Key Takeaways
The United Nations, in two new reports, indicates that the global switch to renewable energy has passed a “positive tipping point” where solar and wind power will become even cheaper and more widespread.
It notes that the three cheapest electricity sources globally last year were onshore wind, solar panels, and new hydropower. Their cost comparison, however, does not include the cost of the backup power when the wind is not blowing and the sun is not shining.
The U.N. reports also discuss capacity growth, which is also not comparable since wind and solar power are highly inefficient, producing about a quarter or a third of the power for the same amount of capacity as a fossil fuel or nuclear generator.
While the United Nations focused on the growth of renewable energy, all fuels — fossil, nuclear, and renewable — hit record levels in 2024, with fossil fuels dominating the global energy mix with an 86.6% share, which is about the same as in 2023.
Renewable energy did not displace fossil fuels last year, as many politicians in Western countries want, but helped to meet increased electricity demand in 2024.
According to two recently released United Nations reports, the global switch to renewable energy has passed a “positive tipping point” where solar and wind power will become even cheaper and more widespread. Using information from an energy cost report by the International Renewable Energy Agency, the United Nations found that the three cheapest electricity sources globally last year were onshore wind, solar panels, and new hydropower. The report indicated that solar power is now 41% cheaper and wind power 53% cheaper globally than the lowest-cost fossil fuel. By those cost numbers, one would expect that generators using only those renewable sources would be constructed. But that is not the case, as China and India are still building coal-fired power plants and China is using more coal each year than all other nations combined to fuel its industrial base.
The problem with the cost numbers quoted above is that they do not capture the cost of backup generation when the wind is not blowing and the sun is not shining — costs that can be very expensive, especially when using large storage batteries for the backup. Storage batteries do not generate power, rather, they store excess power to be used later when the resources needed to power wind and solar generators are not available. The backup power can also be supplied by reliable coal, natural gas, and/or nuclear generators if they are available and have not been shuttered.
Solar and wind power costs are also skewed by the large subsidies they receive from many countries. In the United States, it was estimated by the Treasury Department that the production tax credit for wind, first introduced in 1992 under the Energy Policy Act and extended most recently by the Biden administration in the 2022 Inflation Reduction Act, would cost taxpayers $289.63 billion between fiscal years 2025 and 2034, making it the most costly energy subsidy in the tax code last year. In 2024, the Treasury Department estimated that the investment tax credit, which solar power receives, would cost taxpayers $131.44 billion for those years. These subsidies make the cost of wind and solar cheaper for consumers, but distort the energy market for other technologies that can supply reliable power consistently and do not have the hidden costs of backup power.
President Trump’s One Big Beautiful Bill Act was an attempt to phase these subsidies out, but the final determination of the extent of phase-out will be based on the Treasury Department’s further guidance on the specifics.
According to the U.N.’s multiagency report, Seizing the Moment of Opportunity, 74% of the growth in electricity generated worldwide last year came from wind, solar, and other non-carbon sources. Additionally, 92.5% of all new electricity capacity added to the grid worldwide last year was renewable energy. However, it should be noted that solar generates about a quarter of the power that a reliable fossil fuel or nuclear plant of the same capacity generates, and wind generates about a third of that power. So, while 92.5% seems impressive, the actual power that that capacity can provide is far less than the power provided by fossil fuels.
The advent of artificial intelligence and data centers that need reliable power 24/7 is making utility companies extend the life of their existing fossil fuel and nuclear power plants and build new natural gas and nuclear plants. Fossil fuel and nuclear power plants can operate reliably for 40 or 50 years, while wind and solar facilities have a hard time operating efficiently for 20 or 25 years.
While the United Nations focused on the growth of renewable energy, all fuels — fossil, nuclear, and renewable — hit record levels in 2024. Fossil fuels dominated the global energy mix with an 86.6% share — about the same as in 2023. While renewable energy grew faster than other fuels in 2024, it did not displace fossil fuels as many politicians in Western countries want. Rather, renewables helped to meet the 4% increase in electricity demand.
United Nations Secretary-General Antonio Guterres noted that last year, there was $2 trillion in investment in green energy, which is about $800 billion more than in fossil fuels. However, dollar for dollar, the renewable investment is providing less energy. The United Nations lamented that the renewable growth has not taken place throughout the globe, noting that Africa represented less than 2% of the new renewable energy capacity installed last year, despite having great electrification needs. U.N. officials blame that outcome on the high cost of capital.
The U.N. reports also noted that fossil fuels get almost nine times the government consumption subsidies that renewables receive. In 2023, global fossil fuel subsidies amounted to almost $620 billion, compared with $70 billion for renewables. It is important to note that consumption subsidies are not the same as the supply subsidies noted above for the United States. Consumption subsidies have nothing to do with tax policy, research and development, or loan guarantees, where most U.S. programs are directed. Fossil fuel consumption subsidies are common and even pervasive in the developing world, particularly in economies with state-owned energy companies. The International Energy Agency has been advocating for years that fossil fuel consumption subsidies should be eliminated since they encourage wasteful consumption.
Analysis
Advocates of wind and solar subsidies often claim that these energy sources are low-cost, frequently referencing studies that rely on the Levelized Cost of Electricity (LCOE). This metric condenses both fixed and variable costs into a single number, offering a simplified estimate of generation expenses. However, LCOE has been widely criticized for ignoring critical issues like intermittency and non-dispatchability — factors that directly impact the reliability and true cost of renewable energy. Because wind and solar cannot produce electricity on demand, comparing them to dispatchable sources using LCOE alone leads to misleading conclusions. Once the additional costs required to maintain a stable and reliable power supply — such as backup generation, energy storage, and grid upgrades — are considered, the economics change dramatically. Supporting this concern, data from the International Energy Agency show a consistent pattern across nearly 70 countries: higher shares of wind and solar in a nation’s energy mix are associated with significantly higher electricity prices.
