New study on solar power and CO2 emissions
The emergence of renewable energy like wind and solar as a viable alternative to oil, gas and other fossil fuels has raised critical questions about which form of power offers the best value today — a debate made all the more urgent by the ravages of climate change.
In the U.S., where energy policy has been shaped by politics for more than a century, the battle continues to play out at the highest levels of government. Former President Biden delivered one of the biggest endorsements of renewable energy in the form of the 2022 Inflation Reduction Act (IRA), which offered tax credits and rebates to businesses, organizations and households that invest in solar, wind and geothermal technologies.
By contrast, President Trump has been a staunch supporter of the oil and gas industry. During his inauguration speech in January, he reaffirmed his commitment to fossil fuel production, saying, "We will be a rich nation again, and it is that liquid gold under our feet. That will help to do it."
Within six months of taking office, Mr. Trump signed the "One Big Beautiful Bill Act" into law, which phases out clean energy tax incentives while simultaneously expanding tax breaks for the oil and gas industries. Separately, his administration has pared back offshore wind leasing and made it more difficult for clean energy projects to qualify for federal dollars.
On the global trade front, Mr. Trump has issued a flurry of tariffs on dozens of U.S. trading partners, which experts say will translate into higher costs for energy projects that rely on imports. The White House is pushing these policies amid concerns over rising U.S. energy prices, with average electricity costs up 5.5% from a year ago, according to the Bureau of Labor Statistics.
To get to the bottom of which form of energy is the cheapest, CBS News analyzed the cost to produce coal, gas, nuclear, wind and solar energy, including the impact of tax incentives, tariffs and other factors.
Determining the cheapest form of energy
Multiple criteria come into play in trying to assess the cheapest form of energy. These include consumers' monthly costs; the cost to produce energy; and the potential social cost energy production can have on a community's health and the environment. External factors like tax incentives and fluctuations in the economy also can affect the price it costs to heat and cool our homes.
CBS News set out to answer the question using what's called the Levelized Cost of Energy, or LCOE, a commonly cited benchmark for wholesale energy costs. LCOE is the price that a power-generating facility must receive for its electricity to cover all its expenses — including capital, equipment, maintenance and other financing costs — over the lifespan of a project.
A 2025 LCOE report from investment bank Lazard shows the cost to produce energy without any government subsidies and how that changes when you layer in other factors, such as tax subsidies provided under the Inflation Reduction Act.
Yet while LCOE calculations are widely used, they don't offer a full picture when it comes to evaluating the cost and value of energy, experts told CBS News. Other factors, such as interest rates and federal regulations, can also have a major impact on the cost of building and operating energy infrastructure.
LCOE also doesn't account for the value a given form of energy delivers. For example, because solar and wind are affected by the weather, they tend to be less consistent than oil and gas, meaning a backup source of energy may be necessary.
"You have to talk about, what is the additional cost of balancing that production from a resource that doesn't produce all the time?" Severin Borenstein, faculty director of the Energy Institute at UC Berkeley's Haas School of Business, told CBS News.
How tax subsidies factor in
The U.S. government has a long history of using tax subsidies to encourage energy production. Oil and gas companies have benefited from such support for more than a century. By comparison, only in recent decades have renewable energy projects drawn a larger share of federal dollars.
Lazard's report shows how the LCOE for renewable energy fluctuates when you account for certain provisions of the IRA aimed at lowering the cost of developing clean energy projects. Those include the investment tax credit (ITC), production tax credit (PTC) and energy community bonus, which increases the value of the ITC and PTC by 10% for projects in certain areas.
Lazard's calculations assume these credits will be in place for 10 years. Notably, however, the Republican-backed "big, beautiful bill" signed into law by Mr. Trump this summer is slated to phase out those credits over the next two years.
Although Lazard examines how the IRA affects renewable energy prices, it doesn't factor in any government subsidies flowing to the oil and gas industry, which vary widely and can be difficult to assess.
The Environmental and Energy Study Institute, a bipartisan nonprofit research group, estimates that direct U.S. subsidies to the fossil fuel industry amount to at least $20 billion per year. However, the FracTracker Alliance, a nonprofit focused on the impact of fossil fuels, says the industry receives an estimated $760 billion annually in government subsidies and tax breaks.
More benefits will go to the oil and gas industries under the "big, beautiful bill." A June report from the Joint Committee on Taxation estimates that the legislation will funnel nearly $18 billion in tax incentives to the oil and gas industry over the next 10 years.
Oil and gas companies have lauded the new law as a win for the industry. Sunil Mathew, chief financial officer of Occidental Petroleum, said during a recent company earnings call that the measure "will provide significant cash tax benefits to Oxy." He expects the law will save Occidental $700 million to $800 million reduction in "cash taxes" by the end of next year.
How do tariffs factor into energy production costs?
Mr. Trump's tariffs are also projected to alter the cost it takes to fund energy projects in the U.S. To gauge the impact of tariffs on energy costs, CBS News turned to a model created by global data and analytics company Wood Mackenzie.
In the following chart, dark green indicates a scenario in which the U.S. hasn't applied any country-level tariffs, but still maintains levies on copper, steel and aluminum imports; the medium shade of green represents current baseline tariffs imposed by the U.S. since Mr. Trump resumed office in January through August 7; and the light green indicates if trade relations with a U.S. economic partner is likely to worsen or deteriorate.
As depicted, U.S. tariffs are projected to hit battery storage production the hardest. Chris Seiple, vice chairman of the power and renewables group at Wood Mackenzie, noted that while some energy equipment is produced domestically, other tech, such as battery cells, mostly comes from abroad, making them more susceptible to tariffs.
"The vast majority of our battery cells come from China," he said. "And so the cost of a battery project is going to go up by a certain percentage."
This could lead to what Seiple described as a "whack-a-mole" effect, in which over time companies move their manufacturing to non-tariffed countries to avoid an additional financial burden.
What is the cheapest form of energy?
Given these multiple and interconnected factors, what ends up being the cheapest form of energy to produce?
According to Lazard, renewables remains the most cost-competitive form of generating and distributing energy. Onshore wind, which runs from $37 to $86 per megawatt-hour ($/MWh), is the most affordable on a baseline level and when tax subsidies are included.
Utility scale solar — what most people think of when they hear about solar energy — is the next most cost-effective approach, with costs ranging from $38 to $78 per megawatt-hour.
Fossil fuel and nuclear energy sources are more expensive to generate. Coal costs $71 to $173 per megawatt-hour; gas costs $48 to $109; and U.S. nuclear costs $141 to $220, Lazard found.
The main reasons for this differences in cost? Experts told CBS News that while the capital cost for renewable projects is steep, the expense of operating and maintaining such facilities tends to be lower than that associated with fossil fuel production.
"Wind and solar you basically do all the investment up front, and then it operates — not quite for free — but at extremely low operating costs per kilowatt hour," Borenstein said.
With fossil fuels, the cost of oil, gas and coal — which can be volatile — is another key factor.
"For a natural gas fired power plant, you have to buy the natural gas," he explained. "And likewise, a coal-fired power plant, you have to buy the coal. And so the price… is going to fluctuate."
Experts who spoke with CBS News agreed that renewable energy ends up being the most competitive when it comes to costs. Rob Gramlich, president of Grid Strategies, a Washington, D.C. consulting firm, concurred that solar and wind are the cheapest to run. Natural gas is the most affordable source of backup energy, which is necessary to make sure power is available around the clock, he said.
Seiple said if you need a small amount of inexpensive electricity, solar is the way to go. It's "low cost to build, it can be deployed quickly and modularly, the fuel is free and not volatile in price, and the ongoing maintenance costs are minimal," he said. "And if the U.S. didn't penalize it with tariffs, it would be even lower cost."
Despite such advantages for renewable energy, experts say the U.S. shouldn't put all of its eggs in one basket. Multiple sources told CBS News that what's needed is a diversity of energy options that can meet the country's rising demand for electricity. Taking certain forms of energy out of the mix would compromise the system as a whole, they note.
"There is no one cheapest form that you can run the whole system on, and in fact, it depends on combining them in ways to [get] the cheapest possible cost," Borenstein said.
Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at "60 Minutes," CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.
