Solar and Wind Now the Cheapest Sources of New Power Generation
Renewable energy is now decisively the world’s most cost-effective source of new electricity generation, according to the International Renewable Energy Agency’s (IRENA) Renewable Power Generation Costs in 2024 report.
The findings confirm that solar and wind power not only compete with fossil fuels but consistently outpace them on price. In 2024, solar photovoltaics (PV) were, on average, 41% cheaper than the lowest-cost fossil fuel alternatives, while onshore wind projects came in 53% cheaper, making wind the most affordable renewable energy source at USD 0.034/kWh, followed closely by solar PV at USD 0.043/kWh.
This ongoing cost reduction is attributed to technological innovation, improved supply chains, and economies of scale. In total, 582 GW of new renewable capacity was added globally in 2024, helping avert an estimated USD 57 billion in fossil fuel spending. IRENA estimates that renewables in operation helped avoid up to USD 467 billion in fossil fuel costs over the year.
“Clean energy is smart economics – and the world is following the money,” said UN Secretary-General António Guterres.
Regional Outlook: Opportunities and Constraints
While the global trend is positive, the report warns that regional disparities remain significant.
Europe and North America face higher short-term costs due to permitting delays, grid bottlenecks, and rising balance-of-system expenses. Conversely, Asia, Africa, and South America could see steeper cost declines, thanks to more favorable learning curves and stronger renewable resource potential.
In Africa, despite comparable generation costs to Europe—for example, USD 0.052/kWh for onshore wind—financing costs remain much higher, driven by perceived risk. IRENA’s assumed cost of capital ranged from 3.8% in Europe to 12% in Africa, underscoring a pressing need for more equitable investment frameworks.
“The cost-competitiveness of renewables is today’s reality,” said IRENA Director-General Francesco La Camera. “But the pace and fairness of the energy transition hinge on the choices we make today.”
Structural Barriers: Investment and Infrastructure
IRENA identifies policy inconsistency, opaque procurement, and weak financing structures as persistent barriers—especially in emerging markets. The agency stresses the importance of stable, transparent revenue models such as power purchase agreements (PPAs) to reduce investor risk.
Grid infrastructure is another key hurdle. Integration costs—particularly related to grid connections and permitting delays—are rising, often outpacing the development of new renewable capacity. This is a growing concern across the G20 and the Global South.
Technology and Innovation Drive the Business Case
Beyond generation, costs for battery energy storage systems (BESS) have plummeted—dropping 93% since 2010 to reach USD 192/kWh for utility-scale systems in 2024. Hybrid systems that combine solar, wind, and storage—enhanced by AI and digital tools—are improving grid resilience and performance.
Still, the full benefits of these technologies hinge on infrastructure investment and the elimination of policy bottlenecks in developing economies.
A Clear Path Forward
IRENA concludes that the energy transition is irreversible, but accelerating its pace will depend on how effectively global stakeholders:
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Close financing gaps
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Build resilient, inclusive supply chains
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Enhance international cooperation
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Reform energy market structures
The business case for renewables has never been stronger. However, unlocking their full potential—especially in the Global South—will require decisive leadership, smart investment, and bold policy reform.
