Batteries are now cheaper than natural gas turbines used at many data centers

Wood Mackenzie's latest report reveals that battery storage costs are now lower than those of open-cycle gas turbines, a common choice for many data centers. Across all surveyed continents and the 43 markets, four-hour duration batteries have proven to be the cheaper option. Wood Mackenzie anticipates that the cost of electricity from batteries will keep decreasing while the cost of electricity from gas turbines will only rise over the next few decades.

The report comes at a time when energy prices globally are increasing, contributing to inflation, as data centers demand more electricity. The surge in gas turbine prices is attributed to data center developers who are purchasing these units. These turbines, which are also used as peaking power plants by utilities, have become more expensive due to their high demand and lower efficiency.

The procurement process for these turbines can take two to four years, and waitlists have grown significantly. The situation is further exacerbated by the fact that closed-cycle turbines are becoming harder to procure, with waitlists extending into the early 2030s. Consequently, the cost of new natural gas power plants is on the rise.

However, the scenario for solar power is different. Solar is currently the cheapest new power source in every market surveyed by Wood Mackenzie. Even in North America, where solar prices are under pressure from tariffs and import restrictions, utility-scale solar is expected to fare well. Currently, 168 gigawatts of solar power in North America is protected from price shocks thanks to provisions in the One Big Beautiful Bill, which safeguarded tax credits for projects that began construction or were completed before the end of 2027.

The U.S. natural gas market is projected to contract in the coming decade. In the Middle East and Africa, four-hour batteries will be 33% cheaper by 2035, potentially displacing gas peaking power across all gas markets in the region. In China, energy storage costs are already 55% lower than those of neighboring countries. Wood Mackenzie's principal analyst, Ahmed Jameel Abdullah, emphasized that this economic shift is significant and expanding.