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4-hour battery storage cheaper than gas turbines globally
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As first reported by Wood Mackenzie, its latest levelized-cost-of-electricity analysis shows that four-hour battery storage is now cheaper to install than open-cycle gas turbines in every one of the 43 markets the firm modeled. The change is driven by rapidly falling battery manufacturing costs, policy support in some regions and rising peaking costs for gas driven by fuel volatility and equipment shortages. In the Middle East and Africa, for example, single-axis tracker solar sits at $37/MWh and four-hour storage is forecast to drop from about $120/MWh in 2026 to $80/MWh by 2035, a 33 percent decline that removes the economic case for new gas peakers across the region.
This economic shift is decisive and widening,
Ahmed Jameel Abdullah, principal analyst, Wood Mackenzie
Key takeaways
- Global modelling result: Wood Mackenzie finds four-hour battery storage is less expensive than open-cycle gas turbines in all 43 markets it modeled.
- Middle East and Africa costs: Single-axis tracker solar is at $37/MWh regionally and four-hour storage is forecast to fall from $120/MWh in 2026 to $80/MWh by 2035, a 33% decline.
- China cost benchmark: Wood Mackenzie says China’s grid-scale storage benchmark sits more than 55% below the rest of the Asia Pacific average of $134/MWh.
Table of contents
- Key takeaways
- Why four-hour batteries now beat gas peakers
- How regions compare: MENA, China and Latin America lead
- Near-term headwinds that could slow the trend
- What this means for system planning and developers
- Case for and against faster storage-led displacement of gas
- What to be careful about
- Frequently asked questions
Why four-hour batteries now beat gas peakers
Wood Mackenzie’s LCOE modelling identifies two mechanical drivers behind the crossover. First, continued expansion of battery manufacturing—especially in China—has pushed hardware and integration costs down, changing the supply curve for turnkey storage projects. Second, gas peaking costs have risen because of turbine shortages and fuel-price volatility that inflate both capital and operating assumptions for open-cycle gas turbines.
The firm highlights a recent rebound in battery cell prices—around a 10 percent rise from a 2025 low—and a projected correction in lithium markets that pushes prices back up in 2029. Even so, economies of scale and broader hardware commoditisation keep long-run storage LCOE on a downward path in most regions, preserving the economic case versus new gas peakers.
Ahmed Jameel Abdullah, principal analyst at Wood Mackenzie, summarised the shift as decisive and widening, and the report shows this is not limited to one country or policy regime: storage-plus-solar combinations are already setting dispatchable-cost ceilings where previously gas peakers had been relied on for system firmness.
How regions compare: MENA, China and Latin America lead
The Middle East and Africa already have some of the lowest renewable LCOEs globally. Wood Mackenzie puts single-axis tracker solar at $37/MWh regionally and projects four-hour storage to fall from $120/MWh in 2026 to $80/MWh by 2035, which displaces open-cycle gas turbines on cost across every modeled gas market in the region.
China remains the global low-cost outlier on storage: the report states China’s grid-scale storage benchmark is more than 55 percent below the rest of the Asia Pacific average, which the firm sets at $134/MWh in its baseline. That gap reflects integrated domestic supply chains, large-scale cell manufacturing and lower installation costs compared with import-reliant markets such as Japan and Australia.
In Latin America, Wood Mackenzie expects solar with single-axis tracking to stay the cheapest new-build generation in 2026 and for storage LCOE to fall about 42 percent by 2060 as mandates and standalone procurement expand the market, especially in Brazil, Chile and Mexico, where high capacity factors favour renewables-plus-storage economics.
Near-term headwinds that could slow the trend
The report flags several concrete headwinds. In Europe and North America, trade measures—tariffs, anti-dumping and Sec. 232 import restrictions—are already pressuring module and component prices. Wood Mackenzie models a near-term battery turnkey capex rise of about 2 percent and notes module price increases of roughly 5–6 percent in some segments through 2030.
Lithium and cell-market dynamics also matter: the firm projects lithium prices will roughly double in 2029 when an oversupply clears and demand begins to outstrip newly added mine and refining capacity. That event moderates the pace of capex decline: Europe’s battery capex, for instance, is forecast to fall 12 percent by 2031 before slowing thereafter because of raw-material pressure.
Policy shifts change the shape of the market as well. In North America, tax credits have supported storage deployment, but Wood Mackenzie models a cost spike following the phase-out of the investment tax credit from 2038, which creates a discrete policy-driven distortion in project economics toward the end of the decade.
What this means for system planning and developers
For system planners, the implication is mechanical: if storage-plus-renewables sets the marginal cost for meeting peak and shoulder demand, new gas peaking capacity becomes harder to justify purely on cost grounds. The modelling shows the window for economically rational new open-cycle gas turbines is closing across multiple markets as storage LCOE falls.
For developers and investors, the takeaway is to reassess resource planning and contract design. In regions where storage LCOE is falling fastest, long-term contracted renewables increasingly cap market prices and change revenue stacking for merchant projects. That shifts value toward projects that combine generation with firming capability rather than standalone thermal peakers.
Ahmed Jameel Abdullah framed the shift as more than an incremental competitiveness story: it is about redefining what a power system’s economics look like when declining storage costs are coupled with abundant, low-cost solar and wind resources in many markets.
| Region | Solar LCOE (2026) | Four-hour storage (2026) | Four-hour storage (2035/2036 forecast) |
|---|---|---|---|
| Middle East & Africa | $37/MWh | $120/MWh | $80/MWh by 2035 |
| Asia Pacific (rest of) | — | — | $92/MWh average by 2036 (rest of APAC) |
| China (benchmark) | — | Benchmark LCOE more than 55% below APAC average | — |
| Latin America | Lowest-cost new-build in 2026 | Expanding; LCOE to fall 42% by 2060 | — |
Case for and against faster storage-led displacement of gas
The case for
- Wood Mackenzie: continued Chinese manufacturing scale and cost reductions will keep pushing storage LCOE down, widening the gap with gas peakers.
- Wood Mackenzie: policy support and storage mandates in regions such as Latin America and tax credits in North America sustain near-term deployment and learning curves.
The case against
- Wood Mackenzie: material-price dynamics—notably a projected lithium-price surge in 2029—could slow capex declines and flatten the learning curve.
- Wood Mackenzie: trade measures and tariffs in Europe and North America already raise module and component costs, creating region-specific upward pressure on LCOE.
What to be careful about
- A roughly 10% rebound in battery cell prices from 2025 lows has already pushed turnkey capex up; continued raw-material volatility could sustain higher costs.
- Wood Mackenzie’s baseline assumes lithium prices roughly double in 2029; if that occurs, forecast declines in storage LCOE will be materially slower.
- Tariffs, anti-dumping and Sec. 232 import restrictions in North America and Europe could raise module and component prices and delay projects.
- Policy cliff effects such as the investment tax credit phase-out from 2038 could create localized cost spikes that interrupt deployment momentum.
The bottom line
Wood Mackenzie’s LCOE modelling, as summarised here, marks a structural turning point: in the near term storage-plus-renewables already undercuts gas peakers in the firm’s covered markets, and in regions with world-class solar resources the effect is especially strong. That does not mean every plant will be cancelled immediately—supply-chain bottlenecks, trade measures and policy cliffs can delay projects—but it does change the default assumption for system planners and investors. The practical effect is that new-build procurements and long-term contracts will increasingly treat storage as the baseline for providing peak and firming services rather than gas turbines.
What to watch
- Watch whether four-hour storage reaches about $80/MWh in the Middle East and Africa by 2035, as Wood Mackenzie forecasts.
- Watch whether single-axis tracker solar LCOE in Saudi Arabia and the UAE falls below $20/MWh by 2033, a threshold the report highlights.
- Watch whether China pulls the rest-of-Asia-Pacific storage average toward $92/MWh by 2036 through export-driven price pressure.
Frequently asked questions
How much cheaper is storage than gas in the report’s global modelling?
Wood Mackenzie reports that four-hour battery storage is less expensive than open-cycle gas turbines in all 43 markets it modeled; specific regional comparisons include storage at $120/MWh in 2026 falling to $80/MWh by 2035 in the Middle East and Africa.
Why is China so much cheaper on storage costs?
The report attributes China’s advantage to integrated domestic supply chains and manufacturing scale; it places China’s benchmark storage LCOE more than 55% below the rest-of-Asia-Pacific average, which Wood Mackenzie sets at $134/MWh.
What near-term factors could slow storage cost declines?
Wood Mackenzie flags a rebound in battery cell prices (about a 10% rise from 2025 lows) and projects lithium prices could roughly double in 2029, both of which would moderate the pace of capex decline and slow LCOE improvements.
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