The race to power artificial intelligence is reshaping the economics of electricity, and batteries are coming out ahead. According to a new report from energy research firm Wood Mackenzie, four-hour battery storage is now cheaper than open-cycle gas turbines in all 43 markets where the firm compared the two technologies.

“This economic shift is decisive and widening,” said Ahmed Jameel Abdullah, a principal analyst at Wood Mackenzie.

The findings, released on October 8 as part of the firm’s latest global levelized cost of electricity (LCOE) report, matter far beyond the energy industry. They could influence how tech companies power their AI data centers and how much everyone pays for electricity.

What the Report Found

Wood Mackenzie’s analysis covers markets on every continent. Its headline findings:

  • Four-hour batteries cost less than open-cycle gas turbines in all 43 markets where both were modeled.
  • Solar power using single-axis trackers is the cheapest new source of electricity in 43 of 48 markets studied. Onshore wind wins in the other five.
  • Battery costs are expected to keep falling, while electricity from gas turbines is expected to get more expensive in the coming decades, TechCrunch reported.

LCOE is a standard way to compare power sources. It estimates the average cost of producing each unit of electricity over a power plant’s lifetime, including construction, fuel and maintenance.

Why Gas Turbines Got More Expensive

Part of the reason batteries are winning is that gas has become pricier, and AI is a big factor.

Data center developers racing to build AI computing capacity have been buying up natural gas turbines to generate their own power, according to TechCrunch. Many favor open-cycle turbines, which are easier to get than larger, more efficient closed-cycle models. But open-cycle turbines are less efficient and more expensive to run.

That demand has created long waiting lists. Open-cycle turbines now take two to four years to procure, while waitlists for closed-cycle turbines stretch into the early 2030s. Those backlogs have pushed up prices for all new gas plants.

Wood Mackenzie says investment in gas generation faces a “supply deficit cycle” through the late 2030s, driven by data center demand, which keeps the cost of building gas plants high.

Why This Affects Your Electric Bill

Open-cycle turbines aren’t only used by data centers. Utilities rely on them as “peaker” plants, which switch on during times of high demand, such as hot summer afternoons. When turbine prices rise, utilities’ costs go up too, and those costs often end up in customers’ bills.

Energy prices in the U.S. and elsewhere are already rising as data centers increase electricity demand, adding to inflation, TechCrunch noted. Cheaper battery storage gives utilities another way to meet peak demand without building new gas plants.

A four-hour battery can store electricity when it’s cheap and plentiful, such as midday when solar output is high, and release it during evening peaks. That’s exactly the job peaker plants have traditionally done.

A Look Around the World

The report breaks down costs by region:

  • Middle East and Africa: Four-hour storage costs about $120 per megawatt-hour in 2026 and is forecast to drop 33% to $80/MWh by 2035. Solar in Saudi Arabia and the UAE is on track to fall below $20/MWh by 2033.
  • Asia Pacific: China’s grid-scale storage costs are more than 55% below the average for the rest of the region, which is about $134/MWh.
  • Europe: Battery installation costs rose about 2% this year, the first increase in three years, as battery cell prices rebounded. Wood Mackenzie still expects them to fall 12% by 2031.
  • Latin America: Solar is the lowest-cost technology, and storage costs are forecast to fall 42% by 2060.

The U.S. Picture Is More Complicated

In North America, solar faces headwinds from tariffs, anti-dumping duties and new import restrictions. Wood Mackenzie expects module prices for utility-scale solar to rise about 5% a year through 2030.

However, about 168 gigawatts of utility-scale solar projects are largely protected from near-term price shocks thanks to safe-harbor provisions in the One Big Beautiful Bill Act. Those rules preserve tax credits for projects that begin construction or are completed before the end of 2027.

Tax credits also give battery storage an advantage in the U.S., partly offsetting supply constraints and restrictions on components from certain foreign suppliers. Wood Mackenzie expects storage costs to jump after the investment tax credit phases out from 2038, but still projects storage costs will fall 10% by 2060.

What It Means for AI

For tech companies, the report adds weight to an idea that’s gaining traction: pairing data centers with solar and large batteries instead of relying only on gas turbines. With gas turbines facing multi-year waits, batteries may also be faster to deploy.

Batteries aren’t a perfect replacement. A four-hour battery can cover peaks and short gaps, but data centers need power around the clock, and gas still plays a big role in providing that. Still, the cost trend is clear.

“The structural shift we are tracking is no longer just about renewables becoming competitive,” Abdullah said. Storage and solar, he added, are redefining the economics of power systems.

Why It Matters

The AI boom has been framed as a challenge for the power grid, and in many ways it is. But this report shows it’s also speeding up a shift in how electricity is made and stored. As gas equipment gets scarcer and pricier, batteries are becoming the cheaper option almost everywhere, a trend that could shape both the future of AI and the size of your power bill.