Nearly all renewable energy initiatives worldwide now cost less than traditional fossil fuel energy sources.
In a significant shift towards a cleaner and more sustainable future, renewable energy sources have emerged as the most cost-effective options for new power generation projects worldwide. According to a report published by the International Renewable Energy Agency (IRENA), the current global average Levelized Cost of Energy (LCOE) for key renewable sources in 2024-2025 are as follows:
- Onshore wind: $0.034 per kWh, making it the cheapest new electricity source globally.
- Utility-scale solar photovoltaics (PV): $0.043 per kWh.
- New hydropower: $0.057 per kWh.
These figures represent a dramatic decline over the past decade compared to a new gas combined cycle plant, which has an unsubsidized LCOE range of $0.045 to $0.115 per kWh.
The IEA uses the LCOE metric to represent the average net present cost of electricity generation for a power plant over its entire operational lifetime. This data affirms renewables as not only cost-competitive but generally more affordable than the cheapest fossil fuel options, notably combined cycle gas plants, without subsidies.
The ongoing declines in renewable LCOE, driven by technology improvements and cost reductions, are expected to continue, further widening this cost advantage. For new power generation investments, onshore wind and utility-scale solar photovoltaics now offer the lowest average costs globally, with hydropower somewhat higher but still competitive.
The UN Secretary-General, António Guterres, has emphasised the economic sense and national security benefits of the transition to renewable energy. He stated that we have passed the point of no return from fossil fuels and are on the cusp of a new era of clean energy. The volatile and unpredictable nature of fossil fuel prices and demand leaves countries vulnerable to geopolitical turmoil.
In 2024, a record 582 gigawatts (GW) of new renewable capacity was added globally, a 20% increase over the previous year. The overwhelming majority of new renewable power projects are now cheaper than their new fossil fuel counterparts.
Batteries are increasingly becoming an affordable and integral component of new energy projects. The cost of utility-scale battery energy storage has plummeted by 93% since 2010. Renewable energy has reached a critical tipping point and is the default economic choice for new power generation in most of the world.
However, it is important to note that externalities, such as air and water pollution, health outcomes, and environmental degradation from fossil fuel extraction and transportation, are not captured by LCOE. These costs are significant and must be considered when assessing the true cost of energy production.
You can read the report on the cost-competitiveness of renewable energy in its entirety here. The report by IRENA shows that 91% of newly commissioned utility-scale renewable capacity delivered power at a lower cost than the cheapest new fossil fuel-based alternative.
References: [1] IRENA (2024). Cost-competitiveness of renewables 2024. IRENA. [2] IEA (2024). Renewables 2024. IEA. [3] IRENA (2023). Renewable power generation costs in 2023. IRENA. [4] Lazard (2024). Levelized cost of energy analysis – version 15.0. Lazard.
- The tech industry is collaborating with the science community to innovate renewable energy solutions, aiming to address climate change and reduce reliance on fossil fuels.
- The health sector is increasingly recognizing the implications of climate change on public health, supporting the transition to renewable energy for the benefit of the earth's ecology.
- In the face of climate change, the finance industry is investing heavily in renewable energy projects, recognizing their cost-effectiveness and potential for long-term returns.
- The evolution of renewable energy technology over the past decade has led to a significant reduction in costs, making them more affordable than traditional fossil fuel options like gas combined cycle plants.
- The climate change crisis has prompted the energy industry to prioritize renewable energy development, with onshore wind and utility-scale solar PV offering the lowest average costs worldwide.
- The growing adoption of renewable energy is not only beneficial for the environment but also offers national security advantages, as countries become less dependent on geopolitically volatile fossil fuel resources.
- Following the dramatic decline in renewable energy costs, the research community is focusing on developing advanced energy storage technologies, such as batteries, to further improve the efficiency and reliability of renewable energy systems.
- The UN Secretary-General has emphasized that the transition to renewable energy is not only economically sensible but also necessary for the survival of the earth and its diverse ecosystems, highlighting the significant externalities associated with fossil fuel extraction and transportation.
