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Solar and wind sources have been leading the way in terms of global Levelized Cost of Electricity (LCOE) competitiveness. In Latin America, the average cost fell by 8%, driven by a reduction in supply chain pressures. Falling costs could boost significant revenues in Brazil and Mexico.
In 2024, the global Levelized Cost of Electricity (LCOE) scenario continues to reflect significant advances in renewable energy technologies, with wind and solar leading the way, according to a report by Wood Mackenzie.
According to Amhed Jameel Abdullah, principal research analyst at Wood Mackenzie, “The cost competitiveness of these technologies varies widely across regions, but overall renewables are on track to overtake traditional fossil fuels.”
For solar PV, fixed-axis systems have an average LCOE of $66/MWh globally, with a wide range from $28/MWh to $117/MWh, reflecting the influence of geography, technological advances, and regional market conditions. Single-axis tracking PV systems fare slightly better, averaging $60/MWh, with a range from $31/MWh to $103/MWh, reinforcing their growing role in utility-scale projects.
In contrast, onshore wind technology has a global average LCOE of $75/MWh, with a range of $23/MWh to $139/MWh, demonstrating its competitiveness across a range of domains and markets. Offshore wind, particularly floating systems, remains expensive, with fixed installations costing an average of $230/MWh and floating systems $320/MWh. These costs are expected to decline over time, but remain higher than those of onshore options.
Latin America
By 2024, the average LCOE for renewables in Latin America is set to decline by 8%, driven by easing supply chain pressures and falling capital costs. Single-axis solar PV now has the lowest LCOE in the region, especially in mature markets such as Brazil, Chile and Mexico. By 2060, renewables should have a 70% cost advantage over fossil fuels, highlighting their growing competitiveness. Consequently, Brazil and Mexico will see increasing commercial market opportunities as declining costs for solar and wind outpace electricity prices, creating significant revenue potential.
Asia-Pacific
By 2024, the LCOE of renewable technologies such as wind and solar in APAC has declined by 16%, driven by a 21% drop in capital costs. Solar PV remains the cheapest generation option in the region, with competitive pressure resulting in significant reductions in project costs. Distributed PV also saw a 33% cost reduction, reflecting market competition and improved module efficiency of technologies such as TOPCon and HJT. However, offshore wind remains a premium technology, with cost competitiveness largely limited to China, while other markets continue to face high investments due to ongoing supply chain and inflationary pressures.
Europe
Europe saw a modest 0.2% reduction in average renewables LCOE, despite a 9% reduction in installation costs from 2020 to 2023, due to financial challenges in project financing. Utility-scale solar PV in Southern Europe leads the way, benefiting from significant falls in capital costs and achieving the lowest LCOE in the region. By 2060, renewable technologies could be up to 85% cheaper than fossil fuels, while sustained investment in low-carbon, dispatchable technologies remains crucial to ensure grid stability as renewables expand.
North America
The North American 2024 LCOE report reveals significant cost reductions for renewable energy technologies, led by wind and solar. The LCOE for renewable technologies fell by 4.6% in 2024, thanks to a 4.2% decline in capital costs. By 2060, the LCOE for utility-scale solar is expected to decline by an average of 60%, driven by advances in cell technology and increasing production capacity for key components such as polysilicon. Onshore wind in the US is expected to see a 42% reduction in LCOE, highlighting the long-term competitiveness of renewables in the region. However, offshore wind faces near-term cost pressures but will see a significant LCOE reduction of up to 67% by 2060, highlighting its growing role in the future energy mix.
Middle East and Africa
By 2024, the Middle East and Africa (MEA) region is witnessing a significant reduction in the levelized cost of energy (LCOE) for solar and wind projects, driven by a 13% decline in capital costs per kW. This decline, spurred by stabilizing supply chains, highlights solar PV’s position as the most cost-effective energy source in the region. With Saudi Arabia and the UAE benefiting from high solar irradiation, single-axis solar PV has emerged as the most attractive option for developers, and is projected to reach a competitive LCOE of $19.7/MWh by 2060.
“These results underscore the acceleration in the competitiveness of renewable energy technologies globally, with significant cost reductions projected across all regions by 2060,” Abdullah said. “Rapid cost reductions across all regions highlight not only the growing competitiveness of renewables, but also their potential to fundamentally reshape energy markets, economies, and even geopolitics. As renewable energy technologies mature and scale, the playing field for power generation will shift decisively toward sustainability, efficiency, and resilience.”
“The next decade may not only see the decline of fossil fuel dominance, but also the emergence of unprecedented innovations in the way we generate, store and distribute energy, creating a future in which energy is not only cheaper, but also more accessible and adaptable. The implications for industries, policymakers and communities are profound, and lay the groundwork for new leadership in the global energy transition.” |
