Batteries are now cheaper than natural gas turbines used at many data centers
Quick Answer
Battery storage is now cheaper than open-cycle gas turbines across all surveyed markets, with costs expected to decline further.
Quick Take
This shift is driven by rising energy prices and increased demand from AI data centers, which are pushing up turbine costs. By 2035, four-hour batteries will be 33% cheaper in the Middle East and Africa, displacing gas peaking power.
Key Points
- Four-hour duration batteries are cheaper than open-cycle gas turbines globally.
- AI data centers are driving up demand and prices for natural gas turbines.
- Solar remains the cheapest new power source, despite tariff pressures in North America.
- Battery costs in China are 55% lower than in neighboring countries.
- Natural gas market dynamics will shift significantly in the next decade.
DeepSignal Analysis
What happened
Battery storage has become less expensive than open-cycle gas turbines in all surveyed markets, according to a report by Wood Mackenzie. The report indicates that this trend is likely to continue, with battery costs expected to decline further while gas turbine prices rise due to increased demand from AI data centers.
Key evidence
- Wood Mackenzie's report shows that four-hour duration batteries are cheaper than open-cycle gas turbines across all 43 surveyed markets.
- The report predicts that by 2035, four-hour batteries will be 33% cheaper in the Middle East and Africa, displacing gas peaking power.
- Open-cycle gas turbines are facing rising costs due to high demand from AI data center developers, which has led to longer procurement times and increased prices.
Why it matters
The shift towards cheaper battery storage could significantly impact energy procurement strategies for data centers, particularly as energy prices rise. This change may lead to a reduction in reliance on natural gas turbines, which are currently used for peak power generation. The implications for utilities and energy markets could be profound, as they may need to adapt to a new landscape dominated by battery technology.
📖 Reader Mode
~3 min readBattery storage is now cheaper than a type of natural gas power plant favored by many data center developers, according to a new report from Wood Mackenzie.
On every continent and in each of the 43 markets that Wood Mackenzie surveyed, four-hour duration batteries were less expensive than open-cycle gas turbines. The consultancy predicts that the cost of electricity from batteries will continue to decline while electrons from gas turbines will only grow more expensive in the coming decades.
The report lands as energy prices in the U.S. and elsewhere continue to rise, fueling inflation as data centers push electricity demand to new heights. Prices for gas turbines have been driven up by AI data center developers, which have been buying any model they can get their hands on. The effects have been more acute for open-cycle gas turbines, which are more readily available but less efficient and more expensive to operate.
Those turbines are often used by utilities as peaking power plants, which step in to generate electricity in periods of high demand. As prices for those turbines rise, it can raise costs for utilities, too.
Open-cycle turbines are simpler to make than closed-cycle turbines, but even they now take two to four years to procure. Waitlists for closed-cycle turbines now extend into the early 2030s. Both backlogs have been spiking prices for all new natural gas power plants.
That’s not the case for every generating technology. Solar is now the cheapest form of new power in every market in Wood Mackenzie’s survey.
While solar remains cheapest even in North America, the situation remains complicated there. Solar prices are “under pressure” from tariffs and import restrictions, according to Wood Mackenzie, though utility-scale solar is expected to fare better. There, 168 gigawatts is largely protected from those near term price shocks thanks to safe-harbor provisions in the One Big Beautiful Bill, which kept tax credits for projects that have begun construction or are completed before the end of 2027.
The market for U.S. natural gas will narrow in the coming decade. In the Middle East and Africa, four-hour batteries will be 33% cheaper by 2035, “displacing gas peaking on cost across every gas market in the region.” In China, energy storage costs are 55% below its neighbors’.
“This economic shift is decisive and widening,” Ahmed Jameel Abdullah, principal analyst at Wood Mackenzie, said in a press release.
When you purchase through links in our articles, we may earn a small commission. This doesn’t affect our editorial independence.
Tim De Chant is a senior climate reporter at TechCrunch. He has written for a wide range of publications, including Wired magazine, the Chicago Tribune, Ars Technica, The Wire China, and NOVA Next, where he was founding editor.
De Chant is also a lecturer in MIT’s Graduate Program in Science Writing, and he was awarded a Knight Science Journalism Fellowship at MIT in 2018, during which time he studied climate technologies and explored new business models for journalism. He received his PhD in environmental science, policy, and management from the University of California, Berkeley, and his BA degree in environmental studies, English, and biology from St. Olaf College.
You can contact or verify outreach from Tim by emailing [email protected].
— Originally published at techcrunch.com
Want this in your inbox every morning?
Daily brief at your local 8am — bilingual EN/中文, free.
More from TechCrunch
See more →
AI chip startup Etched defies skeptics, hits $10.3B valuation from big-name investors
AI chip startup Etched has achieved a $10.3 billion valuation after a $300 million Series C funding round, led by Sequoia and supported by notable investors like Andreessen Horowitz. The company claims to have developed innovative low-voltage chips for AI inference, significantly enhancing performance and reducing costs, with $1 billion in orders already booked.
