Why did solar power construction costs rise 18% in the U.S., and despite that increase, why does Lazard still consider it the cheapest new electricity generation to build?

Solar power construction costs rose 18% year-over-year due to tariffs, elevated interest rates, inflationary pressures—including tariff pass-through and supply chain repricing as manufacturers diversify away from China toward Southeast Asia—and broader cost pressures. Despite this increase, Lazard’s annual report confirms solar remains the cheapest form of new electricity generation to build because its levelized cost of energy (LCOE) for utility-scale solar is $40–$98 per megawatt-hour—still lower than the $51–$129 per MWh range for new combined-cycle natural gas plants, and competitive even when accounting for backup costs needed for intermittency.

How do the latest levelized costs for utility-scale solar, onshore wind, and combined-cycle natural gas compare, according to Lazard’s report?

According to Lazard’s report, the levelized cost of energy (LCOE) for utility-scale solar rose to $40–$98 per megawatt-hour from $38–$92 per MWh a year earlier; onshore wind rose to $37–$99 per MWh from $37–$86 per MWh; and combined-cycle natural gas reached a 15-year high of $51–$129 per MWh—making it significantly more expensive than solar and wind on a levelized basis, despite its consistent output.

Solar costs jump 18%, but remain the cheapest generation to build, Lazard says

Jul 13, 2026

Lazard reports U.S. solar project construction costs rose 18% due to tariffs and interest rates, yet solar remains the cheapest new electricity generation source. Combined-cycle natural gas costs hit a 15-year high amid equipment shortages and rising demand.

reuters

2026-07-13

US Natural Gas Power Costs Hit 17-Year High, Lazard Says

2026-07-13

Solar costs jump 18%, but remain the cheapest generation to build, Lazard says

Solar costs jump 18%, but remain the cheapest generation to build, Lazard says

FAQ