Battery storage technology has reached a significant milestone, becoming more cost-effective than open-cycle natural gas turbines, a common power source for many data centers. According to a recent Wood Mackenzie report, four-hour battery systems are now cheaper than these turbines in all 43 markets studied worldwide. The consultancy projects that while battery electricity costs will continue to decrease, the cost of electricity from natural gas turbines is expected to rise in the coming years, driven by rising energy demands and supply constraints.

The surge in AI-driven data center development has intensified demand for natural gas turbines, particularly the open-cycle models favored as peaking plants. This increased procurement has caused turbine prices to spike and lengthened delivery wait times to two to four years, with closed-cycle turbine waitlists extending well into the next decade. As a result, utilities dependent on these turbines face growing costs, in contrast to the falling prices of battery storage solutions.

In parallel, solar power remains the most affordable form of new electricity generation across all markets, as identified by Wood Mackenzie. However, the North American solar sector encounters challenges from tariffs and import restrictions, though large-scale utility solar projects benefit from protections under recent U.S. legislation. This policy framework supports the continued growth of solar energy despite near-term market pressures.

Regionally, the economics of battery storage are reshaping natural gas usage, particularly in the Middle East and Africa, where batteries are projected to be 33% cheaper than gas peaking plants by 2035. In China, energy storage costs are remarkably low, at 55% below neighboring countries. Wood Mackenzie's principal analyst Ahmed Jameel Abdullah highlights this trend as a decisive and expanding shift, signaling a widespread transformation in how data centers and power markets approach energy supply.