Why Clean Energy Is Cheap Energy

Building out clean energy projects across the US is the single most effective way to keep electricity bills down for consumers at a time of rising inflation and exploding energy demand.

This matters because right now, many Americans are seeing their energy bills go up – or are about to. And there’s a lot of confusing finger pointing and arguments about who or what is to blame. But step outside the politics and the way forward is pretty clear.

The Big Picture: Clean Energy Is Cheap Energy

Many factors play a role in your monthly energy bill, from the costs of building and maintaining wires (aka, transmission) to current and projected levels of demand.

But the single-biggest factor in your monthly bill – and the one we can most easily influence is the simple cost of actually generating the electricity.

Here’s where clean energy sources like wind and solar (backed up with batteries and other energy storage) have a superpower against rising bills. Namely, the fact that clean energy is the cheapest form of new electricity almost everywhere.

Here in the US, even with all the headwinds and setbacks the clean energy sector faces, renewables are still the most cost-competitive (i.e. cheapest) form of electricity.

Comparing the Numbers: Clean Energy vs. Fossil Fuels

To assess and compare the costs of different fuel types, analysts use a metric called the “levelized cost of electricity” (LCOE).

In a nutshell, LCOE measures what it costs any given solar, wind, gas, or other power plant to produce energy over its entire lifetime. This includes any ongoing fuel costs and the cost of building the plant in the first place.

LCOE lets us compare apples to apples and see what it costs each energy type to generate one megawatt of electricity over the course of an hour, known as a megawatt–hour (MWh). For reference, that’s about enough to power 300 average US homes for a day.

Because construction and generation costs can vary from place to place, analysts express LCOE as a range of costs for each type.

The gold standard for US energy cost data is Lazard’s annual LCOE+ report, which shows the following costs to generate 1 MWh in 2025:

• Solar PV (Utility-scale): $38–78/MWh
• Wind (Onshore): $37–86/MWh
• Coal: $71–173/MWh
• Gas (Peaking): $149–251/MWh
• Gas (Combined Cycle): $48–109/MWh
• Nuclear: $141–220/MWh

How Much Cheaper are Renewables than Fossil Fuels?

Comparing the middle of each LCOE range (aka, the median) shows:

Solar PV

• Vs. Coal: Solar is $64/MWh cheaper
• Vs. Gas (Peaking): Solar is $142/MWh cheaper
• Vs. Gas (Combined Cycle): Solar is $20/MWh cheaper
• Vs. Nuclear: Solar is $122/MWh cheaper

Onshore Wind

• Vs. Coal: Wind is $61/MWh cheaper
• Vs. Gas (Peaking): Wind is $139/MWh cheaper
• Vs. Gas (Combined Cycle): Wind is $17/MWh cheaper
• Vs. Nuclear: Wind is $119/MWh cheaper

Why Adding More Renewables Makes All Electricity Cheaper

For most of us, the electricity that powers our homes comes from multiple sources throughout a single day. Meaning that when you flip a light switch, the electrons illuminating the bulb at 8 AM and 8 PM could be coming from very different sources.

Where those electrons come from is governed by a complex series of markets that has a huge impact on our bill at the end of the month.

Note: The climate scientist Andrew Dessler has a great and in-depth explainer on how this all works on his Substack. The below is the Cliff Notes/TL;DR version using the same ERCOT example, but if you're curious to know more, check out his piece.

To see how, let’s look at Texas, the top US state for renewable energy generation and battery capacity in 2024. The electricity market in the Lone Star State is run by the Electric Reliability Council of Texas (ERCOT).

ERCOT is responsible for providing electricity to consumers at all times, while keeping costs as low as possible.

Job number one for ERCOT is to estimate how much energy it expects users to need in a given time frame – aka projected demand.

Job number two is to find generators to supply that demand, which it does using a bidding system, where different generators offer to supply X amount of power at Y cost.

ERCOT sorts bids by price and agrees to buy power from generators in order of cheapest to most expensive until it has enough power to cover projected demand, cutting the most expensive generators. This is known as the merit stack.

The catch is that the last generator left on the merit stack (i.e. the most expensive) sets the price for all the accepted generators. This is known as marginal pricing.

Because renewables are generally cheaper than oil and gas, when a new renewable generator comes online, it pushes the most expensive fossil generator off the merit stack list, lowering that marginal price – and there the bill you pay.

This plays out with predictable results. According to the American Clean Power Association, the top four states for renewable energy all saw electricity bills go down over the past year. Conversely, nine out of the bottom 10 states all saw bills go up. (The exception – New Hampshire – gets more than half of its electricity from nuclear power.)

We’re going to build more power generation. Let’s make it the cheap kind.

Exploding power demand is one of the stories of 2025. Driven by increasing data center demand, AI, and increasing the electrification of the economy – to name just a few factors – US power demand is set to rise 2.5% each year through 2035. Global demand is also rising fast.

For policymakers and utilities, there’s no question about whether we’ll have to build new generation to meet this demand. The only question is what kind to prioritize. And at a moment when electricity prices are rising twice as fast as inflation, cost has to be part of the conversation.

Looking forward, the trendlines for clean and fossil costs are heading in opposite directions. In the last decade alone, the cost of solar has fallen 90%, onshore wind 70%, and battery storage by more than 90%. Natural gas, meanwhile, according to the CEO of one of the country’s largest utilities, is “now more expensive than it ever has been in its history.”

This has to matter to policymakers. Especially because renewables aren’t just the cheapest to build – they’re also often the fastest. Especially now, with gas power plant developers facing delays of up to seven years just to get the parts they need due to manufacturing backlogs. And unlike fossil fuels that rely on wells and mines that inevitably run out, solar and wind are effectively unlimited.

Renewables also have the advantage of incredible potential. After all, in just one hour, the Earth is hit with enough sunlight to power the planet for a full year and wind has the potential to provide over 40 times more electricity than the world consumes.

So if policymakers are looking for answers to how to meet all the rising demand for electricity and keep costs low for consumers, maybe all they need to do is look up.

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