Rich Sweeney goes beyond my casual “go read it” reference to the Economist article on renewables in Germany and actually explains its implications:
Like a lot of things, economies of scale are more complex than the renewables lobby would have you believe (Joseph Romm makes the scale argument a lot, and recently Daniel Weiss made a similar claim). However, government can’t simply, and infinitely, induce cost reductions by just promoting scale (I think Stalin made a similar miscalculation). Especially when one of the production inputs is scarce, as silicon is (at least in the short run).
Diseconomies of scale are actually even more of an issue for wind, as I’ve been meaning to post for some time. The technology itself, ie wind turbines, have been around for awhile and could probably be best characterized as mature (at least for high-speed winds). So the potential for cost reduction is probably relatively limited on the capital side. The other main input, however, is finite – wind. Moreover, not all winds (?) are created equal, with some sites being much harder to get too and further away from the grid. So for wind energy, there’s a real possibility of decreasing returns to scale, depending where you are on the supply curve.