Battery storage now cheaper than open-cycle gas turbines for data centers

Battery Storage Outperforms Gas Turbines

A new report from Wood Mackenzie reveals that four-hour duration battery storage is now more cost-effective than open-cycle gas turbines. This finding applies across every continent and in all 43 markets surveyed by the consultancy. The report forecasts a continued decline in electricity costs from batteries, while gas turbine electricity is expected to become more expensive in the coming decades.

Impact of Data Center Demand

The rising demand for electricity, particularly from AI data centers, has contributed to increased energy prices and inflation. Data center developers have been acquiring gas turbines, driving up their cost. This effect is more pronounced for open-cycle gas turbines, which are readily available but less efficient and more costly to operate than closed-cycle alternatives.

Procurement Challenges and Utility Costs

Open-cycle turbines, often used by utilities as peaking power plants during high demand, now have procurement times of two to four years. Waitlists for closed-cycle turbines extend into the early 2030s. These backlogs have increased prices for all new natural gas power plants, potentially raising costs for utilities.

Solar Remains Cheapest, Regional Variations

Solar power continues to be the cheapest form of new power generation in all markets surveyed. While solar prices in North America face pressure from tariffs, utility-scale solar projects are largely protected by safe-harbor provisions for projects started or completed by the end of 2027. In the Middle East and Africa, four-hour batteries are projected to be 33% cheaper than gas peaking by 2035, and China's energy storage costs are 55% lower than its neighbors'.