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

A new report from Wood Mackenzie reveals that battery storage is now cheaper than natural gas turbines in data centers across all surveyed markets. As electricity demand rises and gas turbine prices soar due to AI-related demand, batteries are expected to become even cheaper. This trend indicates a significant economic shift in energy generation and storage towards increased reliance on battery technologies.

Key points

  • Battery storage costs are now lower than open-cycle gas turbines in 43 global markets.
  • The cost of electricity from batteries is predicted to decline, while prices for gas turbines are expected to rise.
  • Rising energy prices and increased demand from data centers are driving up costs for gas turbines.
  • AI developers are heavily investing in gas turbines, causing a supply shortage and price hikes.
  • Open-cycle gas turbines, used as peaking plants, face significant procurement delays, leading to fluctuating utility costs.
  • Solar energy remains the cheapest power source overall, despite facing tariff pressures in North America.
  • By 2035, battery storage in the Middle East and Africa is projected to be 33% cheaper than gas, enhancing its competitiveness.
  • China's energy storage costs are significantly lower than those in neighboring countries.

Why it matters

  • The shift towards cheaper battery storage mirrors the current trend of increasing reliance on renewable energy technologies.
  • This report is relevant in the context of global energy inflation and supply chain issues exacerbated by the COVID-19 pandemic.
  • The increase in data center demand for AI reflects broader IT trends that prioritize efficiency and sustainability.
  • The anticipated long-term price drop in battery technology aligns with global sustainability goals as economies aim to reduce carbon emissions.

The findings emphasize a crucial economic transition in energy production, promoting batteries as a viable alternative to natural gas turbines, thus reshaping the energy landscape in data center operations and contributing to environmental sustainability efforts.