Batteries now cheaper than gas turbines used at many data centers
A Wood Mackenzie report finds four-hour battery storage is cheaper than open-cycle gas turbines in all 43 markets surveyed. Data center demand has pushed up turbine prices and electricity costs.
Battery storage has become cheaper than a type of natural gas power plant favored by many data center developers, according to a new report from the energy consultancy Wood Mackenzie. In all 43 markets surveyed, across every continent, four-hour batteries cost less than open-cycle gas turbines. The analysts expect battery electricity costs to keep falling, while power from gas turbines will grow more expensive over the coming decades.
The report arrives as energy prices in the U.S. and elsewhere keep climbing, feeding inflation as data centers push electricity demand to new highs.
Turbine prices and waiting lists
Gas turbine prices have been driven up by AI data center developers buying whatever models they can find. The effect is sharpest for open-cycle turbines, which are easier to obtain but less efficient and costlier to run. Utilities often use them as peaking plants, which generate power during periods of high demand, so higher turbine prices can raise utilities' costs as well.
Open-cycle turbines are simpler to build than closed-cycle ones, yet they still take two to four years to procure. Waitlists for closed-cycle turbines stretch into the early 2030s. These backlogs are pushing up prices for all new gas-fired plants.
Solar and regional differences
Solar is the cheapest source of new power in every market in the survey. It remains cheapest in North America too, though the picture is more complicated there: solar prices are under pressure from tariffs and import restrictions. Utility-scale solar is expected to fare better, with 168 gigawatts largely shielded from near-term price shocks by safe-harbor provisions in the One Big Beautiful Bill, which preserved tax credits for projects that begin construction or are completed before the end of 2027.
The U.S. natural gas market is expected to narrow over the next decade. In the Middle East and Africa, four-hour batteries will be 33% cheaper by 2035, displacing gas peaking on cost in every gas market in the region. In China, energy storage costs are 55% below those of its neighbors.
"This economic shift is decisive and widening," Ahmed Jameel Abdullah, principal analyst at Wood Mackenzie, said in a press release.
