Renewable energy remains the cheapest option for new power generation despite rising costs across all energy types, according to Lazard's 2026 Levelized Cost of Energy+ report, released Monday. Utility-scale solar's levelized cost of electricity ranges between $40 and $98 per megawatt-hour, while combined cycle gas ranges between $51 and $129 per megawatt-hour. Unsubsidized renewable energy "remains the most cost-competitive form of new-build generation," even as the levelized cost of electricity rises for all generation types.
The report breaks down costs across multiple energy sources, showing onshore wind ranges between $37 and $99 per megawatt-hour, while offshore wind sits between $105 and $167 per megawatt-hour. Conventional alternatives are notably more expensive: peaking gas-fired generation has a levelized cost between $144 and $276 per megawatt-hour, and nuclear ranges between $175 and $255 per megawatt-hour. With the production tax credit, utility-scale solar's low end could drop to as low as $16 per megawatt-hour, and offshore wind's low end to $77 per megawatt-hour. The analysis shows a widening in cost range for onshore wind and utility-scale solar, "with high-end costs rising faster than low-end costs — likely reflecting that some project developers have been better able to mitigate broader cost pressures across supply chain and project-level economics than others."
The forces driving cost increases for all generation types include "higher capital costs, sustained interest rates, tariff pass-through and supply chain repricing," the report said. Lazard found the levelized cost of storage showed an increase in cost for utility-scale standalone storage, "reversing last year's declines," and noted that "the materialization of tariffs on lithium-ion battery imports has curtailed access to the low-cost Chinese cell supply that previously helped drive costs lower." The report also noted that "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."
Renewable and conventional technologies have fundamentally different cost structures that explain their economic performance, Lazard found. Renewable energy is predominantly capital cost-driven "while conventional technologies carry higher fuel and variable cost components — a dynamic that drives technology-specific economics across use cases and reinforces the need for a diverse generation fleet." Natural gas generation faces particular pressure from fuel price sensitivity, which has increased year-over-year, as well as high demand driving down supply and pushing gas turbine costs to a projected $600 per kilowatt by the end of 2027, a 195% increase since 2019, according to Wood Mackenzie data cited in the report. Existing generation enjoys a significant advantage over new builds: "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."
The report's outlook points to continued cost pressure across all generation types, but renewable energy's cost advantage over conventional new-build alternatives persists despite policy headwinds from the One Big Beautiful Bill Act, which created an earlier phaseout deadline for wind and solar projects to qualify for the 48E investment tax credit and 45Y production tax credit. New Foreign Entity of Concern restrictions have accelerated supply chain diversification toward Southeast Asian manufacturing capacity and domestic suppliers for storage, though the storage investment tax credit was preserved through 2033. The bottom line: even as costs rise everywhere, renewables maintain their economic edge for new power generation.