Batteries beat gas turbines on cost at data centers, report says

Battery storage is now cheaper than open-cycle natural gas turbines, the type favored by many data center developers, according to a new report from Wood Mackenzie. On every continent and in each of the 43 markets the consultancy surveyed, four-hour duration batteries beat gas turbines on cost. Wood Mackenzie predicts the cost of electricity from batteries will keep declining while electricity from gas turbines will only grow more expensive in the coming decades.

The report lands as energy prices in the U.S. and elsewhere keep rising, fueling inflation as data centers push electricity demand to new heights. AI data center developers, buying up any turbine model they can get, have driven up prices for gas turbines — an effect that’s been more acute for open-cycle turbines, which are more available but less efficient and costlier to operate. Utilities often use those open-cycle turbines as peaking power plants that step in during periods of high demand; as their prices rise, costs can climb for utilities too. Open-cycle turbines, simpler to build than closed-cycle ones, now take two to four years to procure, while waitlists for closed-cycle turbines extend into the early 2030s — backlogs that have been spiking prices for all new natural gas power plants.

Solar tells a different story: it’s the cheapest form of new power in every market Wood Mackenzie surveyed, including North America, though the situation there is complicated — solar prices are “under pressure” from tariffs and import restrictions, even as utility-scale solar is expected to fare better. In the U.S., 168 gigawatts of utility-scale solar is largely shielded from near-term price shocks by safe-harbor provisions in the One Big Beautiful Bill, which preserved tax credits for projects that began construction, or are completed, before the end of 2027.

Wood Mackenzie expects the market for U.S. natural gas to narrow over the next decade. In the Middle East and Africa, four-hour batteries will be 33% cheaper than gas by 2035, “displacing gas peaking on cost across every gas market in the region.” In China, energy storage costs already run 55% below those of its neighbors. “This economic shift is decisive and widening,” Ahmed Jameel Abdullah, principal analyst at Wood Mackenzie, said in a press release.

Why it matters

As AI-driven demand strains gas-turbine supply chains for years to come, utilities and data center operators have a growing cost incentive to lean on batteries instead — a shift that could reshape how new compute capacity gets powered.