On June 16, Lazard dropped its annual Levelized Cost of Energy (LCOE) report that has become a cornerstone of clean energy cost analysis. For 15+ years, it’s been the industry’s go-to benchmark for comparing the cost competitiveness of energy technologies – from solar and wind to gas, coal, and nuclear.
What is LCOE, Anyway?
Think of the Levelized Cost of Energy (LCOE) as the “break-even” price a project needs to earn per megawatt-hour over its lifetime to pay back investors and lenders. Lazard calculates this by modeling a typical project – including a capital stack comprised of 60% debt at 8% interest and 40% equity – and solving for the $/MWh that hits their target return (12% equity).
Now, let’s dive into the five takeaways from the latest 2025 edition:
- Unsubsidized renewables still outperform fossil fuels. Since the LCOE v9.0 (2015) report, the average LCOE of utility-scale wind and solar technologies have out-competed combined cycle gas*. Here’s the breakdown from LCOE v18.0:
- Solar PV–Utility (unsubsidized): $38–$78 per MWh
- Solar PV–Utility (ITC): $24–$57 per MWh
- Solar PV–Utility (PTC): $20–$45 per MWh
- Wind–Onshore (unsubsidized): $37–$86 per MWh
- Wind–Onshore (PTC): $15–$75 per MWh
- Gas Peaking: $149–$251 per MWh
- U.S. Nuclear: $141–$220 per MWh
- Coal: $71–$173 per MWh
- Gas Combined Cycle: $48–$109 per MWh
Tax credits only sharpen the edge: solar with the ITC comes in as low as $24/MWh.
- Renewables are now competing with gas on marginal cost. Lazard notes that new solar and wind are approaching the operating cost of existing gas plants. That means building new renewables can be cheaper than simply running older fossil assets.
- The cost of solar has fallen 84% since 2009. Since LCOE v3.0, utility-scale solar PV costs have dropped from $359/MWh to $58/MWh. That’s a steep fall, even though recent inflationary pressures have nudged prices slightly higher since their 2021 low ($37/MWh). Wind tells a similar story: massive declines over the last 15 years, despite short-term volatility.
- LCOE isn’t just about price – it reflects market reality. Lazard’s model is refreshingly real-world: it assumes 60/40 debt-equity financing, levered IRRs, and market-based cost of capital. The resulting LCOE is the break-even price a project must earn to satisfy its investors and lenders. In short: it’s the price projects need to work – not just on paper, but in practice. Of course, every deal is different, but we’re big fans of this apples-to-apples approach.
- What the report doesn’t say is just as important. LCOE is a snapshot, not a forecast. Lazard makes that clear. It reflects “today’s” costs, not tomorrow’s constraints. For gas, that’s a red flag. Turbine shortages, long lead times, and upstream inflation could drive gas LCOEs far higher in the near future – something the report notes, but doesn’t model fully.
Why it matters:
Even in worst-case scenarios, renewables remain competitive – on cost, speed, and scalability. And with tools like BuildQ helping teams surface risk, streamline diligence, and accelerate closing, we’re making it easier than ever to be deal-ready.
*See LCOE v18.0, pp. 14 (referencing LCOE v9.0 (2015)).
