In 2024, 91% of new renewable energy projects worldwide delivered power at a lower cost than any new fossil fuel alternative, according to the latest data from the International Renewable Energy Agency (IRENA).
Solar photovoltaics (PV) and onshore wind remained the cheapest sources of electricity, coming in at USD 0.043/kWh and USD 0.034/kWh respectively—41% and 53% cheaper than the lowest-cost fossil generation.
IRENA’s annual Renewable Power Generation Costs report confirms that renewables are no longer just environmentally preferable—they are now economically decisive. A record 582 GW of new renewable capacity was added globally in 2024, saving an estimated USD 57 billion in fossil fuel costs. The aggregate avoided cost of fossil fuel generation by renewables already in operation is even more striking: up to USD 467 billion.
Yet, while renewables are increasingly cost-competitive on a global scale, regional disparities persist. Project economics remain significantly shaped by financing costs and infrastructure bottlenecks. In developed markets like Europe and North America, developers continue to face structural constraints—namely permitting delays, underbuilt grid infrastructure, and elevated balance-of-system (BoS) costs—that risk slowing deployment despite favourable levelized costs of electricity (LCOE).
In contrast, regions such as Asia, Africa, and South America exhibit higher potential for cost declines due to steeper learning rates and stronger renewable resource availability. However, these gains are frequently offset by higher financing costs. For instance, onshore wind LCOEs in Europe and Africa were roughly aligned at USD 0.052/kWh in 2024, but the underlying cost composition diverged sharply: while European projects were driven primarily by capital expenditures, African projects bore a disproportionate financing burden due to cost of capital differences—estimated at 3.8% in Europe versus 12% in Africa.
Cost Declines Endure, but So Do Supply Risks
The long-term drivers of cost reductions—technological innovation, scaling, and competitive supply chains—remain intact. The global average cost of utility-scale battery energy storage systems (BESS) dropped 93% since 2010, reaching USD 192/kWh in 2024. This trend is central to improving renewable integration, with BESS enabling hybrid systems and grid responsiveness.
However, short-term inflationary pressures are mounting. Raw material bottlenecks, elevated freight and logistics costs, and the growing fragmentation of global supply chains—particularly in China—pose risks to continued cost declines. Trade barriers, including tariffs on solar and battery imports in North America and the EU, could also inflate costs if alternative supply routes do not scale rapidly enough.
IRENA warns that rising geopolitical tension and protectionist industrial policy may slow momentum unless supply chains remain open and resilient. The report points to the need for coordinated international action to reduce financing risk, scale manufacturing in the Global South, and accelerate infrastructure upgrades.
The Grid: A Bottleneck to Deployment
One of the most urgent issues emerging from IRENA’s findings is that grid limitations are beginning to cap the growth potential of renewable projects. As more variable renewable energy (VRE) capacity comes online, transmission and distribution infrastructure has struggled to keep pace.
This is particularly acute in G20 economies and fast-growing emerging markets, where project delays are increasingly tied to interconnection issues rather than hardware or investment limitations. Integration costs—once a peripheral concern—are now emerging as a core constraint on the renewables buildout.
Beyond hardware, IRENA underscores that a stable and transparent investment environment is essential. Power purchase agreements (PPAs) remain critical to securing low-cost financing, but inconsistent procurement practices and policy uncertainty in several markets—especially in parts of Africa and Southeast Asia—continue to deter investors.
Without predictable revenue frameworks and supportive grid policy, even the best technology economics may fail to translate into scaled deployment.
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