Mechanisms of hardware and soft technology evolution and the implications for solar energy cost trends

Technology hardware and deployment processes (‘soft technology’) seem fundamentally different, but little work examines the nature of this difference and its implications for technology improvement. Here we present a model to study the roles of hardware and soft technology in cost evolution and apply it to solar photovoltaic (PV) systems. Differing properties of hardware and soft technology help explain PV’s cost decline. Rapid improvements in hardware affected globally traded components that lowered both hardware and soft costs. Improvements in soft technology occurred more slowly, were not shared as readily across locations and only affected soft costs, ultimately contributing less than previously estimated. As a result, initial differences in soft technology across countries persisted and the share of soft costs rose. In general, we show the usefulness of modelling dependencies between technology costs and features to understand past drivers of cost change and inform future technology development.