Wood Mackenzie Analysis: Renewable Energy to Reach Record-Low Global LCOE in 2025
Edinburgh (Scotland) – The levelized cost of electricity (LCOE) for renewable energy continues to fall in 2025. Across all regions, renewable technologies demonstrate clear cost advantages over conventional power generation. Solar and wind power, in particular, are consolidating their position as leading energy sources, while storage solutions are becoming increasingly economically viable.
Solar PV and Wind Lead Global LCOE Improvements
Wood Mackenzie’s latest 2025 LCOE analysis shows significant progress in the cost efficiency of renewables.
“Across all regions, renewable technologies demonstrate clear cost advantages over conventional generation. We expect continued cost reductions through technological improvements, supply chain optimisation and economies of scale, reinforcing renewables' position as the dominant power generation technology globally,“ said Amhed Jameel Abdullah, Senior Research Analyst at Wood Mackenzie.
Solar PV with single-axis tracking leads globally, achieving regional LCOEs of USD 37 per MWh in the Middle East and Africa. Wood Mackenzie expects further reductions across all major regions as module technologies improve and supply chains stabilize. Utility-scale PV with single-axis tracking delivers the lowest average LCOE in Europe, where falling module prices are driving 10 % cost reductions compared with 2024. Southern and Eastern Europe achieve the highest revenues for both onshore wind and solar.
In the Asia-Pacific region, onshore wind projects in China, India, and Vietnam show global competitiveness with LCOEs between USD 25 and 70 per MWh, while offshore wind costs vary considerably. Hybrid solar-plus-battery systems are gaining traction, particularly in Australia and India.
Regional Differences and the Rise of Energy Storage
In North America, short-term tariffs and expiring tax credits are weighing on solar and onshore wind. Nevertheless, Wood Mackenzie’s analysts forecast long-term cost reductions through improved modules, inverters, and trackers. The phase-out of tax incentives is expected to raise onshore wind LCOEs by 24 % after 2030, temporarily reversing earlier cost declines. However, revenue forecasts confirm the sector’s long-term economic viability. Offshore wind LCOEs remain elevated due to policy uncertainty. The firm also expects the resurgent power demand from AI and data centers to drive a boom in gas turbine orders by 2030. In the short term, gas turbine capital costs have doubled compared to 2020, while fuel costs are projected to rise throughout the forecast period.
Latin America has achieved an average 23 % LCOE reduction for renewables between 2020 and 2024, supported by lower capital costs and better project performance. Fixed-bottom offshore wind is expected to become 67 % cheaper by 2060. Battery storage is also becoming increasingly economical, benefiting from lower prices and infrastructure investment.
In the Middle East and Africa, utility-scale solar PV with single-axis trackers remains the most cost-effective technology, especially in Saudi Arabia and the United Arab Emirates. Onshore wind and battery storage are also becoming more competitive, while offshore wind remains relatively expensive. Over the long term, tracker-based PV costs could fall to around USD 17 per MWh by 2060.
Conclusion: The Global Energy Transition Accelerates
“The global energy transition is accelerating at an unprecedented pace, with renewable technologies achieving cost parity with conventional generation across all major markets. Our LCOE 2025 analysis reveals that solar PV and onshore wind have become the dominant low-cost options worldwide, whilst hybrid systems and battery storage are rapidly closing the competitiveness gap,” Abdullah summarized.
Source: IWR Online, 27 Oct 2025
