Batteries cheaper than gas turbines for data centers, report says

Batteries are now a more economical choice than open-cycle gas turbines for data centers, according to a new report from Wood Mackenzie. The consultancy found that across all 43 markets surveyed, four-hour duration battery storage was cheaper than the natural gas power plants favored by many data center developers.

Wood Mackenzie predicts that the cost of electricity generated by batteries will continue to decrease, while electricity from gas turbines will become increasingly expensive over the next few decades. This economic shift is occurring as energy prices rise globally, contributing to inflation and increasing electricity demand from data centers. The demand for gas turbines, particularly open-cycle models which are less efficient but more readily available, has been significantly driven up by AI data center developers, leading to longer wait times and higher prices.

Waitlists for new natural gas power plants, including closed-cycle turbines, now extend into the early 2030s, further spiking prices. In contrast, solar power remains the cheapest form of new power generation across all surveyed markets. However, solar in North America faces pressure from tariffs and import restrictions, though utility-scale projects benefit from tax credits under the One Big Beautiful Bill.

The report highlights specific regional cost advantages for batteries, projecting that by 2035, they will be 33% cheaper than gas peaking in the Middle East and Africa. China also shows a significant cost advantage, with energy storage costs 55% below those of its neighbors. Ahmed Jameel Abdullah, principal analyst at Wood Mackenzie, described the economic shift as "decisive and widening."