Most New Renewable Projects Cheaper Than Fossil Fuels Alternatives: Report

Addition of 582 gigawatts of renewable capacity in 2024 led to avoiding fossil fuel use valued at about $57 billion

A new study confirmed that renewables continue to offer a price advantage over fossil fuels. According to IRENA’s research titled “Renewable Power Generation Costs in 2024”, 91% of new renewable projects are now cheaper than fossil fuel alternatives, Technological innovation, competitive supply chains, and economies of scale have driven this decline in cost.

In 2024, solar photovoltaics (PV) were 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, according to the study. 

Francesco La Camera, Director General of IRENA said, “The cost-competitiveness of renewables is today’s reality. Looking at all renewables currently in operation, the avoided fossil fuel costs in 2024 reached up to USD 467 billion.”

Grid Integration and Financing Challenges

Integration costs are emerging as new constraints on deployment of renewables. Many wind and solar projects are delayed due to grid connection bottlenecks, slow permitting and costly local supply chains, particularly in G20 and emerging markets, where grid investments must keep pace with rising electricity demand and the expansion of renewables, according to the report. 

Challenges like geopolitical shifts including trade tariffs, raw material bottlenecks, and evolving manufacturing dynamics, particularly in China, will likely temporarily raise costs.

Global South

In many developing countries in the Global South, high capital costs, influenced by macroeconomic conditions and perceived investment risks, significantly inflate the levelised cost of electricity (LCOE) of renewables, said the report. 

The report 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. The study’s assumed cost of capital ranged from 3.8% in Europe to 12% in Africa, reflecting differing perceived risk profiles.

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