Batteries are now cheaper than natural gas turbines used at many data centers

The consultancy’s latest survey of 43 markets across all continents shows that a four‑hour lithium‑ion battery system costs less per megawatt‑hour than the open‑cycle gas turbines many hyperscale operators have been snapping up to meet AI‑driven load spikes. The report attributes the turbine price surge to data‑center developers buying “any model they can get,” which has stretched lead times for even the simpler open‑cycle units to two‑four years and pushed closed‑cycle back‑order lists into the early 2030s. By contrast, battery prices continue to fall, and Wood Mackenzie projects a 33 % cost advantage for four‑hour storage in the Middle East and Africa by 2035, with China already enjoying a 55 % price gap versus neighboring regions.

This development arrives as solar has already become the cheapest source of new generation in every market Wood Mackenzie examined, though U.S. solar pricing faces headwinds from tariffs and import limits. The “One Big Beautiful Bill” tax‑credit safe‑harbor protects about 168 GW of utility‑scale solar projects slated for completion before 2027, insulating them from near‑term policy shocks. Meanwhile, the tightening of natural‑gas turbine supply creates a feedback loop: higher turbine costs raise peaking‑plant expenses for utilities, which in turn lift electricity rates for data centers that already consume a disproportionate share of grid capacity. The battery‑cost advantage therefore offers a dual benefit—lower capital outlay for on‑site backup and a hedge against volatile gas‑price spikes that have been feeding broader inflation.

Looking ahead, the key risk lies in whether battery manufacturers can sustain the current cost trajectory as demand scales. Supply‑chain constraints on lithium, cobalt, and nickel could erode price gains, especially if AI‑driven workloads push total storage capacity into the multi‑gigawatt range. Regulators may also intervene if rapid turbine backlogs trigger reliability concerns for grid operators, potentially prompting subsidies for gas peakers that could blunt the battery advantage. Stakeholders should monitor the evolution of procurement lead times for both turbine classes, the rollout of tax‑credit extensions for solar, and the emergence of longer‑duration storage (e.g., eight‑hour or multi‑day) that could further displace fossil‑fuel peakers.