Battery Storage Now Cheaper Than Natural Gas Turbines for Data Centers, Report Finds

According to a new analysis from Wood Mackenzie, battery energy storage has surpassed natural gas as the more economical power solution for data centers, specifically when compared to open-cycle gas turbines. The consultancy’s findings indicate that in every one of the 43 global markets surveyed, four-hour batteries are now less expensive than their gas-powered counterparts.

Wood Mackenzie projects this cost gap will widen in the coming decades, with electricity generation from batteries expected to drop in price while gas turbine output becomes increasingly costly. This shift occurs as energy prices continue to climb in the United States and internationally, exacerbating inflationary pressures driven by surging electricity demands from data centers.

The surge in demand from artificial intelligence developers has significantly inflated the cost of gas turbines. These firms have been acquiring available models aggressively, creating acute shortages. Open-cycle turbines, while simpler to manufacture and widely used by utilities as peaking power plants, are less efficient and more expensive to operate. As their prices rise, utilities face increased costs as well.

Procurement timelines have stretched considerably due to these backlogs. Open-cycle turbines now require two to four years to secure, while closed-cycle turbines face waitlists extending into the early 2030s. Consequently, prices for all new natural gas power plants have spiked.

In contrast, solar energy has emerged as the least expensive form of new power generation across every market in the survey. Although solar prices in North America are facing pressure from tariffs and import restrictions, utility-scale projects are better positioned. Approximately 168 gigawatts of solar capacity is shielded from near-term price shocks thanks to safe-harbor provisions in recent legislation, which preserve tax credits for projects commencing construction or completed before the end of 2027.

The economic transition is particularly stark in other regions. By 2035, four-hour batteries in the Middle East and Africa are projected to be 33% cheaper than gas options, effectively displacing gas peaking power on cost across every market in the region. Similarly, in China, energy storage costs are anticipated to be 55% lower than those in neighboring countries.

“This economic shift is decisive and widening,” stated Ahmed Jameel Abdullah, a principal analyst at Wood Mackenzie, highlighting the permanence of this transition away from gas reliance in new energy configurations.