TABLE OF CONTENTS High capital costs have been a significant barrier to the market entry of wind, photo-voltaics, and other renewable energy technologies. How might the capital cost per unit of output be reduced? There are two general pathways. The first is by making innovations in the design of the system itself that will yield improvements in performance, such as increases in efficiency, availability, or system lifetime. The second is by reducing the manufacturing cost.
Here we consider the possibilities for reducing the unit manufacturing cost. We comment briefly on two ways this can be accomplished for a given system design: (1) manufacturing economies of scale, and (2) learning curves.
An important engineering question for any production process is, What is the most efficient scale of production? Given a technology, management system, and regulatory environment, how can production be most efficiently organized? Various combinations of inputs capital, labor, materials can lead to production of a quantity of output Q. For a given set of inputs { x i} the production function summarizes these possibilities as:
We seek to organize production so that the inputs are used most efficiently. Imagine that each input is increased by a factor ?. Then the production function yields the result:
If ? > 1, there are economies to be realized by increasing the scale of the production operation. If ? < 1, economies can be realized by decreasing the scale of the operation.
