Renewable energy boom helps avoid fossil fuel costs
New data from the International Renewable Energy Agency (IRENA) has revealed that an estimated $480 billion in fossil fuel costs were avoided last year due to a boom in renewable energy. It confirms, they suggest, that renewables are not only the cheapest new power, but also a geopolitical shock absorber which is primed to enhance energy security and economic stability.
The latest research ‘Renewable Power Generation Costs in 2025’, estimates that more than 90% of utility-scale renewable capacity added in 2025 was cheaper than the lowest-cost new fossil alternative. For new gas-fired generation, a turbine shortage roughly doubled the capital cost of a new combined-cycle plant in the United States, while costs climbed towards $100/MWh in higher gas price markets such as Italy, Germany and Japan. Furthermore, the persistent uncertainty surrounding the crisis in the Middle East is likely to keep gas prices elevated throughout the coming year.
Contrastingly, the cost advantage of renewables over fossil fuels continued to widen last year. While the cost of Solar PV remained consistent with its 2024 level of $44 per megawatt hour (MWh), wind continued to improve, with onshore falling by 4% to $33/MWh and offshore by 3% to $78/MWh. Since 2010, the cost of solar PV has fallen by 89%, onshore wind by 71% and offshore wind by 63%.
Francesco La Camera, Director-General of IRENA said: “The decline in renewable energy costs is delivering a powerful economic dividend. For countries that still rely heavily on fossil fuels, every additional megawatt of renewables strengthens economic protection against fuel-price volatility, shielding consumers, businesses and public finances from higher costs.”
He goes on to explain that the “savings generated by existing renewable assets grow, providing a built-in hedge against future shocks. This energy crisis has shown yet again: expanding renewable capacity is a strategic investment in resilience and competitiveness.”[i]
Geopolitical shock absorber
Renewables are acting as a geopolitical shock absorber, with the researchers pointing to the recent Middle East crisis as a prime example. When the Strait of Hormuz closed in early 2026 and caused import prices to spike across Asia and Europe, existing renewable electricity generation provided a crucial financial buffer.
For example, across the three import-exposed Southeast Asian economies of Indonesia, Thailand and the Philippines, the existing renewable fleet avoided around $5.7 billion in coal and gas purchases in 2025. Valued at the higher fuel prices during the peak of the crisis between March-May 2026, those same volumes would have been worth $6.5 billion.
Yet, the economic benefits of renewable power go well beyond generation costs- across 20 major economies assessed (which account for about four-fifths of world’s renewable generation) renewable power in 2025 avoided an estimated $377 billion in fossil-fuel purchases.
The geographic distribution of economic benefits closely mirrors the global distribution of renewable energy capacity. China alone accounted for $177 billion or around half of all cost savings. Second-placed USA avoided fossil fuel costs of $35 billion, followed by Brazil with $32 billion, India with $18 billion, Germany with $18 billion and Japan with $15 billion.
History made as global renewable energy generation surpasses gas for the first time
In May, Ember reported that history had been made, as April saw wind and solar generate more electricity than gas globally for the first month ever. The two renewables generated 22% of global electricity over the course of the month, compared with 20% for gas.
In total wind and solar combined produced a record 531 TWh of electricity, 54 TWh more than gas generation which was recorded at 477 TWh. Compare these figures with just five years ago, where gas generation stood at a similar level (476 TWh) in April 2021, but was nearly double the combined generation from wind and solar (245 TWh).
Notably this milestone for renewable energy generation occurred during the first full month of the global energy crisis linked to the conflict in the Middle East. The researchers at Ember argue that this highlights how rapidly the growth in wind and solar generation is reshaping the global power mix, even amid fossil fuel market volatility.
In addition, the data shows no evidence of widespread gas-to-coal switching globally, despite ongoing energy security concerns. Global Electricity Analyst at Ember, Kostantsa Rangelova, commented: “Countries around the world have been turning to wind and solar because they are cheap, homegrown and secure sources of electricity. The current energy crisis has further strengthened the economic case for renewables compared to imported gas, while also adding greater political urgency to accelerate deployment. For many importing countries, LNG-powered electricity is increasingly unable to compete with wind and solar.”[ii]
References
[i] IRENA – International Renewable Energy Agency
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