Power companies and governments planning new coal-fired plants are running into a hard economic wall. In 2023, an estimated 96 percent of newly installed utility-scale solar PV and onshore wind capacity delivered lower generation costs than new coal and natural gas plants, according to the International Energy Agency. That single number captures a shift years in the making: building clean power is now cheaper than building dirty power across most of the world, and the gap keeps widening.
Cheaper renewables are already killing coal project economics
The cost advantage is not a forecast or a best-case scenario. It is the reported reality of projects that came online last year. The IEA found that solar PV and wind account for the bulk of new capacity additions precisely because their generation costs are lower than both fossil and non-fossil alternatives in most countries. In its analysis of global renewable electricity, the agency notes that developers, utilities, and state-owned power companies are choosing renewables not out of climate ambition alone but because the numbers on their spreadsheets point in one direction.
The practical consequence is straightforward. Every new coal plant proposed today must compete against solar and wind projects that produce electricity more cheaply over their lifetimes. When financing costs for renewables remain low and insurance premiums for coal projects climb, the economics tilt further. A reasonable reading of the current trajectory suggests that if real financing costs for renewables hold below 5 percent while coal projects absorb rising insurance and carbon-risk premiums, the rate of coal plant cancellations could outpace even the IEA’s own projections by a wide margin within the next few years. That hypothesis has not been tested against a formal model, but the direction of pressure is clear from the cost data already on record.
This pressure is already visible in the way utilities structure their generation plans. Long-term power sector strategies that once assumed decades of baseload coal are being rewritten to emphasize flexible gas, battery storage, and large volumes of variable renewables. Even where coal projects remain on the books, many are delayed, downsized, or converted to alternatives before construction starts. Each year that passes with cheaper solar modules and turbines makes it harder to justify locking in 30 or 40 years of coal-related costs.
IEA data and methodology behind the 96 percent figure
The 96 percent statistic comes from the IEA’s Renewables 2023 report, which tracks global capacity additions and their associated costs. The agency’s latest overview states the figure directly: 96 percent of newly installed utility-scale solar PV and onshore wind capacity had lower generation costs than new coal and natural gas plants. The metric relies on levelized cost of electricity, or LCOE, which spreads a project’s capital, fuel, and operating expenses over its expected output to produce a single per-kilowatt-hour price.
The rules for building those LCOE comparisons were formalized in a joint report by the IEA and the OECD Nuclear Energy Agency titled Projected Costs of Generating Electricity 2020. That study defines how discount rates and carbon prices feed into the calculations, and it includes sensitivity analysis showing how different assumptions shift the rankings. At standard discount rates, solar PV consistently came out cheaper than new coal or gas plants in most countries, a finding the IEA first highlighted in its flagship outlook, which declared solar the cheapest source of new electricity in a majority of markets.
Three years of additional data have only reinforced that conclusion. The cost of solar modules has continued to fall, driven in large part by expanded manufacturing capacity in China and learning-by-doing across global supply chains. Turbine technology has also improved, with taller towers and longer blades increasing the capacity factor of onshore wind farms. Together, these trends push down LCOE values for new renewable projects even when interest rates or construction costs rise.
BloombergNEF and other market trackers have documented a sharp expansion of solar manufacturing capacity that has helped keep module prices under pressure. As more low-cost equipment enters the market, developers can bid more competitively into power auctions and bilateral contracts. The result is a compounding effect: each year of cheaper hardware and more experienced project delivery makes the next round of LCOE comparisons even more lopsided against coal, particularly in sunny or windy regions with good grid access.
Why coal still gets built in some markets
Despite the global averages, coal plants are still being proposed and, in some cases, built. The IEA’s 96 percent figure is powerful, but it rests on modeled LCOE estimates rather than granular, country-by-country project-level accounting. Actual contract prices, grid connection costs, and local subsidy structures can shift the picture in specific markets. Southeast Asia and parts of sub-Saharan Africa, for instance, still face higher financing costs for renewables due to currency risk and limited access to cheap capital. In those regions, coal can retain a cost edge that aggregate global statistics obscure.
A second gap involves the decision-making process inside utilities and energy ministries. The IEA and NEA methodology includes sensitivity to discount rates and carbon prices, but there is limited public evidence showing how individual power companies apply those sensitivities when choosing between a coal plant and a solar farm. Procurement decisions often reflect political relationships, existing fuel supply contracts, and grid reliability concerns that LCOE alone does not capture. A coal plant that runs around the clock still appeals to grid operators worried about what happens when the sun sets or the wind drops, even if the per-kilowatt-hour cost is higher.
In some coal-dependent economies, state-owned enterprises also carry legacy obligations to domestic mining sectors and coal-heavy regions. Approving a new plant can be a way to sustain jobs and tax revenue, even if it locks in higher power costs. Multilateral development banks and export credit agencies have begun to restrict support for unabated coal, but domestic public banks sometimes step in to fill the gap, cushioning projects from market signals that would otherwise render them uneconomic.
Finally, grid integration challenges can slow the shift. Where transmission networks are weak or congested, adding large volumes of variable renewables may require expensive upgrades. If those costs are not fairly allocated, they can be used to argue that coal remains the “cheaper” option, even though the comparison is skewed by incomplete accounting. Better planning and regional interconnection can reduce those barriers, but institutional reforms often lag behind technology costs.
What to watch as the coal pipeline comes under pressure
The most telling indicator to track over the next 12 to 18 months is the cancellation rate for proposed coal plants. Dozens of coal units remain in various stages of planning across Asia. If financing dries up or insurance costs spike for those projects while renewable alternatives get cheaper, the pipeline will shrink faster than official forecasts assume. Conversely, if governments in coal-dependent economies continue to backstop new plants with public financing and guaranteed off-take agreements, cost alone will not determine the outcome.
Another signal is the outcome of competitive power auctions. Where solar and wind are allowed to compete head-to-head with new coal on a technology-neutral basis, winning bids provide a real-world check on modeled LCOE values. Repeated rounds in which renewables undercut coal by wide margins make it harder for regulators to justify approving higher-cost options, especially when consumers are facing pressure from inflation in other parts of the economy.
For energy investors, municipal planners, and anyone watching electricity bills, the signal from the IEA data is direct. New coal power is losing on price in the vast majority of markets. The open question is how quickly that economic reality will translate into policy and investment decisions. If regulators and lenders align with the cost trends already visible in the data, the remaining coal pipeline could contract rapidly, freeing up capital for cleaner and ultimately cheaper alternatives. If they do not, households and businesses may end up paying more for power than the technology landscape requires, while the climate and local air quality bear the additional burden.
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*This article was researched with the help of AI, with human editors creating the final content.
