Renewable energy has become a significant part of electricity generation, and it is clear it will play an increasing role in the future. While we do hear talk of falling costs for renewables, it is important to look more broadly at the potential implications and true costs of the expansion, for example, in terms of what they bring to grid reliability and from the perspective of overall affordability and ensuring a balance.
With new strains on electricity grids quickly becoming apparent, compounded by the expanding use of Artificial Intelligence (AI), and the massive datasets it requires, grid reliability has become a central theme in most countries.
The increasing share of renewables is in fact exposing technical limitations in grid flexibility and stability. In particular, ageing grid infrastructure and the pressing need for new grid capabilities to accommodate decentralized renewable technologies are becoming increasingly apparent.
Based on data from OPEC’s World Oil Outlook (WOO) 2025, global electricity generation is projected to increase from 31,345 terawatt hours (TWh) in 2024 to 57,556 TWh in 2050, an increase of about 85%. By far, the greatest increase in power generation is expected to come from wind and solar, which rise from around 4,931 TWh in 2024 to 26,013 TWh by 2050, or an increase of 527%.
OPEC estimates the share of non-hydrocarbons in the global electricity generation mix is projected to grow from 42% to 67% between 2024 and 2050. Many OPEC Member Countries are investing heavily in renewables, with some seen as market leaders in this space.
Although great leaps have been made in reducing solar and wind power costs, it is important to examine total costs. The traditional measuring tool, Levelized Cost of Energy, or LCOE, is used to compare the cost-effectiveness of different energy technologies to allow for informed investment decisions. It represents the minimum price at which electricity needs to be sold to break even on costs.
However, renewable costs are not completely reflected in traditional LCOE figures. They exclude the complexity of fully integrating intermittent and decentralized sources like wind and solar. Thus, when full system costs are included (Total LCOE), the price of renewables rises considerably.
These additional costs include the infrastructure needed (renewables are geographically constrained, increasing reliance on long transmission lines), as well as meeting the challenges that strain system stability, such as curtailment (releasing excess supply that cannot be stored) and intermittency. When the wind blows and the sun shines the costs are lower; the rest of the time expensive backup systems are required. It is also important to recognize that renewables are heavily subsidized in many parts of the world.
Based on available data, the global 2024 average LCOE for solar is seen at $39/MWh, and for wind it is $48/MWh for onshore and $89/MWh for offshore. With ‘additional costs’ included, however, OPEC calculations see the real cost rise to $77/MWh for solar, $72/MWh for onshore wind and $127/MWh for offshore wind, which is a considerable financial load.
A further financial consideration for wind and solar energy systems is the cost and availability of essential minerals, as these technologies are highly mineral intensive. With demand for critical minerals rising rapidly and supply response slow and influenced by investment costs and risks (such as the concentration of some minerals in only a few countries), it could create a growing imbalance between supply and demand and significantly impact prices.
Although the price of a solar module has dropped significantly over the past decade due to technological advancements and economies of scale, these declines have begun to slow due to the rising cost of minerals. Wind power faces even more pronounced cost vulnerabilities, with offshore particularly exposed to price shocks and supply chain pressures.
This need for more power is set to dramatically increase in the future, not just to accommodate the extra burden added by AI and data centres, but also to meet daily requirements for such things as cooking, air conditioning, transportation and communications, along with the running of hospitals, schools and businesses.
Electricity must be reliable and affordable for all people. This points once again for the need to have an all-peoples, all-energies and all-technologies approach to future energy pathways.
The pursuit of fewer emissions is crucial, and OPEC fully supports this in word and deed, but debates also need to be balanced and realistic about the need for all sources of energy to meet rising electricity demand. It is crucial to be pragmatic about energy systems, and particularly the baseload for electricity.
Renewables will continue to be a key component for electricity generation, but we also need to recognize that oil and gas provide a stable, affordable and reliable source of energy to support the consistent baseload power supply required to meet the electricity needs of humankind.