Renewable energy capacity helped avoid approximately $480 billion in fossil fuel costs in 2025, according to the International Renewable Energy Agency (IRENA) report on Thursday.
IRENA's Renewable Power Generation Costs in 2025 report said renewable power generation costs remained low, allowing renewables to retain their position as the cheapest source of new electricity in most markets while further strengthening their cost advantage over fossil fuels.
More than 90% of the utility-scale renewable energy capacity commissioned in 2025 generated electricity at a lower cost than the cheapest new fossil fuel alternative, the report said, adding that renewables widened their cost advantage over fossil fuels during the year.
- Renewable power generation costs continue to decline
The levelized cost of electricity from solar photovoltaic (PV) projects remained unchanged from 2024 at $44 per megawatt-hour (MWh), while wind power costs continued to decline.
Onshore wind costs fell 4% to $33/MWh, while offshore wind costs declined 3% to $78/MWh.
"By contrast, a shortage of gas turbines in the U.S. nearly doubled the capital cost of new combined-cycle gas power plants. Electricity generation costs in gas-dependent markets such as Italy, Germany and Japan also climbed to nearly $100/MWh," report said.
The report added that ongoing uncertainty surrounding the Middle East crisis is expected to keep natural gas prices elevated.
Overall, installed renewable energy capacity helped avoid an estimated $480 billion in fossil fuel costs in 2025.
As a result, renewables have become a geopolitical shock absorber against fossil fuel price volatility during periods of crisis, according to the report.
- Benefits extend beyond electricity generation costs
The report noted that existing renewable electricity generation provided a significant financial buffer following the closure of the Strait of Hormuz in early 2026, when import prices surged across Asia and Europe.
In the import-dependent Southeast Asian economies of Indonesia, Thailand and the Philippines, existing renewable energy capacity eliminated the need for around $5.7 billion in coal and natural gas imports in 2025.
At the higher fuel prices recorded during the March-May 2026 crisis period, those same energy volumes would have been worth $6.5 billion.
According to IRENA, the economic benefits of renewable energy extend well beyond electricity generation costs.
Across 20 major economies, which account for roughly four-fifths of global renewable electricity generation, renewables avoided an estimated $377 billion in fossil fuel purchases in 2025.
The geographical distribution of these savings largely reflected the global distribution of renewable energy capacity.
China accounted for $177 billion, or about half of the total savings, followed by the United States with $35 billion, Brazil with $32 billion, India and Germany with $18 billion each, and Japan with $15 billion.
The report also warned that changes in global trade policies and tariff regimes are expected to put upward pressure on total installed costs this year.
Commenting on the findings, IRENA Director-General Francesco La Camera said declining renewable energy costs are delivering substantial economic benefits.
"Every additional megawatt of renewable energy deployed in countries still heavily dependent on fossil fuels strengthens economic protection against fuel price volatility, shielding consumers, businesses and public finances from rising costs," he said.
"The savings generated by existing renewable assets continue to grow, providing a built-in hedge against future shocks. This energy crisis has once again demonstrated that expanding renewable energy capacity is a strategic investment in resilience and competitiveness," he added.
By Gulsen Cagatay
Anadolu Agency
energy@aa.com.tr
