IRENA: Solar-Plus-Storage Now Cost-Competitive With Fossil Fuels

The International Renewable Energy Agency (IRENA) published a report titled 24/7 Renewables: The Economics of Firm Solar and Wind, concluding that hybrid renewable energy systems combining solar, wind, and battery storage have reached cost parity with fossil fuel generation in high-resource regions, and are on track to undercut them globally within a decade.

IRENA introduced a new project-level metric, the firm levelized cost of electricity (firm LCOE), to assess the cost of delivering continuous electricity from hybrid systems combining solar PV, onshore wind, and battery energy storage systems (BESS). The report found that in 2025, firm LCOE for solar-plus-storage systems in strong solar and wind regions ranged from approximately US$54–82/MWh, down from more than US$100/MWh in 2020. IRENA projects firm LCOE could fall a further 30% by 2030 and approximately 40% by 2035, bringing costs below US$50/MWh at the best-performing sites.

IRENA found that between 2010 and 2024, global weighted average total installed costs for solar PV fell 87% to US$708/kW, while levelized costs declined 90% to US$44/MWh. Battery energy storage systems experienced even steeper declines over the same period, falling 93% from US$2,634/kWh in 2010 to US$197/kWh in 2024. Industry data cited in the report suggests battery system prices fell a further 30% in 2025 alone, reaching their lowest recorded levels.

In 2025, utility-scale solar PV and onshore wind both cost around US$40/MWh globally, less than half the cost of new combined-cycle gas turbines, which exceeded US$100/MWh. In several economies, co-located wind and solar systems with storage are now competitive with the operating costs of existing fossil fuel plants, challenging not only new build economics but also the viability of continued operation of legacy assets.

Mexico's Solar Resource: Underutilized Advantage

Mexico sits within the high-resource regions IRENA identifies as already crossing the cost-parity threshold. The country's solar irradiation levels, particularly across the northwest and central plateau, rank among the strongest globally, the same conditions that IRENA cites as driving firm LCOE below fossil fuel benchmarks. In theory, Mexico is positioned to benefit from the economics the report describes faster than most markets.

In practice, the country faces a structural bottleneck that the cost curves alone cannot resolve. Mexico's solar transition has already demonstrated its scale: over 4.4GW of installed distributed capacity and more than 500,000 interconnected users. However, the main constraint entering 2026 is no longer demand, technology, or cost. The challenge has become systemic: how to operate an electricity system in which solar generation is already structurally relevant, but flexibility and storage capacity have not yet scaled at the same pace.

Mexico's own planning documents acknowledge the scale of the challenge, pointing to the need for approximately 8–9GW of energy storage capacity by the mid-2030s to support higher levels of renewable penetration and maintain system stability.

The federal government has acknowledged the need. CFE's Strengthening and Expansion Plan for the National Electric System includes plans to deploy 2,216MW of battery storage by 2030, an estimated investment of approximately US$2.3 billion. The Indicative Program for the Installation and Retirement of Power Plants (PIIRCE) projects 8.4GW of BESS installations between 2024 and 2038.

The government's planning also mandates that all new intermittent renewable energy plants include 30% of their capacity in batteries, with those batteries capable of storing at least three hours of output. Six photovoltaic plants set to begin operations between 2027 and 2028 are required to include BESS covering roughly 30–35% of their output.

However, the financing landscape for storage projects in Mexico lags behind the technology's maturity. Mexican financial institutions still have limited experience in evaluating BESS projects, which results in less favorable financing conditions, a challenge that also represents an opportunity for specialized firms with the technical and financial expertise to close that gap.

Nearshoring Adds Urgency

IRENA's findings carry particular weight in the context of Mexico's nearshoring drive. Industrial relocation from Asia and the United States is concentrating electricity-intensive manufacturing in northern and central Mexico, precisely the regions with the strongest renewable resource and the greatest grid congestion. Nearshoring's success depends on Mexico's ability to expand and modernize energy infrastructure, including generation and grid capacity, to meet new industrial load requirements.

For multinational manufacturers with aggressive Scope 3 and ESG commitments, the ability to procure verifiably clean electricity around the clock is no longer optional. IRENA's report validates that the technology to do so is cost-competitive. The constraint in Mexico is deployment pace, grid integration, and transmission capacity, not the economics of the underlying technology.

The saturation of transmission infrastructure has been the bottleneck that has slowed the massive deployment of renewables. Distributed generation has maintained annual growth rates of over 30%, but by 2026 the solar equation is incomplete without battery storage, as grid congestion requires distributed generation to be accompanied by smart storage to effectively buffer demand peaks and relieve pressure on CFE.