Lazard's latest LCOE analysis shows renewable-energy costs are rising (solar $40–98/MWh, gas $51–129/MWh) due to supply chain inflation.
Utility-scale renewable energy remains the cheapest option for electricity generation, but costs are rising across the sector, according to a Lazard analysis.
Solar's levelized cost of electricity (LCOE) ranges from $40/MWh to $98/MWh, while onshore wind spans $37/MWh to $99/MWh. Offshore wind is substantially costlier at $105/MWh to $167/MWh. These figures compare favorably to conventional alternatives: combined cycle gas ranges from $51/MWh to $129/MWh, peaking gas-fired generation from $144/MWh to $276/MWh, and nuclear from $175/MWh to $255/MWh. LCOE is an estimate of the cost of energy from a generating resource over the facility's lifetime, accounting for capital costs, fuel costs, and debt and equity costs.
With production tax credits applied, utility-scale solar's LCOE could fall to as low as $16/MWh, while offshore wind's low end could reach $77/MWh. Despite these cost advantages, the One Big Beautiful Bill Act introduced earlier phaseout deadlines for wind and solar projects seeking the 48E investment tax credit and 45Y production tax credit.
The cost structures reveal fundamental differences between technologies. Renewable energy is predominantly capital cost-driven, while conventional technologies carry higher fuel and variable cost components—a dynamic that reinforces the economic case for a diverse generation fleet.
Yet demand growth is paradoxically driving investment in new gas capacity. "Continuous upward revisions to demand projections have driven a sharp increase in announced new-build gas generation despite a 15-year high LCOE and historically long development lead times," the report states. Gas LCOE is rising due to fuel price sensitivity and supply constraints; the cost of gas turbines alone is projected to increase to $600/kW by the end of 2027, a 195% increase since 2019, according to Wood Mackenzie.
New-build generation universally costs more than existing generation. As Lazard notes, "The marginal cost of existing renewable generation is near-zero; this gap between marginal cost and new-build LCOE underscores the near-term economic case for optimizing existing generation while new-build costs across all technologies face sustained pressure."
Storage costs have also risen, reversing last year's declines. Tariffs on lithium-ion battery imports have restricted access to low-cost Chinese cells. However, the One Big Beautiful Bill Act preserved the storage investment tax credit through 2033, while new Foreign Entity of Concern restrictions have accelerated supply chain diversification toward Southeast Asian and domestic manufacturing capacity.