Solar plus batteries cheaper than gas — IRENA report

The rapid declines in the cost of battery storage have allowed solar and wind paired with batteries to undercut the economics of fossil fuels worldwide, a new report from the International Renewable Energy Agency (IRENA) found.

The levelised cost of electricity (LCOE) for solar plus storage ranges from USD$54 to USD$82 per megawatt-hour (MWh) in areas with abundant sunshine, the report found.That is cheaper than the USD$70 to USD$85 per MWh for new coal in China and USD$100 per MWh for new gas around the world.

Solar PV has been economically competitive for many years, but until recently, its intermittency required some sort of backup or compliment, such as gas-fired power from the grid. But the dramatic cost declines in batteries have now made “firm renewables” — solar or wind paired with batteries — cheaper than fossil fuels in many parts of the world.

The LCOE is a measure of electricity over the lifetime of the power source that takes into account construction, financing, operating, and maintenance, and is a way to make an apples-to-apples comparison of different energy sources. In this instance, IRENA wanted to assess the full cost of “firming” renewables to evaluate the cost of 24/7 clean power.

“In high-quality solar and wind zones, optimally configured systems can already deliver round-the-clock electricity at costs below typical fossil fuel benchmarks – and at prices that, once the plant is built, are largely insulated from the fuel cost volatility and supply disruptions,” IRENA wrote.

Take the case of the UAE’s Al Dhafra complex, which uses 5.2 gigawatts of solar PV, combined with 19 GWh of battery storage. It delivers a “firm” 1 GW of clean electricity for the cost of about USD$70/MWh.

California offers another example. For years, the state generated an enormous volume of electricity during the middle of the day from solar. But the state had to rely on gas at night and during winter months.

However, California has now installed 12,000 megawatts of batteries, equivalent to over 40 percent of the state’s energy demand.  It’s a rather staggering milestone, allowing solar to power the grid during the day, with excess energy stored up in battery storage, to be discharged at night.

As a result, California — the world’s fourth largest economy, if it were its own country — now burns 61 percent less gas than it did in 2023.

“24/7 renewable power is now cost-competitive with fossil fuels,” said Francesco La Camera, Director-General of IRENA. “As oil and gas markets remain exposed to geopolitical shocks, including ongoing disruptions in the Strait of Hormuz, we must insulate our economies with resilient renewable systems.”

The cheapest firm solar projects are in China, where a majority of solar-plus-battery systems deliver power below USD$100/MWh, and the lowest are around USD$30/MWh.

But competitive solar-plus-battery projects can be found in a variety of locations, from Brazil, India, Australia, and South Africa.

The U.S. “is an exception,” IRENA noted. “[H]igher financing costs, interconnection charges and permitting complexity have kept costs elevated, and firm solar-plus-storage LCOEs remain higher than in other regions.”

But across all regions, the “firming premium” is narrowing.

The competitiveness of around-the-clock renewables has improved due to a staggering 87 percent decline in solar PV costs between 2010 and 2024 and a 93 percent decline in battery prices over the same period.

The cost declines continued in 2025 and likely even accelerated. IRENA cites industry reports suggesting “turnkey system prices falling by around 30% in a single year, reaching their lowest recorded level.”

There is a “self-reinforcing” cost reduction dynamic at play. As the cost of solar declines, it lowers the cost of generating power. Meanwhile, the cost of batteries is simultaneously declining, cutting down the premium for firming up the electricity. Lower overall LCOEs leads to more deployment, which, in turn, lowers costs further.

Modelling suggests further cost reductions going forward, with LCOEs declining by 32 percent between 2025 and 2030, and by 48 percent between 2025 and 2035.

Beyond the compelling economics, the ongoing crisis in global oil and gas markets will only make renewables more attractive. With extreme price volatility and accumulating shortages of LNG, crude oil, and refined products, much of the world will think twice about gambling on such uncertainty at a time when clean energy offers more security.

“The worst energy crisis in decades has exposed the true cost of fossil fuel dependence,” António Guterres, Secretary-General of the United Nations, said in a statement.

(Writing by Nick Cunningham; editing by Sophie Davies)