IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v199y2025ics0301421525000308.html
   My bibliography  Save this article

Pay-back time: Increasing electricity prices and decreasing costs make renewable energy competitive

Author

Listed:
  • Batz Liñeiro, Taimyra
  • Müsgens, Felix

Abstract

The global energy transition needs a large-scale rollout of electricity generation from renewable energy sources (RES). Leading nations such as Spain, Japan, and Germany have invested early and substantially in RES. This leadership has been associated with high expenditures, but the trend is reversing as RES become more competitive. First, levelized costs of electricity for RES have decreased significantly and second, wholesale prices for electricity have increased, due to more ambitious climate protection and rising fuel prices.

Suggested Citation

  • Batz Liñeiro, Taimyra & Müsgens, Felix, 2025. "Pay-back time: Increasing electricity prices and decreasing costs make renewable energy competitive," Energy Policy, Elsevier, vol. 199(C).
    • Handle: RePEc:eee:enepol:v:199:y:2025:i:c:s0301421525000308
    DOI: 10.1016/j.enpol.2025.114523
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421525000308
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2025.114523?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Shin, Dongheon & Ko, Kyungnam, 2017. "Comparative analysis of degradation rates for inland and seaside wind turbines in compliance with the International Electrotechnical Commission standard," Energy, Elsevier, vol. 118(C), pages 1180-1186.
    2. Jochen Markard, 2018. "The next phase of the energy transition and its implications for research and policy," Nature Energy, Nature, vol. 3(8), pages 628-633, August.
    3. Gawel, Erik & Purkus, Alexandra, 2013. "Promoting the market and system integration of renewable energies through premium schemes: A case study of the German market premium," UFZ Discussion Papers 4/2013, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    4. Neuhoff, Karsten & May, Nils & Richstein, Jörn C., 2022. "Financing renewables in the age of falling technology costs," Resource and Energy Economics, Elsevier, vol. 70(C).
    5. Adrian Odenweller & Falko Ueckerdt, 2025. "The green hydrogen ambition and implementation gap," Nature Energy, Nature, vol. 10(1), pages 110-123, January.
    6. Pegels, Anna & Lütkenhorst, Wilfried, 2014. "Is Germany׳s energy transition a case of successful green industrial policy? Contrasting wind and solar PV," Energy Policy, Elsevier, vol. 74(C), pages 522-534.
    7. Mr. Anil Ari & Mr. Nicolas Arregui & Mr. Simon Black & Oya Celasun & Ms. Dora M Iakova & Ms. Aiko Mineshima & Mr. Victor Mylonas & Ian W.H. Parry & Iulia Teodoru & Karlygash Zhunussova, 2022. "Surging Energy Prices in Europe in the Aftermath of the War: How to Support the Vulnerable and Speed up the Transition Away from Fossil Fuels," IMF Working Papers 2022/152, International Monetary Fund.
    8. Timilsina, Govinda R., 2021. "Are renewable energy technologies cost competitive for electricity generation?," Renewable Energy, Elsevier, vol. 180(C), pages 658-672.
    9. Hirth, Lion, 2013. "The market value of variable renewables," Energy Economics, Elsevier, vol. 38(C), pages 218-236.
    10. Buchholz, Wolfgang & Dippl, Lisa & Eichenseer, Michael, 2019. "Subsidizing renewables as part of taking leadership in international climate policy: The German case," Energy Policy, Elsevier, vol. 129(C), pages 765-773.
    11. Gawel, Erik & Purkus, Alexandra, 2013. "Promoting the market and system integration of renewable energies through premium schemes—A case study of the German market premium," Energy Policy, Elsevier, vol. 61(C), pages 599-609.
    12. Engelhorn, Thorsten & Müsgens, Felix, 2021. "Why is Germany’s energy transition so expensive? Quantifying the costs of wind-energy decentralisation," Resource and Energy Economics, Elsevier, vol. 65(C).
    13. Eising, Manuel & Hobbie, Hannes & Möst, Dominik, 2020. "Future wind and solar power market values in Germany — Evidence of spatial and technological dependencies?," Energy Economics, Elsevier, vol. 86(C).
    14. Aleh Cherp & Vadim Vinichenko & Jale Tosun & Joel A. Gordon & Jessica Jewell, 2021. "National growth dynamics of wind and solar power compared to the growth required for global climate targets," Nature Energy, Nature, vol. 6(7), pages 742-754, July.
    15. Staffell, Iain & Green, Richard, 2014. "How does wind farm performance decline with age?," Renewable Energy, Elsevier, vol. 66(C), pages 775-786.
    16. Malte Jansen & Iain Staffell & Lena Kitzing & Sylvain Quoilin & Edwin Wiggelinkhuizen & Bernard Bulder & Iegor Riepin & Felix Müsgens, 2020. "Offshore wind competitiveness in mature markets without subsidy," Nature Energy, Nature, vol. 5(8), pages 614-622, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karsten Neuhoff & Nils May & Jörn C. Richstein, 2018. "Renewable Energy Policy in the Age of Falling Technology Costs," Discussion Papers of DIW Berlin 1746, DIW Berlin, German Institute for Economic Research.
    2. Winkler, Jenny & Gaio, Alberto & Pfluger, Benjamin & Ragwitz, Mario, 2016. "Impact of renewables on electricity markets – Do support schemes matter?," Energy Policy, Elsevier, vol. 93(C), pages 157-167.
    3. Auer, Benjamin R., 2016. "How does Germany's green energy policy affect electricity market volatility? An application of conditional autoregressive range models," Energy Policy, Elsevier, vol. 98(C), pages 621-628.
    4. May, Nils, 2017. "The impact of wind power support schemes on technology choices," Energy Economics, Elsevier, vol. 65(C), pages 343-354.
    5. Glenk, Gunther & Reichelstein, Stefan, 2021. "Intermittent versus dispatchable power sources: An integrated competitive assessment," ZEW Discussion Papers 21-065, ZEW - Leibniz Centre for European Economic Research.
    6. David Wozabal & Christoph Graf & David Hirschmann, 2016. "The effect of intermittent renewables on the electricity price variance," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(3), pages 687-709, July.
    7. Ländner, Eva-Maria & Märtz, Alexandra & Schöpf, Michael & Weibelzahl, Martin, 2019. "From energy legislation to investment determination: Shaping future electricity markets with different flexibility options," Energy Policy, Elsevier, vol. 129(C), pages 1100-1110.
    8. Neuhoff, Karsten & May, Nils & Richstein, Jörn C., 2022. "Financing renewables in the age of falling technology costs," Resource and Energy Economics, Elsevier, vol. 70(C).
    9. Jägemann, Cosima, 2014. "An illustrative note on the system price effect of wind and solar power - The German case," EWI Working Papers 2014-10, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    10. Anatolitis, Vasilios & Azanbayev, Alina & Fleck, Ann-Katrin, 2022. "How to design efficient renewable energy auctions? Empirical insights from Europe," Energy Policy, Elsevier, vol. 166(C).
    11. Zipp, Alexander, 2017. "The marketability of variable renewable energy in liberalized electricity markets – An empirical analysis," Renewable Energy, Elsevier, vol. 113(C), pages 1111-1121.
    12. Philipp Beiter & Aubryn Cooperman & Eric Lantz & Tyler Stehly & Matt Shields & Ryan Wiser & Thomas Telsnig & Lena Kitzing & Volker Berkhout & Yuka Kikuchi, 2021. "Wind power costs driven by innovation and experience with further reductions on the horizon," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 10(5), September.
    13. Zipp, Alexander, 2015. "Revenue prospects of photovoltaic in Germany—Influence opportunities by variation of the plant orientation," Energy Policy, Elsevier, vol. 81(C), pages 86-97.
    14. Yan, Jie & Möhrlen, Corinna & Göçmen, Tuhfe & Kelly, Mark & Wessel, Arne & Giebel, Gregor, 2022. "Uncovering wind power forecasting uncertainty sources and their propagation through the whole modelling chain," Renewable and Sustainable Energy Reviews, Elsevier, vol. 165(C).
    15. Glenk, Gunther & Reichelstein, Stefan, 2022. "The economic dynamics of competing power generation sources," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    16. Keppler, Jan Horst & Quemin, Simon & Saguan, Marcelo, 2022. "Why the sustainable provision of low-carbon electricity needs hybrid markets," Energy Policy, Elsevier, vol. 171(C).
    17. Thomas Weyman-Jones, 2023. "Energy Price Decoupling and the Split Market Issue," Energies, MDPI, vol. 16(16), pages 1-17, August.
    18. Dehler-Holland, Joris & Schumacher, Kira & Fichtner, Wolf, 2021. "Topic Modeling Uncovers Shifts in Media Framing of the German Renewable Energy Act," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 2(1).
    19. Li, Aitong & Xu, Yuan & Shiroyama, Hideaki, 2019. "Solar lobby and energy transition in Japan," Energy Policy, Elsevier, vol. 134(C).
    20. Klie, Leo & Madlener, Reinhard, 2022. "Optimal configuration and diversification of wind turbines: A hybrid approach to improve the penetration of wind power," Energy Economics, Elsevier, vol. 105(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:199:y:2025:i:c:s0301421525000308. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.