What is the cheapest source of electricity?

Updated October 24, 2026

General information, not a substitute for the advice of an attorney.

Short answer: It depends on what you count. The most-cited U.S. government metric, levelized cost of electricity (LCOE), comes with EIA's own warning that "direct comparisons of LCOE or LCOS across technologies are misleading as a method to assess the economic competitiveness" (EIA AEO2025 LCOE report). We present what the metric says and what it omits rather than name a winner.

What LCOE measures

EIA defines LCOE and its storage counterpart LCOS as "the estimated costs required to build and operate a generator and diurnal storage, respectively, over a specified cost recovery period" (EIA). LCOE "only reflects the cost to build and operate a plant, not the value of the plant to the grid" (EIA). To get at value, EIA pairs it with levelized avoided cost of electricity (LACE) and treats projects whose LACE exceeds LCOE as "more economically attractive to build" (EIA).

What the April 2025 report found

Solar PV LCOE is "lower than natural gas combined-cycle LCOE on average and, in most regions, even without the tax credit" (EIA).
The LCOE values include levelized tax credits: a 30% investment tax credit for battery storage, geothermal, and hydro; a production tax credit of 1.65 cents per kWh for advanced nuclear, biomass, and onshore wind; and 1.50 cents per kWh for solar PV and PV-battery hybrids (EIA).
Combined-cycle plants without carbon capture are limited to a 40% capacity factor in the Reference case, and combustion turbines to 40% or below; solar uses single-axis tracking and hybrids pair with four-hour batteries (EIA).

We do not reproduce the dollar-per-megawatt-hour table here; the figure is on page 8 of the report.

Why the assumptions matter

Capacity factor: the 40% ceiling on gas combined cycle raises its per-MWh cost compared with the 87% assumed in EIA's Alternative Electricity case (EIA). Tax credits: the report is dated April 2025, and Public Law 119-21 of July 4, 2025 later modified the energy credit sections (IRS FAQ fact sheet), so the credit assumptions above no longer describe current law for every technology. Firming: LCOE does not price the storage or backup needed to make a variable resource available on demand, which is why EIA says LCOE alone is not a competitiveness test (EIA).

What is genuinely unsettled

There is no agreed way to charge each technology for the reliability services it needs from others, and credit eligibility after the 2025 law changes is still being worked out.

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