Renewable Energy Boom Avoids $480 Billion in Fossil Fuel Costs in 2025
Abu Dhabi, United Arab Emirates – Renewable energy costs continue to remain low, establishing renewables as the most economical source of new electricity in numerous markets. This trend further solidifies their cost advantage over fossil fuels.
The report titled Renewable Power Generation Costs in 2025, published by the International Renewable Energy Agency (IRENA), reveals that over 90% of the utility-scale renewable capacity added in 2025 was less expensive than the least costly new fossil fuel alternatives.
Cost Dynamics Favoring Renewables
The cost disparity between renewable energy and fossil fuels has widened significantly. In 2025, the price of solar photovoltaic (PV) energy remained stable at USD 44 per megawatt hour (MWh), while onshore wind energy saw a 4% decrease to USD 33/MWh. Offshore wind energy also improved, dropping by 3% to USD 78/MWh.
In contrast, the costs associated with new gas-fired generation have surged. A shortage of turbines has effectively doubled the capital costs for new combined-cycle plants in the United States. In markets with elevated gas prices, such as Italy, Germany, and Japan, costs have approached USD 100/MWh. Additionally, ongoing instability in the Middle East is expected to keep gas prices elevated throughout the year.
Economic Impact of Renewables
Installed renewable energy sources are projected to help avoid approximately USD 480 billion in fossil fuel costs in 2025, positioning renewables as a buffer against the volatility of fossil fuel markets during energy crises.
Francesco La Camera, Director-General of IRENA, stated that the decline in renewable energy costs is yielding substantial economic benefits. He emphasized that for nations still heavily reliant on fossil fuels, each additional megawatt of renewable energy enhances economic resilience against fuel price fluctuations. This, in turn, protects consumers, businesses, and public finances from escalating costs. Existing renewable assets are generating savings that act as a safeguard against future shocks, reinforcing the notion that expanding renewable capacity is a strategic investment in resilience and competitiveness.
Regional Benefits and Global Context
The geopolitical implications of renewable energy were underscored when the Strait of Hormuz was closed in early 2026, leading to spikes in import prices across Asia and Europe. During this period, existing renewable electricity generation provided a vital financial cushion.
In Southeast Asia, particularly in Indonesia, Thailand, and the Philippines, the renewable energy sector helped avoid around USD 5.7 billion in coal and gas purchases in 2025. If valued at the higher fuel prices during the peak of the crisis in March-May 2026, these savings would have amounted to USD 6.5 billion.
The economic advantages of renewable energy extend beyond mere generation costs. In 2025, renewable power across 20 major economies—accounting for roughly four-fifths of the world’s renewable generation—prevented an estimated USD 377 billion in fossil fuel purchases.
The geographical distribution of these economic benefits aligns closely with the global distribution of renewable energy capacity. China alone accounted for USD 177 billion, nearly half of the total cost savings, reflecting the scale of its renewable energy fleet. The United States followed with USD 35 billion in avoided fossil fuel costs, while Brazil, India, Germany, and Japan recorded savings of USD 32 billion, USD 18 billion, USD 18 billion, and USD 15 billion, respectively.
Trends in Renewable Energy Costs
Since 2010, the costs of solar PV have decreased by 89%, concentrating solar by 72%, onshore wind by 71%, and offshore wind by 63%. The rapid expansion of manufacturing, particularly in China, has fostered a highly competitive environment characterized by slim profit margins and prices nearing production costs.
However, this phase of intense competition is undergoing a transformation. Investment in clean technology manufacturing has halved, dropping from a quarterly peak of USD 70 billion in 2023 to USD 35 billion by the end of 2025. As China restructures its renewable industry, global commodity and component prices are rising concurrently.
These factors, coupled with a changing trade and tariff landscape, are likely to exert upward pressure on total installed costs throughout the year. Nevertheless, IRENA’s long-term outlook indicates that costs will continue to decline through 2035, albeit at a slower pace than previously observed.
About the International Renewable Energy Agency (IRENA)
IRENA serves as the leading intergovernmental agency for the renewable energy transition, aiming for systemic change across energy sectors. Comprising 172 member countries, with 13 additional nations in the accession process, IRENA provides essential knowledge, technical assistance, capacity building, and project facilitation. The agency fosters international cooperation and partnerships to combat climate change while promoting sustainable development, energy access, security, and resilient economies.
For further details, please contact:
Nicole Bockstaller, Chief Communications Officer, IRENA, nbockstaller@irena.org.
Source: www.zawya.com
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Published on 2026-07-02 13:52:00 • By the Editorial Desk
