Key points
- Renewable energy detractors often claim that these technologies drive up electricity prices because they require backup power systems.
- However, real-world data from different regions challenge this claim. In many markets, high renewable energy uptake is often associated with below-average power prices.
- In both the US and the EU, most states with above-average shares of wind and solar in their electricity mix have below-average electricity prices.
- In South Australia, power prices tend to be low when wind and solar make up a large share of the electricity mix.
Overview
Wind and solar are the cheapest options for new generation available today, but despite their cost-effectiveness, opponents of renewable energy often claim that these technologies push up power prices.
In his speech to the UN in September 2025, US President Donald Trump said wind is the “most expensive energy ever conceived” and promised to curb the growth of renewables in general as they are “unreliable” and “too expensive”.
In the UK, Conservative Party leader Kemi Badenoch has said that renewables and other decarbonisation solutions are “driving up the cost of energy”. Conservative think tanks including the Fraser Institute have made similar assertions, saying “parallel systems” are needed to back up wind and solar, making the entire energy system unaffordable.
However, real-world energy statistics from a number of countries challenge these claims. In many markets, high renewable energy usage is associated with below-average power prices. This briefing looks at market dynamics in regions with high data availability, namely the US, EU, Australia and India.
Numerous factors influence energy bills — including supply-demand dynamics, location-specific fuel costs, taxes, market rules, emissions regulations, import dependency, the timing of energy investments, and transmission and distribution costs. The correlation of renewable energy usage is not necessarily enough on its own, therefore, to explain changes in energy prices.
That said, claims that renewables drive up total costs are unsubstantiated when looking at hard data from numerous markets. In places taking a lead on wind and solar adoption, end-user costs have in most cases not climbed any faster than in places still more dependent on fossil fuels. In fact, the opposite tends to be true.
Head-to-head: Renewables versus fossil fuels
In 2024, nine of 10 new grid-scale renewable energy projects generated electricity at a lower cost than the cheapest new fossil fuel-fired alternative, according to the International Renewable Energy Agency (IRENA).
Onshore wind is the cheapest source of new electrical energy globally, with an average levelised cost of electricity (LCOE) of USD 0.034/kWh (kilowatt-hour), followed by solar PV at USD 0.043/kWh and hydropower at USD 0.057/kWh. Power from new onshore wind farms is 53% cheaper than the most affordable fossil fuel-based alternatives, while renewables coupled with battery storage are increasingly approaching cost parity with fossil fuel-based generation in key markets, IRENA says.
The cost benefits appear to be reflected in hard data from a number of markets.
Real-world case studies
US market
In the world’s largest economy, most states with higher-than-average shares of wind and solar in their electricity generation mix have below-average household power prices. This includes the three states where variable renewables made up over 50% of the mix in the first nine months of 2025 – namely Iowa, South Dakota and New Mexico (see Figure 1).
Figure 1
Of the 10 US states with the lowest residential electricity tariffs, seven have above-average wind and solar integration rates, including Oklahoma, a wind energy leader in the country. The three exceptions are Louisiana, Arkansas and Washington (see Figure 2).
Figure 2
California and Hawaii are notable outliers in that they have above-average shares of wind and solar and high prices.
In Hawaii’s case, this is largely because the state relies on expensive imported petroleum for a substantial share of its power generation, according to the US Energy Information Administration (EIA), which falls under the Department of Energy. In California, prices are high due to “significant and increasing wildfire-related costs” (which utilities pass on to consumers) and a range of other factors, according to a report by the state’s non-partisan Legislative Analyst’s Office.
Nevertheless, it is worth noting that household power price inflation in California and Hawaii is well below the national average in 2025. Whereas average national prices rose 4.9% year-on-year in the first nine months of 2025, prices remained unchanged in California as the share of wind and solar advanced 5.8 percentage points – the biggest gain of any state. In Hawaii, residential prices declined 6.6% as variable renewables gained another 1.5 percentage points of the overall mix (see Figure 3).
Figure 3
A recent study by the Lawrence Berkeley National Laboratory found that between 2019 and 2024, inflation-adjusted power generation costs in the US actually declined. End-user bills were pushed higher by increased spending on electricity distribution and transmission infrastructure as utilities replaced and upgraded ageing assets, and as supply chain constraints pushed up equipment costs. Moreover, natural disasters, extreme weather, and wildfire mitigation costs “have significantly increased prices in some states”, including California and Florida.
EU market
A similar picture emerges in the European Union (EU), where the energy transition is at a more advanced stage. Most EU countries with above-average shares of wind and solar have below-average household power prices (pre-tax), including Denmark, which currently leads the world in the shift to variable renewables (see Figure 4).
Figure 4
Research has shown that the rise of variable renewables is breaking the relationship between fossil fuels and power prices, leading to lower bills.
In Europe, as is the case in many other markets, the most expensive generator operating at any time sets the wholesale electricity price. Fossil gas is generally the costliest component of the mix in Europe, giving it an outsized impact on prices. Gas set day-ahead prices roughly 60% of the time in 2022, despite generating only 20% of the region’s electricity, the International Energy Agency (IEA) noted in its World Energy Outlook 2025 report.
As cheaper renewables grow their share of the generation mix, costlier fossil fuels determine the price less frequently since they are needed less often.
In Spain, the rapid shift towards wind and solar has greatly reduced the influence of gas and coal plants on electricity prices in recent years, according to an analysis by research group Ember. Wind and solar comprised 44% of Spain’s electricity generation in the first half of 2025, compared to 31.4% across the EU, Ember’s database shows. This explains why Spain’s electricity prices are below the EU average, the group says.
In the first half of 2025, Spain’s power prices were set by fossil fuels 19% of the time, down from 75% in the same period of 2019, per Ember’s analysis. As a result, the country’s wholesale electricity price was 32% lower than the EU average in the first half of 2025.
This change has filtered down to end-users. The average pre-tax electricity price for Spanish households was EUR 0.18/kWh in the first half of 2025, or 13.1% lower than the EU average, according to eurostat data.
Overall, Europe’s shift from gas and other fossil fuels will lead to a slight decrease in the region’s household electricity bills by 2035, modelling by the IEA shows. Unlike the US, which has substantial gas reserves, Europe relies heavily on imports of the fuel, which partly explains why its power prices remain higher.
In an earlier report, the IEA estimated that consumers in the EU saved around EUR 100 billion between 2021 and 2023 as a result of new solar and wind replacing expensive fossil fuel generation. The agency says these savings could have been 15% higher if renewable deployment had increased more quickly.
Elsewhere in Europe, the UK’s National Energy System Operator says the country’s total annual spending on energy will fall from around 10% of GDP in 2025 to around 5% of GDP in 2050 if it follows a high renewable energy pathway.
Indian market
In the world’s most populous nation, the transition to clean energy is at an early stage, despite a recent surge in installations. Coal still accounts for nearly three-quarters (73.6%) of total power output as of 2024, according to data collated by Ember. In this market, there is no clear relationship between renewables and power prices, and many states still have negligible contributions from wind and solar in their generation mix (see Figure 5).
However, in Rajasthan, where the renewables market is more developed, the average price that distribution utilities pay for electricity is below the national median.
Figure 5
In the state of Madhya Pradesh, rising renewable energy integration could lower power purchase costs for utilities by up to 11%, according to a peer-reviewed study published in the journal Energy Policy. The study, conducted by researchers at the University of Oxford and the University of Western Ontario, found that savings would grow as demand increases and the costs of renewables continue to fall.
Australian market
In Australia, the picture is more complicated. Queensland, the national laggard in renewable energy adoption, had the lowest wholesale power prices in the third quarter of 2025, while renewables-leader South Australia had the highest.
The cost issues in South Australia’s energy market are longstanding. According to a 2022 report by the South Australian Productivity Commission, high prices are partly because of the state’s “illiquid and highly concentrated market for ‘on-demand’ electricity”, which makes it expensive to hedge spot market prices. These costs could come down when a new transmission link with New South Wales is fully commissioned in 2027, according to the Australian Energy Market Commission (AEMC).
It should be noted that South Australia’s high electricity prices predate the state’s energy transition, which only gained real traction around a decade ago – wind and solar made up 76% of the state’s power output between July and September 2025, up from 34% in calendar year 2014 (see Figure 6).
Figure 6
Nevertheless, daily energy statistics show that when the share of wind and solar in South Australia’s electricity mix rises, power prices tend to decrease. And when wind and solar comprise over 85% of the mix, wholesale prices sometimes dip into negative territory for the day as a whole (see Figure 7).
Figure 7
With the rest of Australia catching up in terms of wind and solar deployments, the AEMC expects national residential electricity prices will fall by around 5% by 2030. But the agency warns that prices could climb thereafter if the renewables build-out slows.
Conclusion
Electricity prices are influenced by a multitude of factors, which makes the link between renewable energy penetration and end-user costs difficult to quantify.
However, claims that wind and solar are pushing up power prices are not supported by data from numerous global markets. In fact, many regions with above-average shares of variable renewables have below-average prices. Furthermore, there is ample evidence that renewables have shielded consumers from energy price spikes during global crises.
With the cost of wind, solar and battery storage continuing to decline fast, nations have an opportunity to build more resilient and affordable electricity systems by implementing appropriate policy frameworks.
