Batteries Beat Gas Turbines on Cost Across All 43 Markets
Four-hour batteries now undercut open-cycle gas turbines in all 43 markets surveyed, while AI data center demand drives turbine prices and delays higher.
Summary
Four-hour batteries cost less than open-cycle gas turbines in every continent and all 43 markets surveyed by Wood Mackenzie. AI data center developers buying available turbines have driven up prices as electricity demand and energy costs rise, fueling inflation. Open-cycle units, often used by utilities during demand peaks, are more available than closed-cycle models but less efficient and costlier to operate. They now require two to four years to procure, while closed-cycle waitlists extend into the early 2030s, increasing costs for new gas plants and utilities. Wood Mackenzie expects battery electricity costs to keep falling while gas turbine power becomes more expensive.
Solar is the cheapest new power source in every surveyed market. North American solar prices face tariffs and import restrictions, although utility-scale projects should fare better because 168 gigawatts are largely protected by One Big Beautiful Bill safe-harbor provisions for projects beginning construction or completed before the end of 2027. The US natural gas market will narrow over the next decade. By 2035, four-hour batteries will be 33% cheaper in the Middle East and Africa, displacing gas peaking on cost throughout the region, while Chinese storage costs are already 55% below neighboring markets. Wood Mackenzie principal analyst Ahmed Jameel Abdullah said the economic shift is decisive and widening.
Positives
- Four-hour batteries undercut open-cycle gas turbines across all 43 markets and every continent surveyed by Wood Mackenzie.
- Solar is the cheapest source of new power in every surveyed market, including North America.
- 168 gigawatts of US utility-scale solar are largely protected from near-term price shocks by federal safe-harbor provisions.
- Four-hour batteries will be 33% cheaper in the Middle East and Africa by 2035, displacing gas peaking on cost.
- China’s energy storage costs are 55% below those of neighboring markets.
Risks & concerns
- AI data center developers buying available turbines are pushing equipment prices higher as electricity demand surges.
- Open-cycle gas turbines are less efficient and more expensive to operate despite being more readily available.
- Open-cycle turbines take two to four years to procure, while closed-cycle waitlists extend into the early 2030s.
- Higher turbine prices can increase costs for utilities using open-cycle plants to meet peak demand.
- Tariffs and import restrictions are pressuring North American solar prices despite solar retaining its cost advantage.