The cost of producing electricity from renewable sources such as wind and solar has been falling for several years. Now, a new report from the International Energy Agency (IEA) details the contrasting costs for different power generation technologies around the world and shows that renewable sources can produce electricity at close to – or even below – the cost of new fossil fuel-based power stations.

The report entitled ‘Projected Costs of Generating Electricity: 2015 Edition’ also shows that new nuclear power plants generate electricity on a much cheaper basis than other established baseload sources, such as coal- and gas-fired power plants, over the full lifetime of facilities when financing costs are relatively low.

The report, a joint project by the IEA and the Nuclear Energy Agency, calculates the cost of producing electricity from different types of new power plants. Compared with the previous edition published five years ago, the report details a significant drop in the price of solar and wind generation costs, especially for solar photovoltaic (PV) installations, as a result of sustained technological progress. The decline, as well as the flatlining price of new nuclear energy plants, helped arrest cost inflation in electricity generation over the past five years.

The IEA notes that no single technology proves to be the cheapest form of electricity generation under all circumstances – many factors determine the final cost of any investment, principally local influences such as market structure, policy environment and resource endowments. The report looks at generation costs at more than 180 plants – from large nuclear and fossil-fuel facilities to wind farms and residential-size solar PV installations – in 22 countries, including Brazil, China and South Africa.

The data were used to project, country by country and for the different technologies, what it would cost to generate electricity over the lifetime of a plant built to enter service in 2020. The report's standardized form of analysis, the levelized cost of electricity displays the cost range of generation in each country for each technology based on three discount rates.

Although the costs of renewable technologies in some higher-priced markets can be well above those of coal- or gas-fired plants, the report details how utility-scale solar PV and especially onshore wind power are comparable and often lower in countries featuring plentiful resources and appropriate market and regulatory frameworks. Further, although more significant regional variations remain for baseload technologies, variable renewable technology costs continue to converge toward international benchmarks at the lower end of their cost range.