Precious Anga
Lagos — Utility-scale solar power has retained its position as the world’s cheapest source of new electricity generation despite a sharp increase in project costs, according to the latest Levelized Cost of Energy+ (LCOE+) analysis released by global financial advisory firm Lazard.
The report showed that the unsubsidised cost of utility-scale solar electricity increased by 18 per cent, rising to between $40 and $98 per megawatt-hour (MWh). Lazard attributed the increase to higher capital costs, elevated interest rates, import tariffs and persistent supply chain disruptions affecting the renewable energy sector.
Despite the increase, the consultancy said utility-scale solar remains the most cost-effective technology for new electricity generation globally, even after accounting for additional costs associated with battery storage and other backup systems needed to manage the intermittent nature of solar power.
According to the report, higher tariffs on imported solar panels, batteries and inverters, particularly equipment sourced from Asia, have significantly increased project costs. The United States has also introduced stricter compliance requirements, including the Foreign Entity of Concern (FEOC) rules, alongside new tariffs on imported solar cells and energy storage components.
Lazard further noted that rising silver prices have compounded the cost pressures. Silver is a critical raw material used in the manufacture of photovoltaic cells and solar modules, and its recent price rally has pushed up production costs across the global solar supply chain.
While renewable energy costs have risen, the report found that gas-fired power generation has become even more expensive. The cost of electricity generated from newly constructed combined-cycle gas turbine (CCGT) plants climbed to between $48 and $107 per MWh, the highest level recorded in the past 15 years.
The increase in gas generation costs was linked to shortages of gas turbines, prolonged equipment delivery timelines, inflationary pressures, higher engineering, procurement and construction (EPC) costs, and elevated financing expenses.
Despite these challenges, utilities across several markets continue to invest in new gas-fired generation to strengthen grid reliability and provide backup for renewable energy systems. The report said the rapid growth of artificial intelligence (AI) data centres and increasing electricity demand driven by electrification have prompted power companies to continue expanding gas generation capacity.
Lazard also identified onshore wind as one of the most competitive sources of electricity generation, with generation costs ranging between $37 and $99 per MWh, placing it alongside utility-scale solar as one of the lowest-cost technologies available.
The report explained that wind power costs have declined significantly over the past decade as advances in turbine technology, larger rotor blades, taller towers, improved operational efficiency, predictive maintenance and artificial intelligence-driven monitoring have boosted electricity output while reducing operating costs.
According to Lazard, technological innovation and economies of scale have transformed both solar and wind into highly competitive energy sources, even as developers contend with higher financing costs and tighter global supply chains.
The findings suggest that although inflation, tariffs and equipment shortages are pushing up renewable energy project costs, solar and wind remain more economically attractive than most conventional power technologies. Analysts believe this cost advantage is likely to reinforce investment in renewable energy as countries seek affordable solutions to meet rising electricity demand while advancing long-term energy transition goals.
