Technologies that follow Wright’s Law get cheaper at a consistent rate, as the cumulative production of that technology increases. The time series i

Learning curves: What does it mean for a technology to follow Wright’s Law?

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2024-02-13 13:30:08

Technologies that follow Wright’s Law get cheaper at a consistent rate, as the cumulative production of that technology increases.

The time series in the chart shows the deployment of solar panels on the horizontal axis and the price of solar panels on the vertical axis. The orange line that describes the relationship between these two metrics over time is called the learning curve of that technology.

As the cumulative installed capacity increased, the price of solar declinedexponentially. Solar technology is a prime example. For more than four decades, the price of solar panels declined by 20% with each doubling of global cumulative capacity.

The fact that both metrics changed exponentially can be nicely seen in this chart because both axes are logarithmic. On a logarithmic axis, a measure that declines exponentially follows a straight line.

That more production leads to falling prices is not surprising – such ‘economies of scale’ are found in the production of many goods. If you are already making one pizza, making a second one isn’t that much extra work.