Utility-Scale Solar Costs Rise 18% but Remain Cheapest Power Source
By Alex Kimani - Jul 13, 2026, 10:00 AM CDT
- Utility-scale solar costs rose 18% but remain the cheapest new-build generation technology, according to Lazard.
- Combined-cycle gas plant costs have climbed to their highest level in 15 years due to equipment shortages, inflation, and financing costs.
- Growing electricity demand from AI data centers and electrification is prompting utilities to continue investing in new gas-fired generation.
The cost of unsubsidized utility-scale solar rose by 18% to $40-$98/MWh, driven by higher capital costs, interest rates, tariffs, and supply chain pressures, a Lazard's Levelized Cost of Energy+ analysis has found. However, even with these hikes, solar remains the cheapest new-build generation technology globally, even when factoring in auxiliary firming costs due to the intermittent nature of solar energy.
Levies on solar panels, batteries, and inverters, particularly affecting equipment from Asia, have directly elevated import costs.
U.S. markets are facing intense supply chain pressures, including new tariffs on imported cells, batteries and inverters, as well as compliance rules like the Foreign Entity of Concern (FEOC).
Additionally, the cost of silver--a critical component in solar cells and modules--has skyrocketed, driving up direct manufacturing expenses.
According to the Lazard study, the cost for newly built combined-cycle gas turbine (CCGT) plants has surged to a 15-year high at $48-$107/MWh, driven by turbine supply chain bottlenecks, inflationary pressures and historically long equipment delivery timelines.
Meanwhile, high engineering, procurement, and construction (EPC) costs, along with elevated interest rates, are impacting all thermal generation.
Despite the steep price increases, utilities continue to propose new gas infrastructure to satisfy grid reliability requirements and back up renewable energy sources.
The rapid expansion of AI data centers and rising electricity demand from electrification have led utilities to propose a new wave of gas-fired power plants.
Onshore wind remains highly competitive, often mirroring solar's lower-bound pricing at $37--$99/MWh. Onshore wind project costs have significantly fallen over the past decade, with capital costs nearly halving since 2010 thanks to technological innovations, economies of scale and optimized operations.
Modern wind turbines are taller and use longer blades, allowing them to generate more electricity even in areas with weaker winds. Better turbine designs, smarter controls, AI-driven monitoring, predictive maintenance, and more accurate weather forecasting have also improved reliability and helped reduce operating costs.
By Alex Kimani for Oilprice.com
