Renewable Energy Costs In 2024: Majority Of New Projects Cheaper Than Fossil Fuels

Renewable energy continues to lead in cost-effectiveness within global power markets, as confirmed by IRENA's latest report on Renewable Power Generation Costs in 2024. The report highlights that renewables have maintained their price advantage over fossil fuels, driven by technological advancements, competitive supply chains, and economies of scale.

In 2024, solar photovoltaics (PV) were 41% cheaper than the lowest-cost fossil fuel alternatives. Onshore wind projects were even more affordable, being 53% cheaper. Onshore wind remained the most economical source of new renewable electricity at US$0.034/kWh, followed closely by solar PV at US$0.043/kWh.

The addition of 582 gigawatts of renewable capacity in 2024 resulted in significant cost savings. This expansion avoided fossil fuel use valued at approximately US$57 billion. Impressively, 91% of new renewable power projects commissioned last year were more cost-effective than any new fossil fuel alternatives.

Renewables not only compete with fossil fuels on cost but also offer advantages like reduced dependence on international fuel markets and enhanced energy security. The business case for renewables is now stronger than ever before.

Despite continued cost reductions expected as technologies mature and supply chains strengthen, short-term challenges persist. Geopolitical shifts such as trade tariffs, raw material bottlenecks, and evolving manufacturing dynamics, especially in China, pose risks that could temporarily raise costs.

Higher costs are likely to persist in Europe and North America due to structural challenges like permitting delays, limited grid capacity, and higher balance-of-system expenses. In contrast, regions like Asia, Africa, and South America may experience pronounced cost declines due to stronger learning rates and high renewable potential.

Global Perspectives on Renewable Energy

United Nations Secretary-General António Guterres stated: "Clean energy is smart economics – and the world is following the money. Renewables are rising; the fossil fuel age is crumbling. Leaders must unblock barriers, build confidence, and unleash finance and investment."

IRENA Director-General Francesco La Camera added: "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 US$467 billion."

Investment Frameworks and Financing Challenges

IRENA’s 2024 report also examines structural cost drivers and market conditions shaping renewable investment. It concludes that stable 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. However, inconsistent policy environments and opaque procurement processes undermine investor confidence.

Integration Costs and Technological Advances

Integration costs are emerging as a constraint on deploying renewables. Wind and solar projects face delays due to grid connection bottlenecks, slow permitting processes, and costly local supply chains. This issue is acute in G20 countries where grid investment must keep pace with rising electricity demand.

The cost of battery energy storage systems (BESS) has declined by 93% since 2010, reaching US$192/kWh for utility-scale systems in 2024. This reduction results from manufacturing scale-up, improved materials, and optimised production techniques.

The Role of Digital Technologies

Battery storage systems combined with digital technologies are vital for integrating variable renewable energy sources like solar and wind. AI-enabled digital tools enhance asset performance and grid responsiveness.

However, digital infrastructure flexibility remains a pressing challenge in emerging markets where further investment is needed to realise the full potential of renewables.

The transition to renewables is irreversible but depends on choices made today regarding cooperation and investment frameworks—especially in the Global South—to ensure fair progress.

With inputs from WAM