Batteries now cheaper than gas turbines for data centers

Battery storage has reached a significant economic milestone, becoming cheaper than the natural gas power plants frequently favored by data center developers. According to a comprehensive report from Wood Mackenzie, four-hour duration batteries are now less expensive than open-cycle gas turbines across every single continent and in all 43 surveyed markets. The consultancy predicts that electricity costs from batteries will continue their downward trajectory, whereas energy generated from gas turbines will become increasingly expensive in the coming decades.

This pivotal report arrives as energy prices in the United States and other regions continue to climb, fueling broader inflation concerns as data centers push electricity demand to unprecedented heights. Prices for gas turbines have experienced sharp increases because artificial intelligence data center developers have been purchasing every available model they can secure. These market dynamics have been particularly acute for open-cycle gas turbines, which are more readily available than their closed-cycle counterparts but suffer from lower efficiency and higher operational costs.

Utilities frequently rely on these open-cycle turbines as peaking power plants to generate electricity during periods of exceptionally high demand. As the procurement prices for these turbines climb, the financial burden trickles down, potentially raising operational costs for utilities and consumers alike. While open-cycle turbines are mechanically simpler to manufacture than closed-cycle variants, acquiring them currently requires a waiting period of two to four years. Meanwhile, waitlists for closed-cycle turbines now stretch far into the early 2030s, creating severe supply chain bottlenecks that drive up prices for all new natural gas infrastructure.

In contrast, other generation technologies are following different economic trajectories. Solar energy remains the cheapest form of new power in every market surveyed by Wood Mackenzie. Although solar continues to hold this cost advantage even in North America, the regional market faces complications. Solar prices in North America are currently under pressure due to various tariffs and import restrictions, though utility-scale solar projects are expected to navigate these headwinds more effectively. A significant portion of utility-scale capacity in the United States is largely protected from near-term price shocks thanks to legislative safe-harbor provisions that preserved tax credits for eligible projects.

The global transition away from gas peaking plants is accelerating rapidly. In the Middle East and Africa, analysts project that four-hour batteries will be 33 percent cheaper by the year 2035, effectively displacing gas peaking plants across every market in that region. Meanwhile, energy storage costs in China remain significantly lower than those of its neighbors. Industry analysts describe this broader economic shift as both decisive and widening, marking a major turning point in how global energy grids will manage peak demand and support the massive infrastructure growth driven by the technology sector in the years ahead.