The average cost of renewable energy, especially solar, plunged below the average cost of fossil fuels in the Asia Pacific region last year — and the gap will continue to widen, according to energy consultancy Wood Mackenzie.  

Solar is now the least expensive source of power in the region and will grow even less expensive over the coming decades while fossil fuels grow more expensive, the consultancy says.  

The calculations reflect what’s known as the levelized cost of energy, or LCOE, which calculates the cost of producing electricity over the entire life of a project. The method allows apples-to-apples comparisons between renewables such as solar and wind — which require large upfront spending to build but then run on free fuel — with coal and gas generation projects that may cost less to build but need fuels with costs that vary with global markets and incur delivery costs. 

Wood Mackenzie says China’s manufacture of solar modules and wind turbines has boomed, overwhelming demand at home and even abroad. That’s driving down renewable costs across the region after lingering supply bottlenecks and shortages from manufacturing shutdowns during the Covid-19 pandemic, which pushed prices 18% higher in 2022. 

China’s renewables push, along with additional manufacturing elsewhere and technological advances in both wind and solar, will carry on forcefully enough to keep prices for renewables lower for decades to come, Wood Mackenzie says. 

Meanwhile, the consultancy expects the cost of coal and natural gas to rise as countries step up taxation on the carbon emissions that come with burning fossil fuels.  

By 2030, the consultancy says renewables will be about one-third cheaper than fossil fuels.  

To be sure, the LCOE model doesn’t incorporate all aspects of electricity generation, such as the system changes needed to accommodate for variable wind and solar energy (to dive more into these caveats, check out this explainer from nonprofit World Resources Institute).