Thom Covert, UChicago Booth

Abstract:
We study the impact of learning-by-doing and product innovation on the path of technical progress in wind turbine manufacturing. To measure changes in wind turbine cost over time, we leverage a simple but physically realistic model of how observable wind turbine characteristics, like rotor size, relate to power production and manufacturing material needs.  We embed this into a model of wind turbine demand, and estimate it using 20 years of global data on wind farm characteristics, including wind speeds, power prices, and the turbines they installed.  Our cost estimates negatively correlate both with manufacturer experience, and with measures of manufacturing innovation, like the delivery of newer and larger turbines.  These results are consistent with a theory that LBD and innovation explain much of the observed decline in wind turbine prices over the last 20 years.