91% of New Renewable Projects Now Cheaper Than Fossil Fuels Alternatives
Renewables maintain their cost leadership in global power markets, IRENA’s new report on Renewable Power Generation Costs in 2024 confirms.
The report confirms that renewables maintained their price advantage over fossil fuels, with cost declines driven by technological innovation, competitive supply chains, and economies of scale.
In 2024, solar photovoltaics (PV) were, on average, 41% cheaper than the lowest-cost fossil fuel alternatives, while onshore wind projects were 53% cheaper. Onshore wind remained the most affordable source of new renewable electricity at USD 0.034/kWh, followed by solar PV at USD 0.043/kWh.
The addition of 582 gigawatts of renewable capacity in 2024 led to significant cost savings, avoiding fossil fuel use valued at about USD 57 billion. Notably, 91% of new renewable power projects commissioned last year were more cost-effective than any new fossil fuel alternatives.
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.
While continued cost reductions are expected as technologies mature and supply chains strengthen, short-term challenges remain. Geopolitical shifts including trade tariffs, raw material bottlenecks, and evolving manufacturing dynamics, particularly in China, pose risks that could temporarily raise costs.
Higher costs are likely to persist in Europe and North America, driven by structural challenges such as permitting delays, limited grid capacity, and higher balance-of-system expenses. In contrast, regions like Asia, Africa, and South America, with stronger learning rates and high renewable potential, could see pronounced cost declines.
IRENA’s 2024 report also explores the structural cost drivers and market conditions shaping renewable investment. It concludes that stable and predictable revenue frameworks are essential to reduce investment risk and attract capital.
Mitigating financing risk is central to scaling renewables in both mature and emerging markets. Instruments such as power purchase agreements (PPAs) play a pivotal role in accessing affordable finance, while inconsistent policy environments and opaque procurement processes undermine investor confidence.
Particularly, integration costs are emerging as a new constraint on deployment of renewables. Increasingly, wind and solar projects are delayed due to grid connection bottlenecks, slow permitting and costly local supply chains. This is acute in G20 and emerging markets, where grid investment must keep pace with rising electricity demand and the expansion of renewables.
Furthermore, financing costs remain a decisive factor in determining project viability. In many developing countries of the Global South, high capital costs, influenced by macroeconomic conditions and perceived investment risks, significantly inflate the levelized cost of electricity (LCOE) of renewables.
For example, IRENA found that while onshore wind generation costs were similar in Europe and Africa with around USD 0.052/kWh in 2024, the cost structures varied significantly. European projects were capital-expenditure driven, while African projects bore a much higher share of financing costs. IRENA’s assumed cost of capital ranged from 3.8% in Europe to 12% in Africa, reflecting differing perceived risk profiles.
Finally, technological advances beyond generation are also improving the economics of renewables. The cost of battery energy storage systems (BESS) has declined by 93% since 2010, reaching USD 192/kWh for utility-scale systems in 2024. This reduction is attributed to manufacturing scale-up, improved materials and optimised production techniques.
Battery storage, hybrid systems, combining solar, wind and BESS as well as digital technologies are increasingly vital for integrating variable renewable energy. Artificial intelligence (AI)-enabled digital tools are enhancing asset performance and grid responsiveness. However, digital infrastructure, flexibility, and grid expansion and modernisation remain pressing challenges, including in emerging markets, where the full potential of renewables cannot be realised without further investment.
Read the full report Renewable Power Generation Costs in 2024.
IRENA | https://www.irena.org/
