Battery Storage Becomes Cheaper Than Natural Gas Turbines for Data Centers, Report Shows

Battery storage systems have become more cost-effective than open-cycle natural gas turbines across global power markets, according to a recent report by energy research firm Wood Mackenzie. The shift represents a pivotal disruption for artificial intelligence data center developers, who have historically relied on natural gas peaking infrastructure to satisfy surging electricity loads during grid constraints.

Covering 43 surveyed markets across every continent, the analysis established that four-hour duration batteries consistently undercut open-cycle gas turbine economics. "This economic shift is decisive and widening," stated Ahmed Jameel Abdullah, principal analyst at Wood Mackenzie. The research further determined that solar power stands as the cheapest form of newly installed generation worldwide, with Chinese energy storage costs running 55 percent lower than regional peers.

Surging power demand from AI computational facilities has strained global supply chains for natural gas equipment, driving turbine prices higher. Open-cycle gas turbines, prized for quick deployment during peak demand, now encounter waitlists spanning two to four years, while combined-cycle alternatives face delivery backlogs extending into the early 2030s. Consequently, rising procurement and fuel expenses have diminished the traditional operational cost advantages long held by fossil-fueled peaking units.

Wood Mackenzie projects electricity generated from utility-scale batteries will continue declining in cost, whereas gas-fired generation faces mounting economic pressure over the coming decades. In the Middle East and Africa, four-hour storage units are projected to become 33 percent cheaper by 2035, accelerating the displacement of gas peaking capacity across major regional grids despite lingering tariff complexities in North American clean energy supply chains.