Renewable levelized cost of electricity competitiveness reaches new milestone across global markets in 2025

The global landscape for levelised cost of electricity (LCOE) continues to reflect significant advances in renewable energy technologies. Solar photovoltaic technology will maintain its position as the world's most cost-competitive power generation source through 2025, with single-axis tracker systems in the Middle East and Africa leading at US$37/Megawatt hour (MWh). Wood Mackenzie expects continued module efficiency improvements and supply chain stabilisation to drive further cost reductions across all major regions. 

“Across all regions, renewable technologies demonstrate clear cost advantages over conventional generation. We expect continued cost reductions through technological improvements, supply chain optimisation and economies of scale, reinforcing renewables' position as the dominant power generation technology globally,” said Amhed Jameel Abdullah, senior research analyst at Wood Mackenzie. 

The Wood Mackenzie reports cover the regions of Europe, North America, Latin America, Asia Pacific and the Middle East and Africa. 

Asia Pacific 

Wind and solar technologies drive profound structural change across Asia Pacific's (APAC) power market. Utility-scale solar photovoltaic delivers the lowest generation costs regionwide, with LCOE spanning US$27/MWh in China to US$118/MWh in Japan by 2025. Onshore wind establishes emerges as a highly cost-competitive option, with China, India and Vietnam achieving global leadership at US$25-70/MWh. Offshore wind costs vary dramatically by market, with China demonstrating positive merchant revenue potential whilst other markets face elevated costs through the early 2030s. 

Hybrid solar-plus-battery systems gain momentum across APAC as battery costs fall and efficiencies improve, with Australia stabilising solar through batteries and India pushing hybrid systems toward grid parity. China maintains competitive advantages in energy storage costs, achieving the world's lowest storage LCOE through intense supplier competition. Nuclear small modular reactors remain significantly more expensive than pressurised water reactors despite development progress. 

Europe 

Europe's renewable LCOE fell 7% in 2025 as capital costs dropped 8% versus the 2020-2024 average. Utility-scale solar PV with single-axis tracking offers Europe's lowest average LCOE, with declining module prices driving 10% cost reductions from 2024. 

Utility-scale four-hour battery storage costs will fall below US$100/MWh by 2026, dropping another 35% by 2060. Commercial distributed PV LCOE will decline 49% by 2060 compared to current levels. Southern and Eastern European markets rank highest for onshore wind and solar revenue surplus. 

Onshore wind LCOE faces post-inflation recovery, falling 16% through the 2020s from US$67.6/MWh in 2024 to US$56.7/MWh by 2030. Offshore wind LCOE will rise through the early 2030s as supply chain constraints increase component prices. Negotiating power has shifted to original equipment manufacturers and suppliers, supporting margin recovery. 

North America  

Renewable technology costs in North America will decline to 2060 despite policy challenges. New US tariffs have increased short-term solar capital costs. However, advancing module, inverter and tracker technologies will drive long-term price reductions. Residential solar faces similar near-term cost pressures from tariffs and investment tax credit phaseouts. 

Tax credit phaseouts will increase onshore wind LCOE by 24% after 2030, reversing earlier cost declines. However, merchant revenue projections affirm the sector's long-term commercial viability as onshore wind will achieve higher capture prices than other renewable technologies, signalling robust market value. Offshore wind LCOEs remain elevated as policy uncertainty undermines IRA (Inflation Reduction Act) benefits and delays project development. 

Resurgent power demand for AI boom and data centers is leading to a surge in gas turbine orders through 2030. In the short term, capital cost for gas turbine power plants doubles in real terms relative to 2020 levels. Furthermore, fuel costs steadily climb throughout the forecast period, driven by higher levels of power burn and LNG exports. 

Low-carbon dispatchable technologies improve but remain costly. Nuclear Small Modular Reactors (SMRs) and enhanced geothermal feature in Wood Mackenzie’s long-term forecasts as markets balance rising demand, increasing gas costs and net-zero targets. These subsidised technologies still cost more than renewables but offer critical dispatchability. 

Latin America 

The average LCOE for renewables in Latin America fell 23% between 2020 and 2024. Improved performance and a 20% reduction in capital costs pe kilowatt (kW) drove this decline. Commercial solar PV achieved the lowest average LCOE across the region. Single-axis solar PV delivered the most competitive utility-scale generation costs in 2025. Mature markets including Brazil, Chile and Mexico recorded the region's lowest LCOE values. 

Onshore wind LCOE will drop 42% between 2025 and 2060 after peaking in 2024. The regional average reflects improving technology and manufacturing scale. Supply chain normalisation will accelerate cost improvements. Offshore wind faces different dynamics with delayed cost reductions until the mid-2030s. Global supply chain constraints and slow capacity ramp-up will limit near-term improvements. However, fixed-bottom LCOE will fall 67% from 2025 levels by 2060.  

Latin America's battery storage market continues expanding as global prices decline. Grid constraints are being gradually addressed through infrastructure investment. Storage LCOE will decrease 24% by 2060 as the market matures. Countries are implementing policies to support storage deployment. 

 Middle East and Africa 

Wind and solar LCOEs across the Middle East and Africa region declined further in 2025, falling 6% to 10% year-on-year. Utility-scale solar PV maintains its position as the region's price setter. This reflects exceptional irradiance levels and robust net capacity factors, particularly in Saudi Arabia and the United Arab Emirates. Single-axis tracker technology consistently outperforms onshore wind in these markets. Single-axis tracker PV costs are projected to converge at approximately US$17/MWh by 2060. 

 Tracker and fixed-tilt PV technologies will remain more cost-effective than onshore wind throughout our outlook period. Onshore wind costs will settle around US$30/MWh over the same timeframe. Utility-scale battery storage costs across the Middle East continue their downward trajectory, with average turnkey prices in Saudi Arabia and the UAE expected to decline 7% to 9% by 2034. 

In general, onshore wind technology demonstrates strong regional competitiveness with costs ranging from US$25/MWh in China to US$70/MWh in Vietnam, establishing a global average around US$50-60/MWh across major markets.  

On the other hand, offshore wind faces more challenging economics, with costs varying dramatically by region - China shows positive merchant revenue potential while other markets experience elevated costs through the early 2030s, with European offshore wind LCOE rising due to supply chain constraints and component price increases. These offshore costs are expected to decline significantly by 2060, with fixed-bottom systems in Latin America projected to fall 67% from 2025 levels. 

“The global energy transition is accelerating at an unprecedented pace, with renewable technologies achieving cost parity with conventional generation across all major markets. Our LCOE 2025 analysis reveals that solar PV and onshore wind have become the dominant low-cost options worldwide, whilst hybrid systems and battery storage are rapidly closing the competitiveness gap” added Abdullah.