Price drops, volume takes off

solar chart

Price elasticity of demand is a function that economists study for different products. With the odd exception demand goes up when price goes down, but sometimes the function is linear and other times you get more of a step change.

As you can see, solar energy is a product where there is a step change. This chart makes it remarkably clear how quickly demand grew once solar energy became cheaper than alternative sources. It also suggests that growth will continue at a staggering rate as cost declines further. Note also that as more money flows into solar more money flows into solar research, so there’s a high chance those further cost declines will come through.

  • paulsweeney

    It’s actually not a bad idea to seek out step functions. Everyone else might think the relationship is just straight line and unattractive, but experiments might prove otherwise.

  • brisbourne

    True. A company that takes a market through a step change should be able to grow very fast.