Key Takeaways:
The cost of building utility-scale solar projects in the US jumped 18% from a year earlier as tariffs, elevated interest rates and supply chain pressures pushed the levelized cost of energy to $40 to $98 per megawatt hour, according to Lazard's 2026 Levelized Cost of Energy report. Despite the increase, solar remains the cheapest form of new electricity generation to build, with costs still 81% lower than when the financial advisory firm began tracking the metric two decades ago.
"After years of steep cost declines, the market is beginning to see some upward movement, and annual fluctuations are to be expected," Samuel Scroggins, Managing Director and Head of Renewables & Sustainable Infrastructure at Lazard, said. "But when viewed over the long term rather than year to year, the broader trend remains clear: utility-scale solar LCOEs have fallen by roughly 81% over the past two decades."
Onshore wind remains the most cost-competitive renewable technology with an LCOE range of $37 to $99 per MWh, though that also widened from $37 to $86 per MWh a year earlier. When paired with battery storage, wind costs rise to $49 to $140 per MWh. Offshore wind remains significantly more expensive at $105 to $167 per MWh, reflecting higher construction, financing and infrastructure requirements. Standalone utility-scale battery storage costs reversed years of declines, rising to $210 to $292 per MWh for a 100 MW, four-hour system — a 27% increase from 2020 levels on a per-MWh basis.
Gas power at a 17-year high
New-build conventional generation continues to face cost pressures. Gas-fired combined-cycle plants, which burn gas to drive one turbine and then use steam byproducts to drive a second, saw LCOE rise to $51 to $129 per MWh — the highest level in at least 17 years, according to Lazard. George Bilicic, global head of power, energy and infrastructure at Lazard, said costs are poised to climb even higher as demand surges from new data centers and equipment shortages persist. Coal remains among the least competitive options at $72 to $177 per MWh, while new nuclear generation is the most expensive at $175 to $255 per MWh, weighed down by high capital requirements and lengthy development timelines.
What rising demand means for clean energy investors
The report arrives as US electricity demand surges to record levels, driven by data center growth and the electrification of transportation and industry. Lazard's analysis shows that even after accounting for the cost of firming intermittent renewable generation — the expense of backing up solar and wind with dispatchable capacity — renewables remain broadly competitive with new gas-fired power. Scroggins said the US faces an "insatiable" power demand environment that will require significant additions of solar, wind, natural gas and nuclear capacity.
For clean energy investors, the key tension is between near-term cost headwinds and long-term structural demand. Tariffs on lithium-ion battery imports and the Foreign Entity of Concern provisions restricting access to low-cost Chinese battery cells are pushing storage costs higher, with those increases being passed on to off-takers. At the same time, the 81% long-term decline in solar costs and the continued competitiveness of wind underscore the role renewables will play in meeting rising power demand. Companies exposed to utility-scale solar deployment and grid infrastructure face margin compression from higher input costs but benefit from a demand environment that Lazard describes as historically strong.
This article is for informational purposes only and does not constitute investment advice.
