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

The cost of powering data centers just dropped, making battery storage a cheaper alternative to natural gas turbines.

Four-hour battery storage systems are now more affordable than open-cycle natural gas turbines, a common power source for data centers, according to a Wood Mackenzie report. This finding holds true across all continents and 43 surveyed markets, with battery electricity costs projected to decrease while gas turbine costs are expected to rise. The report emerges amid increasing energy prices and surging electricity demand from data centers, particularly those driven by AI. Demand for natural gas turbines has outstripped supply, leading to extended procurement times of two to four years for open-cycle models and even longer for closed-cycle variants. This scarcity has driven up prices for new natural gas power plants. In contrast, solar energy is identified as the cheapest new power source globally, although US solar projects face pressures from tariffs and import restrictions. However, existing US solar projects are largely protected by tax credits through 2027. Wood Mackenzie anticipates batteries will significantly undercut gas peaking power costs in the Middle East and Africa by 2035.

The economic parity between battery storage and natural gas turbines signals a significant shift in infrastructure investment for data centers. This change is particularly impactful as data center energy demands escalate due to AI. Companies can now more readily adopt greener and potentially more stable power solutions without the premium cost historically associated with them. The increasing wait times and rising prices for natural gas turbines further strengthen the case for battery adoption, suggesting a move away from fossil fuel reliance for critical infrastructure. This trend could accelerate the decarbonization efforts within the tech sector, aligning with broader climate goals.

The report indicates that solar remains the most economical choice for new power generation globally, but battery storage's emergence as a cheaper alternative to gas turbines for critical, on-demand power presents a compelling hybrid solution. For data centers, this means greater flexibility in energy sourcing and a potential reduction in operational expenditures, especially in regions where gas prices are volatile or supply is constrained. The projected cost declines for batteries and the increasing expense of gas turbines suggest this economic advantage will widen, making battery storage a key component of future data center energy strategies and potentially influencing grid-level energy storage deployments.