Renewables remain cheapest new power option, and avoided $US480bn in fossil fuel costs in 2025

A new report has revealed that 90 per cent of utility-scale renewable energy capacity added in 2025 was cheaper than the lowest-cost new fossil fuel alternative, helping to avoid an estimated $US480 billion in fossil fuel costs by year’s end.

The Renewable Power Generation Costs in 2025 report published by the International Renewable Energy Agency (IRENA), found that the cost advantage of renewables over fossil fuels continued to widen throughout 2025.

It describes renewables as not only the cheapest new power source around the world but also a “prime geopolitical shock absorber” capable of enhancing energy security and economic security.

Renewable power costs are starting to stabilise, according to IRENA, with solar PV remaining at its 2024 levelised cost of $US44 per megawatt-hour (MWh).

However, both onshore and offshore wind continued to improve, falling by 4 per cent and 3 per cent to $US33/MWh and $US78/MWh respectively. These are global averages, and costs may vary from country to country.

IRENA also estimated that the installed cost of a four-hour utility-scale battery decreased by around 30 per cent in 2025, down to $US140/kWh, falling faster than any other energy technology.

The same story was not replicated across the entirety of the renewable energy sector, with dispatchable renewable energy technologies like hydropower, geothermal, and concentrating solar all seeing increases to $US62/MWh, $US89/MWh, and $US115/MWh respectively.

Of all dispatchable renewable energy sources, only bioenergy saw a decline in its levelized cost of electricity (LCoE), dropping to $US86/MWh.

However, the cost of new fossil fuel-fired generation continued to rise in 2025, driven in part by a gas-turbine shortage. The capital cost of a new combined-cycle gas-fired plant nearly doubled in the United States and climbed towards $US100/MWh in higher price markets such as Italy, Germany, and Japan.

The report also clearly demonstrated the role renewable energy is providing as a geopolitical shock absorber.

Looking specifically at three import-exposed Southeast Asian economies – Indonesia, Thailand, and the Philippines – IRENA showed that their combined renewable fleet displaced an estimated $US5.7 billion in coal and gas purchases throughout 2025, much of which would have been imported.

When valued at the higher fuel prices during the peak of the crisis caused by the United States and Israel war with Iran and the closure of the Strait of Hormuz, those same volumes would have been worth $US6.5 billion.

Even beyond generation costs, when looking at 20 major economies which account for around four-fifths of the world’s renewable generation, IRENA found that renewable power in 2025 avoided an estimated $US377 billion in fossil fuel purchases.

“For countries that still rely heavily on fossil fuels, every additional megawatt of renewables strengthens economic protection against fuel-price volatility, shielding consumers, businesses, and public finances from higher costs,” said Francesco La Camera, IRENA director-general.

“Savings generated by existing renewable assets grow, providing a built-in hedge against future shocks. This energy crisis has shown yet again: expanding renewable capacity is a strategic investment in resilience and competitiveness.”

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