Key facts
- Utility-scale solar costs rose 18% to $40-$98/MWh.
- Solar remains the cheapest new-build generation technology globally, even with increased costs.
- Combined-cycle gas turbine (CCGT) plant costs reached a 15-year high of $48-$107/MWh.
- Onshore wind costs are competitive, ranging from $37-$99/MWh.
- Increased tariffs, supply chain pressures, and higher interest rates are driving up energy generation costs.
The cost of unsubsidized utility-scale solar power has seen an 18% increase, reaching between $40 and $98 per megawatt-hour. This rise is attributed to escalating capital expenses, higher interest rates, new tariffs, and persistent supply chain challenges, according to Lazard's Levelized Cost of Energy+ analysis. Despite these increases, solar energy continues to be the most economical option for new power generation globally, even when factoring in costs for auxiliary firming to manage its intermittent nature.
Import costs have been directly impacted by levies on solar panels, batteries, and inverters, particularly those sourced from Asia. U.S. markets are experiencing significant supply chain pressures, including new tariffs on imported cells, batteries, and inverters, alongside compliance requirements like the Foreign Entity of Concern (FEOC) rules. Furthermore, the price of silver, a crucial component in solar cells and modules, has surged, driving up direct manufacturing expenses.
Meanwhile, the cost for newly constructed combined-cycle gas turbine (CCGT) plants has climbed to a 15-year high of $48-$107/MWh. This surge is driven by bottlenecks in the turbine supply chain, inflationary pressures, and exceptionally long equipment delivery timelines. High engineering, procurement, and construction (EPC) costs, coupled with elevated interest rates, are affecting all forms of thermal generation.
Despite these cost increases, utilities are still proposing new gas infrastructure to ensure grid reliability and to serve as backup for renewable energy sources. The burgeoning demand for electricity from the rapid expansion of AI data centers and general electrification efforts is prompting utilities to propose a new wave of gas-fired power plants.
Onshore wind power remains a highly competitive energy source, with costs often aligning with solar's lower price range at $37-$99/MWh. Over the past decade, onshore wind project costs have decreased substantially, with capital costs nearly halving since 2010 due to technological advancements, economies of scale, and optimized operations. Modern wind turbines feature taller towers and longer blades, enabling greater electricity generation even in areas with less consistent winds. Improvements in turbine design, control systems, AI-driven monitoring, predictive maintenance, and more accurate weather forecasting have also enhanced reliability and reduced operating expenses.