$43
Global avg $/MWh
(IRENA, 2024)
€24
Best-in-class €/MWh
(Spain, 2024)
-89%
Cost decline
since 2010
-20%
Projected by 2030
(ETIP PV)

What is solar LCOE and why does it matter?

The Levelized Cost of Energy (LCOE) represents the average cost of producing one megawatt-hour (MWh) of electricity over the lifetime of a solar plant, accounting for all capital expenditures (CAPEX), operating costs (OPEX), financing costs and expected energy yield. It is the single most important metric for comparing the economic competitiveness of solar energy against other power sources.

For developers, investors and asset managers, LCOE determines whether a project is bankable. For policymakers, it shapes subsidy levels and auction ceiling prices. Understanding how LCOE varies across European countries is essential for making informed investment decisions.

Global solar LCOE benchmark (2024)

According to IRENA's Renewable Power Generation Costs in 2024 report (published June 2025), the global weighted average LCOE for utility-scale solar PV stood at $0.043/kWh ($43/MWh) in 2024. This represents a marginal 0.6% increase year-on-year, following a 12% decrease between 2022 and 2023.

Solar PV remains the second most affordable source of new power generation globally, behind onshore wind at $34/MWh. It costs less than half the LCOE of combined-cycle gas turbines ($102/MWh) and less than one-fifth of new nuclear ($258/MWh), according to BloombergNEF's LCOE 2026 report.

Regional disparities

LCOE varies significantly by region, primarily driven by solar irradiance, financing costs (WACC) and local supply chain maturity. China and India achieve the lowest national LCOEs at approximately $33/MWh and $38/MWh respectively. European LCOEs tend to be higher due to lower irradiance in northern latitudes, higher labor costs and more complex permitting processes.

Solar LCOE across Europe: country comparison

Europe's solar LCOE landscape is highly heterogeneous. Southern European markets with high irradiance levels achieve significantly lower costs than northern markets. The following table synthesizes data from IRENA, Wood Mackenzie and ETIP PV for utility-scale solar PV in 2024-2025:

Country LCOE range
(€/MWh)		 Avg. capacity
factor		 Typical WACC
(real)		 Key driver
Spain 24 – 32 18 – 22% 4.5 – 6.5% High irradiance, mature market
Portugal 26 – 34 17 – 21% 4.8 – 6.8% Excellent resource, growing market
Italy 28 – 38 16 – 20% 5.0 – 7.0% Good resource, permitting challenges
Greece 27 – 35 17 – 21% 5.5 – 7.5% High irradiance, higher WACC
France 35 – 48 13 – 17% 4.0 – 5.5% Low WACC, moderate resource
Germany 42 – 56 11 – 14% 3.5 – 5.0% Low WACC, lower irradiance
Netherlands 45 – 58 10 – 13% 3.8 – 5.2% Limited resource, space constraints
Poland 40 – 52 11 – 14% 5.5 – 7.5% Growing market, higher WACC
UK 48 – 62 10 – 13% 5.0 – 6.5% Low irradiance, higher land costs

Sources: IRENA (2024), Wood Mackenzie Europe LCOE 2025, ETIP PV Strategic Research Agenda. LCOE calculated for utility-scale fixed/tracker systems, 7% nominal WACC unless stated otherwise.

Key takeaways from the data

The spread between the cheapest (Spain, ~€24/MWh) and most expensive (UK, ~€62/MWh) European markets is nearly 3x. This gap is primarily driven by two factors: solar irradiance (which determines annual energy yield) and the cost of capital (WACC), which can add €5-15/MWh depending on the country's risk profile.

Notably, Germany achieves competitive LCOEs despite low irradiance thanks to one of Europe's lowest WACC levels (3.5-5.0% real), reflecting mature financial markets and strong policy support. Conversely, Greece has excellent solar resources but higher LCOEs due to elevated financing costs.

LCOE cost drivers: what makes the difference?

1. Solar irradiance & capacity factor

Annual solar irradiance varies from approximately 900 kWh/m² in Scandinavia to over 1,800 kWh/m² in southern Spain. This directly impacts the capacity factor, which measures actual energy production versus theoretical maximum. Higher capacity factors mean more kWh produced per installed kW, spreading fixed costs over more output and reducing LCOE.

2. CAPEX (Capital Expenditure)

European utility-scale solar CAPEX typically ranges from €450-700/kWp in 2025, depending on the market. Module prices have dropped to approximately €0.11/Wp for mono PERC (a 22% year-on-year decline), but balance-of-system (BoS) costs, grid connection and permitting fees vary significantly across countries.

3. WACC (Weighted Average Cost of Capital)

According to IRENA, the real after-tax WACC for EU solar projects ranges from 2.3% to 7.5%. A 1 percentage point increase in WACC can add €3-6/MWh to the LCOE, making it one of the most impactful variables. This is why de-risking instruments (PPA contracts, government guarantees, green bonds) are critical for reducing LCOE.

4. OPEX (Operating Expenditure)

Annual OPEX for utility-scale solar in Europe typically represents €8-15/kWp/year, covering maintenance, insurance, land lease, asset management and grid fees. While OPEX is a smaller component than CAPEX in the LCOE formula, it compounds over the 25-35 year project lifetime.

Solar PV has experienced an extraordinary cost decline. Global LCOE has fallen approximately 89% since 2010, from over $350/MWh to $43/MWh in 2024 (IRENA). However, the rate of decline has moderated in recent years, with a slight 0.6% increase in 2024 driven by supply chain disruptions and rising balance-of-system costs in some markets.

BloombergNEF's 2026 outlook notes a 6% increase in the global solar LCOE benchmark to $39/MWh in 2025, attributing it to higher inverter costs and rising grid connection expenses. However, they project a renewed 30% decline by 2035 as next-generation technologies (TOPCon, HJT, perovskite tandems) reach mass production.

For Europe specifically, ETIP PV projects that solar LCOE in southern Europe could reach €19/MWh by 2030 and €13/MWh by 2050, driven by continued module efficiency improvements and lower financing costs.

LCOE formula and methodology

The standard LCOE formula used throughout this analysis is:

LCOE = Total Lifecycle Cost / Total Lifetime Energy Production
LCOE = [CAPEX + Σ(OPEXt / (1+r)t)] / [Σ(Et / (1+r)t)]
Where r = discount rate (WACC), Et = energy production in year t, accounting for degradation

Key assumptions that affect the result include: project lifetime (typically 25-35 years), annual degradation rate (0.4-0.7%/year for crystalline silicon), discount rate (WACC), and whether end-of-life costs or salvage value are included.

Investment implications

For investors and developers evaluating European solar opportunities, the LCOE data points to several strategic conclusions:

  • Southern Europe remains the sweet spot — Spain, Portugal and Greece offer the lowest LCOEs with increasing PPA market liquidity.
  • WACC is as important as irradiance — A project in Germany with 12% capacity factor but 3.5% WACC can compete with a Greek project at 20% capacity factor but 7.5% WACC.
  • Battery storage is becoming a game-changer — With BESS LCOE dropping to $78/MWh in 2025 (BNEF), co-located solar+storage projects are unlocking new revenue streams through arbitrage and ancillary services.
  • Technology choice matters increasingly — Bifacial modules with single-axis trackers can boost yield 10-25% over fixed-tilt monofacial systems, significantly impacting LCOE in high-irradiance markets.

Sources