Is Renewable Energy Cheaper Than Fossil Fuels?

With concerns about climate change and energy security growing, many people wonder if renewable energy like solar and wind power can provide cheaper electricity than traditional fossil fuels like coal and natural gas. The quick answer is that in most cases, renewables are now the cheapest form of new electricity generation.

In this comprehensive article, we will examine the costs of different energy sources, both renewable and fossil fuel-based. We will look at how the costs of renewables like solar and wind have fallen dramatically in recent years. We will also discuss the hidden health and environmental costs of fossil fuels that are not reflected in their market prices. After reviewing the evidence, we will explain why most experts agree that renewables are now the most affordable option for new electricity generation in most parts of the world.

The Declining Costs of Renewables

Renewable energy has become increasingly competitive with fossil fuels in recent years, thanks to significant advancements and decreasing costs. This shift towards renewable sources of energy is not only beneficial for the environment but also for our wallets. Let’s take a closer look at the declining costs of different types of renewables.


Solar energy has seen a remarkable decline in costs over the past decade. The price of solar panels has dropped by more than 80% since 2010, making it one of the most affordable sources of electricity. In some regions, solar energy is already cheaper than fossil fuels, making it an attractive option for both residential and commercial use. The efficiency of solar panels has also improved, allowing for greater energy generation even in areas with less sunlight. According to the International Renewable Energy Agency (IREA), solar power is on track to become the cheapest source of electricity globally by 2030.


Wind energy has also witnessed a significant reduction in costs, making it a viable alternative to fossil fuels. Advances in technology, such as larger and more efficient turbines, have contributed to the declining costs of wind energy. According to the Global Wind Energy Council (GWEC), the average cost of onshore wind power has decreased by approximately 40% since 2010. Offshore wind farms, which were once considered expensive, have become more cost-effective as well. In fact, many countries are investing in offshore wind projects due to their immense potential for generating clean and affordable energy.

Other Renewables

In addition to solar and wind, other forms of renewable energy are also becoming more affordable. For example, the cost of biomass energy, which utilizes organic materials like wood and agricultural waste, has decreased due to technological advancements and economies of scale. Geothermal energy, which harnesses heat from the Earth’s core, is seeing cost reductions as well. These developments in various renewable energy technologies are pushing us closer to a future where clean energy is not only environmentally friendly but also economically advantageous.

It’s important to note that the declining costs of renewables are not solely driven by technological advancements. Government policies and incentives, as well as investments from private companies, have played a significant role in driving down costs and making renewable energy more accessible. As a result, the transition to renewable energy is not only a sustainable choice but also a smart financial decision.

The Stable or Increasing Costs of Fossil Fuels

When it comes to comparing the costs of renewable energy and fossil fuels, it’s important to take into account the stability or even the increasing costs of fossil fuels. While renewable energy sources such as solar and wind have seen significant cost reductions in recent years, the prices of fossil fuels have remained relatively stable or even risen. Let’s take a closer look at the costs of different types of fossil fuels:


Coal has long been a staple in the energy industry, but it comes with a significant environmental and health cost. In recent years, the cost of mining and transporting coal has increased due to stricter regulations and safety measures. Additionally, the cost of mitigating the environmental impact of burning coal, such as carbon capture and storage, adds to the overall expense. These factors, combined with the declining demand for coal, have made it less economically viable compared to renewable energy sources.

Natural Gas

Natural gas has been touted as a cleaner alternative to coal, but its costs have also been subject to fluctuations. While natural gas prices have been relatively low in recent years due to increased domestic production, they are still susceptible to market forces, such as supply and demand dynamics. Additionally, the infrastructure required for extracting, processing, and transporting natural gas can be expensive. As renewable energy technologies continue to advance and become more cost-effective, the long-term viability of natural gas as a primary energy source may be questionable.


Petroleum, or crude oil, remains a dominant fossil fuel in transportation and other sectors. The cost of petroleum is influenced by geopolitical factors, such as conflicts in oil-producing regions, as well as global demand and supply dynamics. Fluctuations in oil prices can have a significant impact on the overall cost of energy. Moreover, the environmental consequences of burning petroleum, such as greenhouse gas emissions and air pollution, necessitate additional investments in emission reduction technologies. As the world moves towards cleaner and more sustainable energy solutions, the reliance on petroleum is expected to decrease, making renewable energy a more attractive and cost-effective option.

Externalities: The Hidden Costs of Fossil Fuels

When comparing renewable energy to fossil fuels, it is important to consider the externalities associated with each. Externalities refer to the hidden costs or consequences that are not factored into the market price of a product or service. In the case of fossil fuels, these externalities can have significant impacts on our environment and health.

Climate Change Impacts

One of the most significant externalities of fossil fuels is their contribution to climate change. The burning of coal, oil, and natural gas releases greenhouse gases like carbon dioxide into the atmosphere, leading to global warming. This, in turn, has far-reaching consequences such as rising sea levels, extreme weather events, and the loss of biodiversity. According to the Intergovernmental Panel on Climate Change (IPCC), human activities are the main cause of global warming, with fossil fuel combustion being a major contributor.

Air Pollution and Health Effects

Fossil fuels are also major sources of air pollution, which has detrimental effects on human health. The combustion of these fuels releases pollutants such as sulfur dioxide, nitrogen oxides, and particulate matter into the air. These pollutants can lead to respiratory problems, cardiovascular diseases, and even premature death. According to the World Health Organization (WHO), outdoor air pollution from fossil fuel combustion alone is responsible for an estimated 4.2 million premature deaths worldwide every year.

Other Environmental Damage

In addition to climate change and air pollution, fossil fuels also cause other forms of environmental damage. The extraction and transportation of these fuels can result in habitat destruction, water pollution, and soil degradation. For example, oil spills have devastating effects on marine ecosystems, causing harm to marine life and coastal communities. Furthermore, the extraction of fossil fuels often involves the destruction of natural landscapes, including forests and wildlife habitats.

It is important to note that these externalities are not accounted for in the market price of fossil fuels. As a result, the true cost of using fossil fuels is often underestimated. On the other hand, renewable energy sources such as solar and wind power have minimal externalities and do not contribute to climate change or air pollution. Investing in renewable energy can help mitigate these hidden costs and create a cleaner and healthier environment for future generations.

Comparing All Costs: Renewables Are Cheapest

When it comes to the cost of energy, the debate between renewable sources and fossil fuels has been ongoing for years. While many argue that renewables are more expensive than traditional sources, a comprehensive analysis of all costs reveals that renewables are actually the cheapest option.

1. Initial Investment

One factor often cited as a drawback of renewable energy is the high initial investment required for infrastructure development. While it is true that building wind farms or solar power plants can be expensive, it is important to consider the long-term benefits. Once the infrastructure is in place, the ongoing operational costs of renewables are significantly lower than those of fossil fuel plants.

2. Fuel Costs

Renewable energy sources, such as wind and solar, do not require fuel to generate electricity. This means that once the initial investment is made, the cost of producing energy from renewables is essentially free. On the other hand, fossil fuels have volatile prices and are subject to geopolitical factors that can greatly impact the cost of energy production.

3. Environmental Costs

When comparing the costs of renewables and fossil fuels, it is crucial to take into account the environmental impact. Fossil fuel combustion releases harmful greenhouse gases into the atmosphere, contributing to climate change and air pollution. These external costs are not reflected in the price of fossil fuels, but they have significant economic and health consequences. Renewable energy, on the other hand, produces clean electricity with minimal environmental impact.

According to the International Renewable Energy Agency (IRENA), the cost of renewable energy technologies has been declining rapidly in recent years. In many parts of the world, renewable energy is already cheaper than fossil fuels. For example, in 2020, solar power became the cheapest source of electricity in history, surpassing the cost of coal and natural gas in many countries.

It is also worth noting that government incentives and subsidies have played a crucial role in driving down the cost of renewable energy. These policies have encouraged investments in renewable infrastructure, leading to economies of scale and technological advancements.

Future Cost Projections Favor Renewables

When it comes to the debate between renewable energy and fossil fuels, one of the key factors that often comes up is cost. Historically, fossil fuels have been the cheaper option, but as technology advances and economies of scale kick in, the tides are turning in favor of renewables. Future cost projections point to a significant decline in the cost of renewable energy sources, making them a more cost-effective choice in the long run.

Advancements in Technology

One of the main reasons for the projected cost decline of renewable energy is the advancements in technology. Solar panels and wind turbines are becoming more efficient and affordable to produce, thanks to innovations in manufacturing processes and materials. These advancements are driving down the overall cost of renewable energy systems, making them increasingly competitive with fossil fuels.

Economies of Scale

Another factor contributing to the cost advantage of renewable energy is economies of scale. As the demand for renewable energy increases, the production volume also goes up, leading to lower costs. This is particularly evident in the solar industry, where the cost of solar panels has dropped significantly over the years. With more installations and a growing market, the cost of renewable energy technologies is expected to continue declining.

Government Support

Government policies and incentives play a crucial role in the development and deployment of renewable energy. Many countries are implementing favorable policies to encourage the adoption of renewable energy sources. These policies include tax credits, feed-in tariffs, and grants, which help offset the initial high costs of installing renewable energy systems. As more governments prioritize renewable energy, the costs associated with transitioning from fossil fuels are expected to decrease.

Environmental Considerations

While cost is an essential factor, it’s important to consider the environmental impact of our energy choices. Fossil fuels contribute to climate change and air pollution, resulting in severe consequences for both the planet and human health. Investing in renewable energy not only helps reduce greenhouse gas emissions but also provides cleaner and more sustainable energy sources. By prioritizing renewables, we can create a healthier and more sustainable future for generations to come.


In conclusion, when we look comprehensively at both market prices and external costs, renewable energy from sources like solar and wind is generally cheaper than new electricity generation from fossil fuels like coal and gas. The costs of renewables have fallen rapidly in the last decade while fossil fuel costs have remained stable or even increased in some places.

Going forward, this cost advantage for renewables is projected to grow even wider. As technology continues to improve and renewables scale up globally, their costs will keep falling. The clear economic winner in most regions today for new electricity generation is renewable energy.

Leave a Comment

Scroll to Top