Renewable energy continued to strengthen its economic advantage in 2025, helping countries avoid an estimated $480 billion in fossil fuel costs while protecting economies from volatile energy markets, according to a new report from the International Renewable Energy Agency (IRENA).
In its Renewable Power Generation Costs in 2025 report, IRENA said renewables have evolved into a “geopolitical shock absorber,” reducing exposure to fossil fuel price swings and remaining the most cost-effective source of new electricity generation across most global markets.
More than 90% of utility-scale renewable energy projects commissioned in 2025 produced electricity at a lower cost than the cheapest newly built fossil fuel alternatives, reinforcing renewables’ growing cost advantage.
Renewable power remains the lowest-cost option
Solar photovoltaic (PV) generation costs held steady at $44 per megawatt-hour (MWh) compared with 2024, while wind power became even more competitive. Onshore wind costs declined 4% to $33/MWh, and offshore wind costs fell 3% to $78/MWh.
By comparison, IRENA noted that shortages of gas turbines in the United States nearly doubled the capital costs of new combined-cycle gas plants. Electricity generation costs in gas-dependent economies, including Italy, Germany and Japan, climbed to nearly $100/MWh, highlighting the growing economic gap between renewable and fossil fuel-based power.
The agency also warned that ongoing geopolitical tensions in the Middle East are expected to keep natural gas prices elevated, further strengthening the financial case for renewable energy.
Clean energy cushions economies from market volatility
Beyond lowering electricity costs, renewable energy provided critical economic protection during periods of market disruption.
IRENA said existing renewable generation helped offset the impact of the temporary closure of the Strait of Hormuz in early 2026, when energy import prices surged across Asia and Europe.
In Southeast Asia, renewable energy capacity in Indonesia, Thailand and the Philippines eliminated the need for approximately $5.7 billion in coal and natural gas imports during 2025. Based on the higher fuel prices recorded between March and May 2026, those avoided imports would have been worth around $6.5 billion.
Across 20 major economies—representing roughly 80% of global renewable electricity generation—renewables prevented an estimated $377 billion in fossil fuel purchases during 2025.
China accounted for the largest share of those savings at $177 billion, followed by the United States ($35 billion), Brazil ($32 billion), India and Germany ($18 billion each), and Japan ($15 billion).
Trade risks remain despite falling renewable costs
While renewable technologies continue to become more competitive, IRENA cautioned that changing global trade policies and tariffs could increase the cost of new renewable energy installations in the coming year.
IRENA Director-General Francesco La Camera said the continued decline in renewable energy costs is delivering significant economic and strategic benefits.
He said every additional megawatt of renewable capacity installed in fossil fuel-dependent countries strengthens protection against fuel price volatility, helping shield consumers, businesses and public finances from rising energy costs.
La Camera added that the growing savings generated by existing renewable assets provide countries with a built-in safeguard against future energy shocks, underscoring that expanding renewable energy capacity is both an economic and strategic investment in long-term resilience and competitiveness.
