Global Solar Energy Costs Drop, Offshore Wind Prices Stay High: Wood Mackenzie

Global Solar Energy Costs Drop, Offshore Wind Prices Stay High: Wood Mackenzie

Globally, the Levelised Cost of Electricity (LCOE) landscape made significant advances in renewable energy technologies, with wind and solar power leading the way. The levelized cost of electricity (LCOE) is used to evaluate the net present value of the cost of electricity over generated during the lifetime of the generating system from the energy technology.

According to the latest LCOE reports from Wood Mackenzie,  solar PV, fixed-axis systems LCOE cost reached an average of US$66/MWh globally. Its market price ranged from US$28/MWh to US$117/MWh, reflecting the influence of geography, technology advancements, 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, according to Wood Mackenzie Report

In contrast, onshore wind technology reports a global average LCOE of US$75/MWh, spanning from US$23/MWh to US$139/MWh, demonstrating its competitiveness across a variety of terrains and markets. Offshore wind, particularly floating systems, remains expensive, with fixed installations averaging US$230/MWh and floating systems at US$320/MWh. These costs are expected to fall over time but remain higher than onshore options.

“Across regions, the cost competitiveness of these technologies shows significant variation, but overall, renewables are on a steady path towards outcompeting traditional fossil fuel sources,” 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

In 2024, the LCOE for renewable technologies like wind and solar in APAC decreased by 16%, driven by a 21% drop in capital costs. Solar PV remains the region’s cheapest generation option, with competitive pressure leading to significant reductions in project costs. Distributed PV also saw a cost reduction of 33%, reflecting market competition and improved module efficiencies for 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 capex due to ongoing supply chain and inflationary pressures.

Europe

Europe saw a modest 0.2% reduction in the average LCOE for renewables, despite a 9% decrease in installation costs from 2020 to 2023, due to the financial challenges of project funding. Utility-scale solar PV in Southern Europe leads the way, benefiting from significant declines 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 dispatchable low-carbon technologies remains crucial to ensure grid stability as renewables expand.

North America

The 2024 North America LCOE report reveals significant cost reductions for renewable energy technologies, with wind and solar leading the way. The renewable technologies LCOE declined by 4.6% in 2024, underpinned by a 4.2% drop in capital costs. By 2060, utility-scale solar LCOE is expected to decline by an average of 60%, driven by advancements in cell technology, and increased production capacity for key components like polysilicon. Onshore wind in the U.S. is projected to see a 42% reduction in LCOE, underscoring the long-term competitiveness of renewables in the region. However, offshore wind faces short-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.

Latin America

In 2024, the average LCOE for renewables in Latin America decreased by 8%, driven by easing supply chain pressures and falling capital costs. Single-axis solar PV now boasts the region’s lowest LCOE, especially in mature markets like Brazil, Chile, and Mexico. By 2060, renewables are projected to hold a 70% cost advantage over fossil fuels, highlighting their growing competitiveness. As a result, Brazil and Mexico are poised to see a rise in merchant market opportunities, as declining solar and wind costs surpass electricity prices, creating significant revenue potential.

Middle East and Africa

In 2024, the Middle East and Africa (MEA) region is witnessing a notable reduction in the levelised cost of energy (LCOE) for solar and wind projects, driven by a 13% decline in capital costs per kW. This decrease, spurred by stabilising 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 irradiance, single-axis tracker solar PV emerges as the most attractive option for developers, set to reach a competitive LCOE of US$19.7/MWh by 2060.

“These findings underscore the accelerating competitiveness of renewable energy technologies globally, with significant cost reductions projected across all regions by 2060,” said Abdullah. “The rapid cost reductions across regions highlight not just the growing competitiveness of renewables, but the potential to fundamentally reshape energy markets, economies, and even geopolitics. As renewable energy technologies mature and scale, the playing field for energy generation will shift decisively towards sustainability, efficiency, and resilience.

“The next decade may not just see the decline of fossil fuel dominance, but also the rise of unprecedented innovation in how we generate, store, and distribute power, creating a future where energy is not just cheaper but more accessible and adaptable. The implications for industries, policymakers, and communities are profound, setting the stage for new leadership in the global energy transition.”