Battery Storage Now More Cost-Effective Than Natural Gas Turbines for Data Centers

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Battery storage solutions have become cheaper than open-cycle natural gas turbines—commonly used in data centers—across global markets, according to Wood Mackenzie. This shift is driven by rising gas turbine costs amid data center demand and ongoing battery price declines.

Battery storage systems are increasingly replacing natural gas turbines as the more economical option for powering data centers worldwide. A recent report by consultancy Wood Mackenzie reveals that in all 43 markets surveyed—spanning every continent—four-hour duration battery storage costs less than open-cycle gas turbines, a type of power plant favored by many data center developers.

Open-cycle gas turbines, often used as peaking power plants during periods of high electricity demand, have experienced sharp price increases in part due to heightened competition from AI-driven data center construction. These turbines are relatively easier to manufacture compared to closed-cycle units, yet their current procurement times range from two to four years. Closed-cycle turbines face even longer waitlists extending into the early 2030s, contributing to overall cost inflation for new natural gas power plants.

As battery system costs continue to decline, Wood Mackenzie forecasts that electricity from batteries will become even more affordable, while natural gas-based electricity prices are expected to rise. This trend signals a significant economic shift in energy supply for data centers, which are responsible for rising electricity demand and associated inflationary pressures in markets such as the United States.

While solar power remains the least expensive form of new energy generation in all surveyed regions—including North America, though somewhat tempered there by tariffs and import restrictions—battery storage offers strategic advantages for managing peak electricity loads and augmenting renewable sources.

Regionally, by 2035, four-hour battery storage is anticipated to be 33% cheaper than gas peaking plants in the Middle East and Africa, effectively displacing gas turbines on cost grounds in those markets. In China, energy storage costs are already 55% lower compared to neighboring countries, further underscoring the global competitiveness of battery technologies.

Ahmed Jameel Abdullah, principal analyst at Wood Mackenzie, described this shift as "decisive and widening," highlighting the growing economic viability of battery storage for data centers and other power consumers reliant on peaking generation capacity. This development marks a notable turning point in the energy industry, with implications for infrastructure planning and the transition toward cleaner, more cost-effective power solutions.