Renewable energy is increasing its price advantage over fossil fuels, with cost declines driven by technical advances, efficient supply chains, and economies of scale.
Energy from solar photovoltaics (PV) was an average 41% cheaper than the lowest-cost fossil fuel alternatives last year, while onshore wind was 53% less expensive, according to an international study.
Onshore wind remained the most affordable source of new renewable electricity at US$0.034 per kWh, followed by solar PV at US$0.043/kWh, found the report, Renewable Power Generation Costs 2024, by IRENA, the International Renewable Energy Agency.
The trade group found 91% of new renewable projects were cheaper than fossil fuel alternatives, confirming the cost-competitiveness of green power. The data helps explain the increased momentum of cross-border investment in renewable energy in recent years.
Further underlining the strength of the energy transition, renewables provided more than half of Britain’s annual electricity for the first time last year, Government figures show.
Together, wind, solar and biomass provided 50.4 per cent of electricity last year, a rise from 46.5 per cent the previous year, while generation from fossil fuels was down to a record low of 31.8 percent.
The IRENA data also underline the growing economies of green power, not least through declining infrastructure costs, a trend likely to attract more capital investment and a long-term decline in subsidy. Total ‘installed costs’ of renewable power decreased by more than 10% for all technologies between 2023 and 2024, except for offshore wind, where they remained relatively stable, and bioenergy, where they increased by 16%.
However, the report also warned of mounting grid integration and financing challenges, notably in emerging and capital-constrained markets.
A mixture of capacity factors, market share, and financing costs led to a slight increase in the ‘levelised cost of electricity’ (LCOE) for some technologies – solar PV by 0.6%, onshore wind by 3%, offshore wind by 4%, and bioenergy by 13%. Meanwhile, costs declined for concentrated solar power (-46%), geothermal (-16%), and hydropower (-2%).
IRENA said: “Renewables are not only cost-competitive vis-a-vis fossil fuels but are advantageous by limiting dependence on international fuel markets and improving energy security. The business case for renewables is now stronger than ever.”
Innovation apart from generation is also improving the economics of renewables. Battery energy storage system (BESS) costs have declined by 93% since 2010, reaching US$192/kWh for utility-scale systems in 2024, a trend attributed to manufacturing scale-up, improved materials and better production techniques.
As renewables gain cost advantages and drive energy security, the shift to clean power is no longer just an environmental goal – it’s a sound business strategy. Acuity Law with Purpose supports investors and developers in realising this potential, providing expert legal advice for a sustainable and profitable energy future.
