Solar vs. Coal vs. Nuclear: Lazard’s 2025 Report Reveals the Cheapest Power Source

• Wind & Solar Now the Cheapest: Lazard’s latest analysis shows onshore wind costs around $37–$86 per MWh and utility solar $38–$78, beating fossil fuels on price cbsnews.com. Even without subsidies, renewables remain the lowest-cost new power sources for the 10th straight year lazard.com.
• Fossil Fuels Lag in Cost: Coal power runs about $71–$173 per MWh, and natural gas $48–$109, far higher than wind or solar cbsnews.com. The cheapest fossil generation (coal) is nearly double the average cost of utility-scale solar pv-magazine-usa.com. New nuclear is priciest at $141–$220 per MWh cbsnews.com.
• Dramatic Tech-Driven Cost Declines: Utility-scale solar PV costs have plummeted ~83% since 2009 pv-magazine-usa.com, and wind turbine upgrades (taller towers, bigger blades) doubled output per turbine over the past decade cbsnews.com. Renewables’ price drops have only recently leveled off due to inflation and supply chain pressures pv-magazine-usa.com.
• Reliability Still a Factor: Wind and solar are cheap but intermittent – backup power or storage is needed when the sun isn’t shining or wind isn’t blowing cbsnews.com cbsnews.com. Experts say natural gas remains the most affordable “on-demand” backup source to ensure 24/7 power availability cbsnews.com.
• Policy Shapes the Playing Field: U.S. federal incentives like the Inflation Reduction Act’s tax credits further slash renewable costs (boosting solar/wind economics by 10%+ in many projects) cbsnews.com. However, recent moves to phase out clean energy subsidies could raise future renewable costs cbsnews.com, while tariffs on imported steel, solar panels, and batteries have already made some projects pricier cbsnews.com.

Introduction: The Race for the Cheapest Energy Source

What is the cheapest form of energy today? It’s a complex question fueled by falling renewable costs, volatile fossil fuel prices, and urgent climate concerns. To cut through the noise, analysts often turn to the Levelized Cost of Energy (LCOE) – a metric that compares the all-in lifetime cost of different power sources. LCOE represents the price a generator must receive per unit of electricity to cover its construction, financing, and operating costs over its lifespan cbsnews.com. In essence, it’s a “apples-to-apples” benchmark of what it costs to produce a megawatt-hour (MWh) of electricity from solar panels, wind turbines, coal plants, nuclear reactors, and more.

Investment firm Lazard publishes one of the most widely cited LCOE analyses each year. Lazard’s 2025 LCOE+ report – as referenced in a recent CBS News investigation – paints a clear picture: renewable energy has taken the lead as the most cost-competitive form of power generation cbsnews.com. But raw cost is only part of the story. As experts told CBS, determining “the cheapest” energy source also means looking at reliability, scalability, and environmental impact cbsnews.com cbsnews.com. This report dives into Lazard’s latest findings and beyond, comparing major energy sources on cost, trends, and real-world considerations. We’ll also examine what these evolving economics mean for consumers, governments, and industries in 2025.

LCOE Showdown: How Different Energy Sources Stack Up on Cost

Lazard’s analysis makes it clear that wind and solar now dominate on price for new electricity generation. Below is a comparison of key energy sources by their LCOE (cost per megawatt-hour), without subsidies, in the United States:

• Onshore Wind: ~$37–$86 per MWh. Wind power is the cheapest source of new energy on average cbsnews.com. In prime locations with strong winds, wind farms can generate electricity for as little as roughly $40 per MWh. Even at the higher end of the range, wind’s cost is competitive with or below most fossil-fueled plants. Lazard notes that wind has been the lowest-cost new generation option for many years running lazard.com. This cost advantage is driven by technology gains – modern wind turbines are far taller and more efficient than a decade ago, able to capture more energy per turbine. In fact, the largest turbines today produce double the power output of those from ten years ago cbsnews.com, enabling more MWh for the same infrastructure. Once built, wind farms also have minimal fuel costs (wind is free) and relatively low maintenance overhead.
• Utility-Scale Solar PV: ~$38–$78 per MWh. Large solar farms are a close second in the low-cost race cbsnews.com. Solar’s costs have seen a spectacular decline – about an 83% drop since 2009 pv-magazine-usa.com – thanks to cheaper solar panels, economies of scale in manufacturing, and improvements in solar cell efficiency. At the best sites (sunny locations with low construction costs), utility solar can approach the lower $30s per MWh, nearly as cheap as wind. Even the upper end (~$70–$80) is on par with or below new gas and coal costs. As one energy expert explained, “solar is low cost to build, can be deployed quickly and modularly, the fuel is free and not volatile in price, and ongoing maintenance costs are minimal” cbsnews.com. Those qualities make solar extremely attractive for adding new power capacity. However, like wind, solar output varies with the weather and daytime cycle – a point we’ll return to under reliability.
• Natural Gas (Combined-Cycle): ~$48–$109 per MWh. Modern combined-cycle natural gas plants – which burn gas to drive turbines and also use waste heat to generate extra power – have been a go-to choice for reliable power. Their LCOE spans a wider range depending on fuel prices and plant usage. At the low end (around $50), gas can be fairly cost-effective, but volatile fuel costs often push gas generation toward the higher end of the range cbsnews.com. Notably, Lazard’s 2025 report warns that building new gas plants has gotten more expensive recently – reaching a ten-year high in LCOE – due to turbine supply shortages and rising materials costs lazard.com. In other words, while existing gas plants still play a major role (especially when natural gas fuel prices are low), investing in new gas capacity is pricier than it has been in a decade. We should distinguish two types of gas generation: baseload combined-cycle plants (running steadily) versus peaking plants (quick-start turbines used during high demand spikes). Peaking gas turbines have much higher LCOEs – Lazard estimates on the order of $110–$228 per MWh pv-magazine-usa.com – because they operate less frequently but still incur capital costs. Overall, gas is no longer the cheapest option for new power on a pure cost basis, but it provides valuable on-demand energy (more on that under reliability).
• Coal-Fired Power: ~$71–$173 per MWh. Coal power has been decisively overtaken by renewables in cost. Lazard’s data shows new coal plants are very expensive – often over $100 per MWh, with an average cost roughly double that of new solar farms pv-magazine-usa.com. Even operating existing coal plants is becoming less competitive. In some scenarios, “it is cheaper to build and operate new wind and solar than to keep an old coal plant running,” a Lazard banker noted cbsnews.com. Coal’s woes stem from multiple factors: high fuel and maintenance costs, aging infrastructure, and environmental regulations. Many U.S. utilities find they simply can’t justify the expense of coal power when wind or solar (plus some natural gas backup) can deliver electricity at lower cost. This economic reality has driven a wave of U.S. coal plant retirements in recent years cbsnews.com. Globally, some emerging economies still build coal plants, but even there, renewables increasingly undercut coal on price in addition to offering cleaner air.
• Nuclear Energy: ~$141–$220 per MWh (new build in U.S.). Nuclear power is an outlier in terms of cost – by far the most expensive form of new generation according to Lazard’s analysis cbsnews.com. Traditional large nuclear plants require massive upfront investment (tens of billions of dollars) and have tended to suffer from construction delays and cost overruns. For example, the only recent U.S. nuclear project, Plant Vogtle in Georgia, came online seven years late and at double the budget, ultimately costing around $30+ billion for two reactors eenews.net. These overruns translate into very high LCOE for new nuclear. Advocates note that once built, nuclear reactors provide steady baseload power with near-zero fuel costs (uranium is cheap and used in small quantities) and no carbon emissions. Indeed, nuclear can supply reliable electricity around the clock, unlike solar or wind. The challenge is the scalability and economics – utilities have been reluctant to order new large reactors given the Vogtle experience and cheaper alternatives. Efforts are underway to develop Small Modular Reactors (SMRs) that could be built faster and cheaper in factories, potentially lowering nuclear LCOE in the future eenews.net eenews.net. However, as of 2025, SMRs remain in prototype stages and not yet a commercial reality eenews.net. For now, nuclear’s cost is a major barrier. Lazard actually had to estimate nuclear LCOE based on limited data (few new plants are being built) raycandersonfoundation.org – and those estimates still put nuclear at roughly 3–5 times the cost of equivalent power from wind or solar.
• Other Sources (Hydro, Geothermal, etc.): Lazard’s report also considers some other generation types. Conventional hydropower (large dams) can produce very low-cost electricity in the right conditions, often rivaling wind for cheapest MWh. In fact, many existing hydro plants have LCOEs well below $50/MWh. However, hydro is location-dependent – you need rivers and suitable geography – and almost no new large dams are being built in the U.S. due to site limitations and environmental hurdles. Geothermal power taps into underground heat and can provide around-the-clock generation. Its costs in Lazard’s analysis appear as a broad estimated range (since new projects are few), roughly on par with or slightly above combined-cycle gas. Geothermal potential is also site-specific (limited to regions with accessible hot reservoirs). Finally, utility-scale battery storage is assessed in Lazard’s LCOE+ report as a complement to generation. While not an energy source, batteries are crucial for storing cheap solar/wind energy for use when needed. The good news is that battery costs are plummeting – 2025 saw “sharp declines for battery storage systems…dropping [storage] LCOE back to 2020 levels” after a spike in recent years lazard.com. Cheaper storage improves the effective cost and reliability of renewables by buffering their output (more on this later).

In summary, wind and solar are currently the kings of low-cost power. For an investor or utility looking to add new electricity capacity in 2025, these renewables offer the smallest price per MWh by a wide margin cbsnews.com. The cost differences are stark: on average, coal-fired electricity costs roughly twice as much as solar pv-magazine-usa.com, and nuclear costs about four times as much as wind. Natural gas occupies a middle ground, cheaper than coal or nuclear but still generally more expensive than renewables on an upfront cost basis cbsnews.com.

It’s worth noting that Lazard’s figures above are unsubsidized – they do not include government incentives. When you factor in policies like tax credits, renewables look even cheaper (often by $5–$15/MWh). We’ll discuss policy impacts later, but even in a “level playing field” analysis, renewables come out on top. As one energy economist put it, “renewable energy ends up being the most competitive when it comes to costs” cbsnews.com, while fossil and nuclear options struggle to keep up.

Why Renewables are So Cheap: Technology and Trend Drivers

The rise of wind and solar as the cheapest energy sources is no accident – it’s the result of decades of innovation, economies of scale, and learning-by-doing that have slashed the costs of renewable technology. Key trends and drivers include:

• Massive Cost Declines for Solar PV: Solar power has seen a solar-coaster of cost reduction. The price of solar photovoltaic modules has fallen dramatically as manufacturing shifted to mass production (especially in China) and module efficiency improved. Lazard’s data shows utility-scale solar’s LCOE dropped ~83% from 2009 to 2023 pv-magazine-usa.com – an almost tenfold reduction in cost per unit of power. This is one of the steepest cost learning curves of any energy technology in history. For context, in 2009 the cost to generate 1 MWh from a solar farm was well over $300; by 2023 it was in the few tens of dollars pv-magazine-usa.com. Cheaper solar panels, along with lower costs for inverters, trackers, and installation, all contributed. While solar’s cost decline has slowed recently, industry experts still foresee incremental improvements (e.g. new panel materials like perovskites, better storage integration) that could continue to nudge solar LCOE down.
• Wind Turbine Scale and Efficiency: Wind power costs have likewise plunged (roughly 70%+ decline in LCOE over the last decade, according to various analyses). A big factor is the growth in turbine size and efficiency. As noted, today’s onshore wind turbines can be over 100 meters tall with blades the length of a football field. Each new generation of turbines captures more wind energy, meaning fewer turbines (and less maintenance) for the same output. The U.S. Energy Information Administration confirms that “the largest turbines installed today can produce double the power they could’ve a decade ago,” dramatically increasing the energy yield per turbine and per wind farm cbsnews.com. This improved performance directly lowers LCOE. Additionally, better wind farm design, improved materials, and more sophisticated wind forecasting (to optimize operations) have contributed to wind’s cost competitiveness. Offshore wind, a newer segment, has higher costs today (Lazard’s report likely shows offshore wind LCOEs that are still above onshore wind). However, offshore wind is also on a steep learning curve and benefitting from larger 12+ MW turbines; it’s projected to become more cost-competitive, especially in Europe where many large offshore farms are coming online.
• Economies of Scale and Global Supply Chains: Both solar and wind have benefitted from globalized supply chains and scaling up. Solar module manufacturing became vastly cheaper as factories scaled to gigawatt levels (with China dominating production). Wind turbine component supply has similarly scaled, though recent supply chain hiccups (steel price spikes, shipping delays) did put some upward pressure on costs in 2021–2022. In fact, Lazard observed that for the first time ever, the lowest-cost renewables saw a slight increase in LCOE in the past year due to cost inflation and higher interest rates pv-magazine-usa.com. This means the era of ultra-rapid cost decline hit a speed bump. But these challenges are considered temporary: as supply chain issues normalize and if interest rates stabilize, renewable costs may resume a downward trend or at least remain very competitive. Indeed, Lazard noted that despite recent pressures, average LCOEs stayed roughly flat year-over-year pv-magazine-usa.com – indicating renewables have largely absorbed these shocks while holding their cost advantage.
• Innovation in Energy Storage: A critical technological trend to watch is battery storage. The ability to store electricity cheaply addresses the intermittency of solar and wind, effectively increasing their value. Lithium-ion battery costs fell rapidly through 2020, then experienced a short uptick (due to supply chain and commodity costs). But the 2025 Lazard report highlights that battery storage costs have resumed their decline – with significant year-on-year cost drops bringing storage LCOE back to where it was in 2020 lazard.com. Drivers include improved battery chemistries, manufacturing scale (especially driven by the electric vehicle market), and even a temporary oversupply of cells lazard.com. Technological advancements, such as batteries with higher energy density and longer lifespans, are coming to market. Cheaper storage means that a solar or wind farm can be paired with batteries to provide more consistent power output, reducing the need for gas peaker plants and further lowering the effective cost of integrating renewables into the grid.
• Improvements in Fossil Fuel Tech (and Limits): Traditional power sources have also improved, but more modestly. Modern combined-cycle gas turbines are highly efficient (some convert 60% of fuel energy to electricity), which helped gas LCOE stay moderate. However, as mentioned, building new gas plants is getting pricier due to manufacturing bottlenecks and higher financing costs lazard.com. Coal power technology (like supercritical boilers) improved efficiency somewhat, but those gains are overshadowed by fuel and carbon costs. For nuclear, next-gen designs (SMRs, advanced reactors) promise lower costs through modular construction and enhanced safety features, but these are still in demonstration phase eenews.net eenews.net. In sum, incremental innovations in fossil and nuclear haven’t come close to the transformative cost declines seen in wind and solar.

Looking ahead, many experts expect renewables to remain on top for cost. While we likely won’t see the same dramatic percentage drops of the 2010s, continued improvements (and the sheer momentum of global production) should keep pushing renewable LCOEs down or stable. Fossil fuel costs, conversely, could rise if fuel prices increase or if carbon pricing is implemented. It’s also important to note that LCOE is a snapshot, not a full prediction of future costs lazard.com. Unforeseen breakthroughs (or crises) could change the economics. But as of 2025, the trend lines firmly favor clean energy from a pure cost perspective.

Beyond Cost: Scalability, Reliability and Other Considerations

If cheapest cost were the only metric, we might simply build nothing but wind and solar farms everywhere. Reality is more complicated. Different energy technologies have different strengths and weaknesses in terms of reliability, availability, and scalability. Here’s how the major sources compare when looking beyond the dollar-per-MWh:

• Reliability and Intermittency: One big drawback of wind and solar is that they are intermittent by nature. Wind turbines only generate when the wind blows; solar panels only produce during the day (and less on cloudy days). This means their output can’t be controlled to match demand at all times. In contrast, coal, gas, and nuclear plants are dispatchable – they can produce power on-demand (coal and nuclear provide steady baseload output, whereas gas plants can ramp up and down more quickly to follow demand peaks). As a result, even though wind and solar are cheapest per MWh, they can’t single-handedly power an electrical grid 24/7 without help. We need backup sources or storage to maintain reliability during calm nights or winter doldrums. “You have to talk about, what is the additional cost of balancing that production from a resource that doesn’t produce all the time?” as energy economist Severin Borenstein explains cbsnews.com. Currently, the most common “balancing” strategy is to use natural gas plants as a flexible backup. Natural gas is often cited as “the most affordable source of backup energy, which is necessary to make sure power is available around the clock,” in the words of grid expert Rob Gramlich cbsnews.com. Gas plants can fire up quickly when wind or solar output dips, ensuring the lights stay on. Hydropower (where available) is another excellent balancing resource – water can be released as needed to generate electricity on demand (and some hydro reservoirs can even store energy by pumping water). Batteries are the fast-rising star in reliability: large battery installations can smooth out short-term fluctuations (e.g. storing excess solar at midday to use in the evening). As battery durations extend to several hours or more, they start to compete with gas peaker plants for meeting peak demand.
• Firm Capacity vs. Energy: Related to reliability is the concept of capacity – the guaranteed power output a source can provide during peak need. Solar and wind have lower “capacity factors” (they might average 20–50% of their nameplate capacity over time). Grid operators thus can’t count on their full capacity being available at any given peak hour. This has led to evolving methods to accredit the “firm” capacity contributions of renewables, often pairing them with storage or diversifying across regions lazard.com. Traditional plants (gas, coal, nuclear) can be counted on for a high percentage of their capacity, which historically made them indispensable for meeting peak demand. However, maintaining too much inflexible baseload (like nuclear) can be inefficient if it oversupplies during low-demand periods. The optimal solution emerging in many regions is a diverse mix: lots of cheap renewables for bulk energy, plus sufficient firm capacity (gas turbines, hydro, storage, maybe some nuclear) to cover the gaps. As Borenstein emphasizes, “There is no one cheapest form [of energy] that you can run the whole system on… it depends on combining them in ways to get the cheapest possible cost” cbsnews.com. In other words, a portfolio approach keeps the grid reliable and cost-effective.
• Scalability and Deployment Speed:How quickly and widely can each source be scaled up to meet growing demand? Here, renewables also shine. Solar PV is extremely scalable – it’s modular and can be installed almost anywhere (from rooftops to deserts). A utility-scale solar farm (hundreds of MW) can be built in a year or two, and smaller projects in months. Onshore wind projects typically take a couple of years for permitting and construction; they require suitable windy sites (plains, ridges, etc.) and enough land, but the U.S. and many countries have substantial wind resources still untapped. Both solar and wind can be deployed in a distributed fashion too (e.g. thousands of small solar farms or wind sites) rather than needing one giant location, which adds resiliency. Natural gas plants are also reasonably quick to build – a mid-sized gas plant might take 2–3 years to permit and construct. Gas plants can be built in a range of sizes and locations (though they need pipeline access for fuel), making them relatively flexible to deploy where needed. Coal plants, on the other hand, are huge undertakings – typically 4–6 years to build, and at this point essentially none are being built in the U.S. or Europe due to economic and environmental constraints. In fast-growing Asian economies, coal plants still get built but often face delays and local opposition. Nuclear reactors are notoriously slow to build at scale: a large plant can take a decade or more from planning to operation (as seen with Vogtle’s 10+ year timeline) eenews.net. The complexity of nuclear construction, regulatory oversight, and financing hurdles make it difficult to rapidly scale nuclear in the near term. The proposed SMRs could change that dynamic if they prove out – e.g. factory-built modules assembled on site could cut construction times drastically – but that likely won’t be realized until the 2030s if at all. Hydropower scaling is limited by geography; where large dams don’t already exist, new ones face long timelines and environmental challenges. Geothermal could be scaled in certain regions (like the western U.S.), but growth has been slow due to drilling risks and site-specific feasibility.
• Resource Availability: Another scalability aspect is the resource itself. Sunlight and wind are abundant and inexhaustible (though variable). In many regions, there’s effectively enough solar and wind potential to supply multiples of current energy demand – the limitation is building the infrastructure and managing variability. Natural gas and coal rely on fuel resources that are finite (though large reserves still exist) and subject to geopolitical dynamics. Gas has an advantage of a mature global supply chain (and the U.S. has ample domestic gas from fracking, though price can fluctuate with market demand). Coal is also globally traded but is in decline and often faces higher transport costs. Uranium for nuclear is relatively plentiful and a small part of nuclear’s cost – fuel availability isn’t a major constraint for nuclear (spent fuel/waste is the bigger issue). Overall, renewables score well on long-term resource sustainability, whereas fossil fuels face eventual depletion (and interim price volatility).
• Operational Flexibility: Different power sources play different roles in grid operations. Gas plants are prized for flexibility – they can ramp output up or down quickly to follow demand surges or dips in renewable output. Coal plants are less flexible; they’re often best run at a steady output and are slow to turn on or off. Nuclear plants are also typically run at full power constantly (they’re technically capable of load-following to some extent, but economics favor steady operation). Hydro is highly flexible – operators can adjust water flow rapidly, making it a great complement to renewables. Batteries provide exceptional short-term flexibility – they can respond in milliseconds – which helps with grid frequency regulation and rapid smoothing of supply-demand imbalances. In a renewable-heavy grid, batteries plus fast-ramping gas turbines and demand response systems will likely provide the needed flexibility.

In summary, wind and solar’s Achilles’ heel is intermittency, not cost. They are the cheapest sources of energy, but their variability means they cannot single-handedly power a modern economy without backup. Natural gas (and to a degree hydro and storage) currently fill that reliability role, ensuring stable power supply. Nuclear offers reliability and zero emissions, but its high cost and slow deployment are major constraints. Energy planners often talk about an “all of the above” strategy – using each source where it makes the most sense. The 2025 reality is that for new generation, “all of the above” is getting re-weighted toward renewables first, with just enough conventional capacity to maintain reliability.

Environmental Impact: The Hidden Costs (and Savings)

Cost comparisons like LCOE focus on direct monetary costs to build and operate power plants. But each energy source also carries environmental and health impacts – which can be viewed as indirect costs to society. Considering these factors often strengthens the case for cleaner energy:

• Climate Change (CO₂ Emissions): Fossil fuels emit large amounts of carbon dioxide (CO₂) when burned, the primary driver of climate change. Coal is the worst offender, followed by natural gas (which emits about half as much CO₂ as coal per unit of electricity). To illustrate: a coal-fired plant emits roughly 820 grams of CO₂ per kWh, whereas a natural gas plant emits around 450 g per kWh natureoffice.com. In contrast, wind and solar power emit near-zero CO₂ in operation – only small amounts across their lifecycle (manufacturing, installation) on the order of a few tens of grams per kWh planete-energies.com. One analysis noted that coal generation releases about 80 times more CO₂ per kWh than wind power once all lifecycle emissions are accounted planete-energies.com. Nuclear also has very low carbon emissions in operation (comparable to wind/solar in lifecycle CO₂). The huge disparity in carbon footprint means that even if, say, coal appears “cheap” in certain contexts, the long-term climate damage imposes a cost not captured in the market price. Economists often argue for pricing this external cost (via carbon taxes or cap-and-trade), which would further tilt the economics toward renewables and nuclear. Already, the societal impacts are evident: for example, extreme weather linked to climate change can drive up energy costs and strain grids (one study found U.S. wholesale electricity costs increased ~35% in summer 2023 vs. 2022 due to climate-related demand and fuel impacts cbsnews.com).
• Air Pollution and Health: Burning coal (and to a lesser extent, gas) releases pollutants like sulfur dioxide, nitrogen oxides, particulate matter, and mercury. These contribute to smog, acid rain, and respiratory and cardiovascular illnesses in populations downwind. Coal plant pollution has been linked to asthma, lung disease, and premature deaths. Even with emissions controls, coal is a major source of local air toxins. Natural gas burns cleaner than coal (far less particulate and sulfur emissions), but it still produces NOx and contributes to ozone smog. In contrast, wind and solar emit no air pollutants during operation. The public health benefits of shifting to clean energy are substantial. A recent study by Lawrence Berkeley National Lab found that U.S. wind and solar generation from 2019–2022 saved an estimated $249 billion in climate and air quality health costs – roughly $62 billion per year by avoiding fossil emissions pv-magazine-usa.com. This includes lives saved and illnesses avoided thanks to cleaner air. Those massive benefits are not reflected in the simple LCOE numbers but are real impacts. Nuclear plants likewise produce no air pollution in normal operation (the primary environmental concern with nuclear is radioactive waste and the low-probability risk of accidents).
• Land and Water Use: Renewable energy does require land – solar farms need acreage and wind farms are spread over large areas (though land under wind turbines can often still be used for farming or grazing). There are concerns about land impacts and habitat disruption, especially for some large solar projects. However, there is plenty of low-value or dual-use land that can host renewables, and strategies like installing solar on rooftops, parking lots, and degraded lands can minimize impacts. Wind turbines can pose risks to birds and bats, which is being addressed through better siting and technology (like bird-safe turbine designs and radar shutdown systems). Hydropower can have significant ecological impacts (altering waterways, affecting fish migration, etc.), which is why new dams are controversial. Thermal power plants (coal, gas, nuclear) often require cooling water, which can strain water resources and harm aquatic life with thermal discharges. For instance, nuclear and coal plants typically consume billions of gallons of water for cooling annually. Solar and wind use negligible water once operating. On land footprint: a coal mine or gas drilling operation plus the plant itself also use land and can degrade local environments (mountaintop removal mining, fracking impacts, etc.), though these are often out of sight to the consumers.
• Waste and Pollution: Coal combustion leaves behind coal ash, a toxic mix of heavy metals that must be stored (with a history of containment failures polluting rivers). Natural gas extraction can leak methane (a potent greenhouse gas) and cause local water issues. Nuclear fission generates spent nuclear fuel that remains radioactive for thousands of years – it’s securely stored on-site at reactors pending long-term disposal solutions. While nuclear waste volumes are small, it’s an enduring stewardship concern. By contrast, the main “waste” issue for renewables is what to do with old solar panels and wind turbine blades at end-of-life. There’s a growing focus on recycling these components to avoid landfill disposal 20-30 years down the line. These waste considerations are important, though again not reflected in LCOE.

In sum, renewables have a clear environmental advantage over fossil fuels: virtually no greenhouse emissions or air pollution once they’re up and running. Nuclear has a climate advantage (no CO₂) but brings different environmental challenges (long-lived waste and potential accident risk). When factoring in the hidden costs of pollution and climate change, the balance further favors moving away from coal and gas. Policymakers often attempt to account for this through regulations or incentives – for example, renewable portfolio standards, emissions caps, or subsidies for clean energy. Such measures essentially acknowledge that the cheapest energy in market terms (say, gas at $50/MWh) might not be the cheapest in societal terms once externalities are included. By aligning market prices with true costs to society, the transition to cleaner (and ultimately cheaper) sources can accelerate.

Policy Implications: How Governments Influence Energy Costs

Energy economics don’t exist in a vacuum – government policies and market regulations have a huge influence on which sources thrive or falter. In 2025, policy winds are shifting, and decisions made by governments can effectively tip the scales of cost-competitiveness:

• Subsidies and Tax Incentives: Governments have long used subsidies to support energy industries. For over a century, the oil and gas industry in the U.S. benefited from favorable tax treatment (such as the Intangible Drilling Costs deduction dating back to 1913) to encourage fossil fuel production cbsnews.com. These legacy subsidies quietly keep fossil fuel costs lower than they otherwise would be. In recent decades, to spur cleaner energy, governments introduced incentives for renewables. The U.S. federal Production Tax Credit (PTC) for wind and Investment Tax Credit (ITC) for solar have been instrumental in scaling those industries. In 2022, the Inflation Reduction Act (IRA) turbocharged clean energy support, offering enhanced credits for renewable projects and even bonuses for projects in certain communities cbsnews.com. Lazard’s report illustrates how such credits can significantly reduce LCOE for renewables cbsnews.com – in some cases cutting costs by 10–30%, which can make a project financially viable. For example, a wind farm might need to earn ~$40/MWh unsubsidized, but with credits it could break even at a much lower rate, enabling cheaper electricity for consumers. However, policy support is not guaranteed perpetually. By 2025, political dynamics introduced uncertainty: a “big, beautiful bill” backed by U.S. Congressional Republicans (and signed by President Trump, who returned to office in 2025) aims to phase out clean energy tax credits within two years cbsnews.com. If those incentives vanish after 2026, the effective costs of new wind and solar could rise, possibly slowing their deployment. Meanwhile, that same legislative push is funneling new subsidies to oil and gas – nearly $18 billion in tax incentives for fossil energy over the next decade cbsnews.com. This policy whiplash shows how government action can rapidly change the economics: supporting one resource or penalizing another.
• Tariffs and Trade Policy: The interconnected global supply chain for energy equipment means trade policies matter. The U.S. imposes tariffs on imported solar panels, steel, aluminum, and other components. Since 2018, tariffs on solar modules (primarily targeting China) increased the cost of solar projects domestically. In 2025, the Trump administration further expanded tariffs on various trading partners and materials cbsnews.com cbsnews.com. According to energy analysts, these tariffs have especially hit battery and solar costs. “The vast majority of our battery cells come from China… so the cost of a battery project is going to go up” with tariffs, explained Chris Seiple of Wood Mackenzie cbsnews.com. CBS News, using a Wood Mackenzie model, found that under current tariffs, certain clean energy projects could see noticeable cost increases, and an escalating trade war scenario would worsen this cbsnews.com. There’s already evidence of a “whack-a-mole” effect: companies shift manufacturing to tariff-exempt countries (e.g. solar panel assembly moving to Southeast Asia) to avoid U.S. duties cbsnews.com. In short, protectionist trade policies can inadvertently raise the price of renewables and storage in the short term, while trade agreements or tariff waivers could lower costs. It’s a lever policymakers must balance between domestic industry goals and clean energy affordability.
• Environmental Regulations and Carbon Costs: Policies that put a price on pollution can alter cost calculations. While the U.S. doesn’t have a federal carbon tax, other regulations (like mercury and air toxics standards, coal ash rules, etc.) impose compliance costs on coal plants, effectively raising their operating cost. Some states and countries participate in carbon cap-and-trade markets (e.g. California’s cap-and-trade, the EU Emissions Trading System). A carbon price – if significant – directly increases the LCOE of carbon-heavy sources (coal, gas) relative to zero-carbon sources. Lazard’s base LCOE figures don’t include a carbon tax, but if you hypothetically added, say, $50 per ton of CO₂, coal and gas LCOEs would jump, whereas wind/solar/nuclear remain unchanged. This is why many utilities conduct “carbon shadow pricing” in planning, anticipating that future climate policies could penalize fossil fuels. As of 2025, the momentum for carbon pricing in the U.S. is uncertain, but internationally we see it gaining traction (the EU’s carbon price has made coal power uneconomic there, for instance).
• Infrastructure and Grid Policy: The ability to deploy cheap renewables at scale depends on grid infrastructure and rules. Transmission lines are needed to connect windy and sunny regions to population centers. Slow permitting and local opposition to new power lines can bottleneck renewable expansion, effectively limiting how much cheap wind/solar can reach the market. Policy reforms to streamline transmission development (or federal initiatives to build high-voltage interstate lines) could greatly enhance renewable scalability. Additionally, grid rules (set by grid operators and regulators) determine how different resources are valued. For example, capacity markets might pay generators for being available at peak times – favoring resources with firm capacity. If rules evolve to give proper credit to batteries or demand response, that can improve the economics of a renewables-heavy grid. Lazard points out that system operators are updating capacity accreditation methods as renewables grow lazard.com, which can impact the cost of maintaining reliability (often referred to as “firming costs”). Policymakers and regulators essentially have to modernize grid planning to integrate the cheap renewable energy while keeping the lights on.
• Public Investment and R&D: Government-funded R&D has been critical in the energy sector. Past investments helped advance solar panel tech, more efficient turbines, and nuclear reactor designs. Continued or increased funding for clean energy R&D (like better batteries, green hydrogen, carbon capture for gas plants, etc.) could pay dividends in future cost reductions. Likewise, public investment in demonstration projects (e.g. helping to build first-of-a-kind SMRs or long-duration storage projects) can accelerate commercialization. The Department of Energy’s recent programs supporting advanced reactors and large-scale energy storage are examples eenews.net eenews.net. On the flip side, reduction in research funding or focus (for instance, if a government emphasizes fossil fuels at the expense of renewables research) could slow innovation.

In conclusion, policy can make or break the cost competitiveness of energy sources. Right now, pro-renewable policies like tax credits and emissions regulations amplify the inherent cost advantage of wind and solar, while any rollback of support or imposition of trade barriers can erode some of their edge. Fossil fuels have long enjoyed implicit and explicit subsidies; removing those or making polluters pay would further increase fossil LCOEs relative to clean energy. As the Lazard report underscores, renewables are already “the most cost-competitive form of generation” even without subsidies subscriber.politicopro.com. With supportive policies, the transition to renewable energy could accelerate, whereas contrary policies might slow it but likely not stop the economic trend. Policymakers thus face choices that will determine how quickly consumers see the benefits of cheaper, cleaner power.

The Bottom Line for Consumers, Government, and Industry

The shifting economics of energy in 2025 carry significant implications for various stakeholders:

For Consumers: Ultimately, energy costs hit consumers’ wallets through their utility bills and prices at the pump. If utilities can source more electricity from low-cost wind and solar, consumers stand to benefit from lower electricity rates (all else equal). Indeed, many utilities are now closing expensive coal plants and investing in renewables specifically because it can save ratepayers money over time cbsnews.com. However, the transition can also bring short-term costs – for example, investments in new transmission lines or energy storage might be passed through to rates initially. Overall, though, the prospect of abundant cheap renewable energy is good news for consumers: it offers a path to affordable and stable electricity prices in the long run, since wind and sunlight aren’t subject to fuel price spikes. There’s also more consumer choice emerging: home solar panels and batteries are options for those who want to take advantage of falling solar costs directly (though rooftop solar is still more expensive per kWh than utility-scale, many homeowners find it worthwhile with incentives) raycandersonfoundation.org. One caveat is reliability – consumers expect the lights on 24/7. As more intermittent sources are added, utilities and regulators need to ensure reliability standards are met (through grid upgrades, backup resources, etc.). Smart appliances and home energy management can also empower consumers to use energy when it’s cheapest (say, running water heaters or charging EVs when solar power is plentiful at midday). Lastly, on the climate front, consumers benefit broadly from cleaner air and reduced climate risks, even if they might not always connect that to their energy bill. Energy cost trends are aligning with environmental benefits, so consumers don’t have to choose one or the other – clean energy is increasingly the economical choice.

For Governments and Policymakers: The fact that wind and solar are now cost leaders gives governments more confidence to pursue ambitious clean energy targets. Where in the past there was a perceived cost penalty to green energy, now it’s often the cost-saving option. This economic shift can shape policy in multiple ways. Governments can plan to retire polluting plants without burdening the economy, since renewables can fill the gap affordably. They can also focus subsidies more efficiently. For instance, if solar and wind are already cheap, perhaps future subsidies should target harder-to-decarbonize areas (like energy storage, heavy industry, or next-gen nuclear for reliability). Policymakers also have to manage the transition impact – e.g. helping coal-dependent communities with economic diversification, as coal mining and plant jobs decline due to market forces. Energy security is another government concern: with cheap domestic renewables and storage, nations can improve energy independence (less reliance on imported fuels subject to geopolitical risk). The 2022 war in Ukraine underscored the vulnerability of fossil fuel supply chains; many European countries accelerated renewable deployment as a security strategy. Governments also must invest in infrastructure and reform regulations to accommodate the new energy mix – speeding up grid interconnections, updating market rules as discussed, and ensuring a resilient grid in the face of new patterns (like high solar output midday, etc.). Lastly, the falling cost of clean energy gives governments a powerful tool to meet climate goals (such as commitments under the Paris Agreement) without sacrificing economic growth. It flips the script to “clean energy as an opportunity” rather than a cost burden. However, inconsistent policies (e.g. abrupt subsidy cuts or trade barriers) can create boom-bust cycles that actually raise costs, so stable, long-term energy policy is key to harnessing these cost trends.

For Industry and Energy Companies: The energy sector is in flux. Utilities and power producers are making big decisions on what to build (or shut down). Most are now opting for solar farms, wind farms, and natural gas plants over coal or nuclear due to cost. Utilities that traditionally relied on coal are rapidly rebalancing their portfolios. The Lazard findings that new renewables can beat even the operating cost of old coal plants raycandersonfoundation.org has sunk in – it often makes economic sense to retire aging coal units and invest in renewables plus some gas or storage. Renewable energy companies are, of course, booming with this demand – solar and wind developers have a strong business case to pitch to utilities and corporate buyers (like tech companies aiming for 100% clean energy). We also see oil & gas companies diversifying: some oil majors are investing in renewable projects or technologies like green hydrogen, sensing the long-term shift. However, fossil fuel industries are not disappearing overnight; natural gas companies in particular find continued opportunity as gas remains a key backup and heating fuel. They may position gas as a “bridge fuel” or invest in carbon capture to prolong gas plant viability in a low-carbon future. Nuclear industry players, facing the lack of appetite for large reactors, are focused on advancing SMRs and hoping for future deployment – governments may be their main customers initially (e.g. for government labs or remote communities). Another industry aspect is manufacturing: the demand for solar panels, wind turbines, batteries, etc., represents a huge economic opportunity. Countries are racing to build up domestic manufacturing (as seen with provisions in the IRA to onshore clean tech supply chains). Companies in these supply chains stand to gain from the growth of renewables. Conversely, manufacturers relying on cheap energy (like steel or chemicals) could benefit from lower electricity prices due to renewables, improving their competitiveness. Lastly, the power sector transition is spawning new industries like energy storage deployment, smart grid tech, and electric vehicle infrastructure – all creating jobs and business prospects. Legacy industries will need to adapt or face decline; for example, coal mining companies are in permanent downturn in places shifting to cleaner power.

A Diverse and Cheaper Energy Future: The overarching implication of Lazard’s 2025 analysis and related trends is that the world can move to a cleaner energy mix without higher costs – in fact, with potential cost savings. Solar and wind’s economic edge changes the narrative. The challenge ahead is ensuring reliability and managing the transition, rather than worrying about the affordability of clean power. As one expert neatly summed up: “Wind and solar, you basically do all the investment up front, and then it operates – not quite for free – but at extremely low operating costs” cbsnews.com. That fundamental advantage of no fuel cost means once we build out the infrastructure, we could enjoy cheap, stable energy for decades. Meanwhile, he noted, “for a natural gas-fired power plant, you have to buy the gas; for a coal plant, you have to buy the coal. And so the price is going to fluctuate.” cbsnews.com Fuel-based generation will always expose consumers to commodity price swings.

Looking to the future, a key takeaway from experts is that balance is crucial. We should leverage the low costs of renewables as much as possible, while investing in grid upgrades, storage, and complementary technologies to ensure a reliable supply. A diversified energy system – predominantly renewable but supplemented by flexible gas, hydro, nuclear, or other resources – appears to offer the “cheapest possible cost” for the whole system when properly combined cbsnews.com. Energy transitions are complex, but the economics are lining up in favor of clean energy. Both market forces and smart policies can accelerate this shift, delivering benefits to consumers and society. In summary, Lazard’s latest cost data confirms a trend that seemed almost unthinkable two decades ago: the cheapest electrons we can generate now come from the sun and the wind. And that is a powerful insight for shaping energy decisions in 2025 and beyond.

Sources:

1. CBS News – Which form of energy is the cheapest? (Mary Cunningham, CBS MoneyWatch) cbsnews.com cbsnews.com cbsnews.com cbsnews.com cbsnews.com – Lazard’s 2025 LCOE figures and expert quotes on cost comparisons, reliability, and the need for a balanced energy mix.
2. Lazard – 2025 Levelized Cost of Energy+ Report (Press Release) lazard.com lazard.com lazard.com lazard.com – Key findings highlighting renewables’ cost competitiveness, rising gas generation costs, and storage cost declines.
3. pv magazine – Lazard report: Renewables cheapest, fossil fuels double the cost (Ryan Kennedy, June 2024) pv-magazine-usa.com pv-magazine-usa.com pv-magazine-usa.com pv-magazine-usa.com – Details on LCOE ranges (wind $27–$73, solar $29–$92, coal $69–$169, etc.), historical solar cost decline (83%), and external benefits of renewables.
4. Ray C. Anderson Foundation blog – Latest Numbers from Lazard’s LCOE (John Lanier, Apr 2023) raycandersonfoundation.org – Interpretation of Lazard’s chart: in some cases new wind/solar are cheaper than operating existing coal or gas plants.
5. CBS News – Trump-era policy impacts on energy costs cbsnews.com cbsnews.com – Discussion of the Inflation Reduction Act’s renewable subsidies versus the rollback legislation, and how tariffs increase clean energy costs.
6. E&E News/Politico – After Vogtle, what’s next for nuclear? (Zach Bright, Apr 2024) eenews.net – Report on Georgia’s Vogtle nuclear plant coming online 7 years late and double the budget ($35 billion), exemplifying nuclear cost challenges.
7. EIA & EESI – Energy facts & historical context cbsnews.com cbsnews.com – Turbine efficiency improvements; longstanding oil/gas subsidies.
8. NatureOffice / Planète Énergies – CO₂ emissions by source planete-energies.com natureoffice.com – Lifecycle carbon emissions: coal ~820 g/kWh, gas ~450 g, vs. wind ~10 g, solar ~40 g (coal ~80× wind’s CO₂ per kWh).