Energy generation

Lazard’s Levelized Cost of Energy (LCOE) v18.0 finds that renewable generation remains the most cost-competitive form of new power. On an unsubsidised basis, utility-scale solar costs range from USD 38–78/MWh and onshore wind from USD 37–86/MWh, undercutting coal (USD 71–173/MWh) and gas combined cycle generation (USD 48–109/MWh). Renewables continue to attract investment due to low capital costs and rapid deployment.

The report notes that the cost gap between new renewables and the marginal operating cost of existing gas combined-cycle plants has widened amid low gas prices and increasing energy demand. However, Lazard cautions that gas technology costs are expected to rise due to turbine shortages, higher construction expenses, and supply chain delays. Nuclear power, exemplified by cost reductions at the Vogtle units 3 and 4, is positioned to benefit from scale and development efficiencies.

LCOE sensitivities show that U.S. federal tax incentives (Investment and Production Tax Credits) significantly improve renewable competitiveness. Carbon pricing of USD 40–60 per tonne could raise conventional generation costs materially, further enhancing the relative advantage of renewables. Variations in fuel prices strongly affect conventional generation LCOEs, while renewables remain insulated from these fluctuations.

Historically, LCOEs for wind and solar have fallen by 55 % and 84 %, respectively, since 2009, though cost reductions have slowed. Between 2020 and 2025, utility-scale solar costs rose by around 54 % and onshore wind by 49 %, reflecting supply chain constraints and equipment price volatility. Lazard emphasises that while renewables remain competitive, maintaining cost reductions will require continued technological advancement and scaling.

Energy storage

Levelized Cost of Storage (LCOS) v10.0 shows a notable decline in storage costs. Utility-scale standalone systems (100 MW, 4 hour) now range from USD 115–254/MWh, and commercial and industrial (C&I) systems (1 MW, 2 hour) from USD 319–506/MWh. These declines are attributed to lower-than-expected electric vehicle demand, creating an oversupply of lithium-ion cells, and improvements in energy density and capacity.

Tax incentives continue to reduce costs further, with the federal Investment Tax Credit (up to 40 %) significantly improving project economics. Lazard also identifies market uncertainties driven by tariffs and evolving supply chains, as manufacturers relocate production to Southeast Asia and India. Despite these challenges, energy storage adoption is expanding beyond wholesale markets into high-growth regions such as Arizona, Colorado, and Florida, where grid resilience and data centre growth are driving demand.

Value snapshot case studies indicate that project returns have increased, supported by declining costs and rising capacity payments. Resource adequacy payments nearly doubled in 2025, while unsubsidised internal rates of return (IRR) for utility-scale and C&I projects reached 20–48 % in certain cases. These findings highlight growing profitability in the sector.

Energy system

The Cost of Firming Intermittency analysis evaluates the additional costs of ensuring reliability as renewable penetration rises. Firming costs vary by market and technology, with effective load-carrying capability (ELCC) values ranging from 7 % for solar in CAISO to 51 % for solar in SPP. Net costs of new firm capacity (Net CONE) range between USD 8–19 per kW-month depending on the region and resource type.

Lazard finds that firming costs increase with higher shares of intermittent generation. Independent system operators such as CAISO and PJM are adapting accreditation frameworks to better reflect correlated resource performance and seasonal variations. In CAISO, for example, higher solar penetration has reduced the ELCC of 4-hour storage systems.

The study concludes that a diverse energy mix will be essential for future system reliability. While renewables remain cost-competitive, firming costs highlight the importance of complementary technologies, including long-duration storage, geothermal, nuclear small modular reactors, pumped hydro, and carbon capture and storage. Lazard expects continued evolution of accreditation frameworks and system design to balance affordability and reliability across power markets.