Four-hour battery storage has reached a cost milestone, with its levelized cost of electricity now lower than gas peakers in markets around the world, according to a Wood Mackenzie analysis. In the United States, storage for a 2026 commercial operation date is 65% to 75% cheaper than new open-cycle gas turbine peakers, depending on whether state-level carbon pricing applies.
The shift is driven by data center load growth, which is pushing gas generation into a supply deficit through the late 2030s and keeping thermal capital costs elevated. Gas turbine prices are projected to rise 195% since 2019 to $600/kW by 2027, while backlogs at the three major manufacturers range from 35 GW to 116 GW. At the same time, expanding battery manufacturing continues to push storage costs down, making the economic advantage "decisive and widening," according to Wood Mackenzie principal analyst Ahmed Jameel Abdullah.
Solar is also reshaping power economics. Single-axis tracker solar is now the lowest-cost new-build technology in 43 of 48 modeled markets, with onshore wind leading in five. In the most competitive markets, Saudi Arabia and the UAE, solar LCOE is on track to fall below $20/MWh by 2033. In the Middle East and Africa, four-hour storage costs are forecast to drop 33% to $80/MWh by 2035, displacing gas peaking across the region. China remains the global storage cost benchmark, more than 55% below the rest of the Asia-Pacific average.
North America faces near-term headwinds for solar from tariffs, anti-dumping duties, and import restrictions, with distributed solar seeing the most significant price increases. Utility-scale solar is partially protected by 168 GW of safe-harbored capacity, though module prices are still expected to rise about 5% annually through 2030. Storage tax credits currently provide a competitive advantage, but a cost spike is anticipated after the credits phase out from 2038; over the long term, new battery chemistries and domestic supply chain expansion are expected to drive storage LCOE down 10% by 2060.