ABU DHABI: Renewable energy continued to strengthen its position as the world’s most cost-effective source of new electricity in 2025, helping countries avoid an estimated USD 480 billion in fossil fuel costs, according to a new report released by the International Renewable Energy Agency (IRENA).
The report, Renewable Power Generation Costs in 2025, reveals that more than 90% of utility-scale renewable energy projects commissioned during the year generated electricity at lower costs than the cheapest new fossil fuel alternatives, reinforcing the economic case for accelerating the global energy transition.
Solar photovoltaic (PV) remained highly competitive, maintaining an average generation cost of USD 44 per megawatt-hour (MWh), while onshore wind costs declined by 4% to USD 33/MWh and offshore wind fell by 3% to USD 78/MWh.
In contrast, fossil fuel-based electricity generation became increasingly expensive. The report notes that shortages of gas turbines nearly doubled the capital cost of new combined-cycle gas plants in the United States, while electricity generation costs from gas approached USD 100/MWh in countries including Italy, Germany, and Japan. Continued geopolitical tensions in the Middle East are also expected to keep global gas prices elevated.
IRENA Director-General Francesco La Camera said the continued decline in renewable energy costs is delivering substantial economic benefits while enhancing energy security.
“The decline in renewable energy costs is delivering a powerful economic dividend. Every additional megawatt of renewables strengthens protection against fuel-price volatility, shielding consumers, businesses and public finances from higher costs,” he said.
The report highlights that renewable energy has increasingly acted as a buffer against geopolitical disruptions. Following the temporary closure of the Strait of Hormuz in early 2026, which triggered sharp increases in global fuel prices, countries with significant renewable energy capacity were better protected from rising import costs.
In Southeast Asia, existing renewable energy capacity in Indonesia, Thailand, and the Philippines helped avoid approximately USD 5.7 billion in coal and gas imports during 2025. At the higher fuel prices witnessed during the March–May 2026 energy crisis, those same savings would have reached USD 6.5 billion.
Across 20 major economies representing nearly 80% of global renewable electricity generation, renewable energy prevented an estimated USD 377 billion in fossil fuel purchases during 2025.
China recorded the largest savings, avoiding USD 177 billion in fossil fuel costs—nearly half of the global total—followed by the United States (USD 35 billion), Brazil (USD 32 billion), India (USD 18 billion), Germany (USD 18 billion), and Japan (USD 15 billion).
The report also notes the remarkable decline in renewable energy costs since 2010, with solar PV prices falling by 89%, concentrated solar power by 72%, onshore wind by 71%, and offshore wind by 63%. Much of this reduction has been driven by the rapid expansion of manufacturing capacity, particularly in China.
However, IRENA cautions that the period of steep cost reductions may be slowing. Global investment in clean technology manufacturing has fallen from a quarterly peak of USD 70 billion in 2023 to around USD 35 billion by the end of 2025, while rising commodity prices, supply chain adjustments, and evolving trade and tariff policies could place upward pressure on renewable energy project costs in the near term.
Despite these challenges, IRENA projects that renewable energy costs will continue to decline through 2035, albeit at a more gradual pace, maintaining renewables’ long-term competitiveness and reinforcing their central role in building resilient, affordable, and sustainable energy systems worldwide.
