Key Takeaways
- Wood Mackenzie highlights declining costs for solar and energy storage across major global regions.
- China leads in the lowest LCOE for solar and energy storage, while Europe anticipates further reductions in costs.
- North America faces short-term cost challenges but will benefit from long-term technological advancements.
Cost Trends in Utility-Scale Solar
Wood Mackenzie reports significant improvements in module efficiency and supply chain stabilization, projecting further reductions in costs across major regions. In the Asia-Pacific, the Levelized Cost of Energy (LCOE) for utility-scale solar ranges from US$27/MWh in China to US$118/MWh in Japan. China also achieved the lowest LCOE for storage in 2025, maintaining a lead in energy storage costs.
Hybrid solar-plus-storage projects are gaining traction due to declining battery costs and improved efficiency. Notably, Australia integrates solar with battery storage for stability, while India advances hybrid systems towards grid parity. “The global energy transition is accelerating at an unprecedented pace, with renewable technologies achieving cost parity with conventional generation,” said Amhed Jameel Abdullah, a senior research analyst at Wood Mackenzie.
European Market Dynamics
In Europe, the LCOE for single-axis tracker solar PV saw a 10% decline in 2025, attributed to reduced module prices. The forecast predicts a dramatic 49% drop in commercial distributed solar LCOE by 2060, with Southern and Eastern European markets yielding the highest solar revenue surpluses. Energy storage costs, particularly for 4-hour duration battery storage, are expected to fall below US$100/MWh by 2026, with a further 35% reduction by 2060.
North American Challenges and Progress
In North America, renewable technology costs are projected to decline despite recent tariff impacts that have temporarily increased US solar costs. The long-term outlook remains optimistic, driven by advancements in modules, inverters, and tracker technologies. However, residential solar systems face short-term headwinds due to tariffs and the impending expiration of Section 25D tax credits.
Latin America’s Renewable Landscape
Latin America has seen a 23% decrease in average LCOE for renewables from 2020 to 2024, driven by performance improvements and a 20% reduction in capital costs per kilowatt-hour. Commercial solar PV achieved the region’s lowest average LCOE, with single-axis solar PV offering the most competitive utility-scale generation costs for 2025. As countries pursue energy storage policies, the forecast indicates a 24% LCOE reduction in this sector by 2060.
Middle East and Africa Trends
In the Middle East and Africa, solar PV and wind LCOE decreased by 6% to 10% in 2025. High irradiation levels and strong capacity factors ensure that utility-scale solar PV maintains the lowest prices in the region, particularly in Saudi Arabia and the UAE. By 2060, single-axis tracker PV costs are expected to reach around US$17/MWh, with energy storage costs in these countries projected to decline by 7% to 9% by 2034.
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