stefan, 2021. "Cost dynamics of clean energy technologies," ZEW Discussion Papers 21-054, ZEW - Leibniz Centre for European Economic Research.
    8. Beuse, Martin & Dirksmeier, Mathias & Steffen, Bjarne & Schmidt, Tobias S., 2020. "Profitability of commercial and industrial photovoltaics and battery projects in South-East-Asia," Applied Energy, Elsevier, vol. 271(C).
    9. Rong Wang & Sandra Hasanefendic & Elizabeth Von Hauff & Bart Bossink, 2023. "A System Dynamics Approach to Technological Learning Impact for the Cost Estimation of Solar Photovoltaics," Energies, MDPI, vol. 16(24), pages 1-17, December.

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