No. 2025-17 - Who rides the renewable cost curve? Country evidence on prices, learning, and policy

Abstract:

How fast can every country benefit from renewable cost declines? Using the largest cross-country panel dataset assembled to date, this paper analyzes 34 years of cost observations for 72 countries to ask whether all nations benefit equally from the global renewable learning curve. After adjusting for purchasing power parity, we document two findings: (i) country price dispersion is widening, roughly twice as fast for wind as for solar; (ii) country cost rankings are highly persistent (Spearman year-to-year ρ > 0.75). Decomposing total CAPEX and assessing experience curves indicates that global learning accounts for 60–75% of country solar cost declines but virtually none of wind’s, with local price pressures negating most wind power learning. multivariable regressions reveal contrasting drivers: solar costs are most sensitive to sovereign bond yields and exchange-rate pass-through, whereas wind costs decrease with GDP per capita and foreign direct investment. These findings carry just-transition implications. They suggest that without targeted finance and procurement support, lower-income countries may pay a lasting premium for clean energy, deepening global inequality. An analysis of climate policy shows that market-trading instruments (auctions, renewable certificates) correlate with 7–12% lower solar costs, while overall policy intensity has no significant effect on either technology. We conclude by outlining four policy levers—regional procurement consortia, FDI facilitation, finance de-risking, and market-based support schemes—that could narrow cross-country cost gaps.