By Kennedy Maize
Four-hour battery storage is now kicking gas off the worldwide market for peaking power, according to a new study by the Wood Mackenzie international energy consulting firm. “This economic shift is decisive and widening,” said WoodMac principal analyst Ahmed Jameel Abdullah. “Gas turbine shortages and rising fuel volatility are driving up peaking costs, while expanding battery manufacturing continues to push storage costs down.”
The analysis of the levelized cost of electricity (LCOE) looked at 43 markets in five regions where both renewables with batteries and open-cycle gas turbine generators are in play.
Utility-scale solar is already the “clear price setter” in the Middle East and Africa, the study notes. “Single-axis tracker solar comes in at US$37/MWh regionally, falling to US$24/MWh by 2035, with Saudi Arabia and the UAE on track to fall below US$20/MWh by 2033. 
Adding battery energy storage makes the renewables edge even greater. “Four-hour storage reaches US$120/MWh in 2026 and is forecast to fall 33% to US$80/MWh by 2035, cementing its role as the enabling technology for solar and wind integration.”
The story is the same in Latin America, where solar PV is the least cost generation “with average costs expected to fall 38% by 2060. Brazil, Chile and Mexico hold a structural cost advantage driven by world-class solar resources and high-capacity factors….Grid-scale battery storage is expanding rapidly across the region, underpinned by storage mandates tied to renewable energy projects and standalone procurement for grid stability. Storage LCOE is forecast to fall 42% by 2060 as deployment scales and regulatory frameworks mature.”
The Asia-Pacific region is similar, with a twist, says WoodMac, as “regional disparities are stark.” This year, the cost of solar generation “in the highest cost market is more than 200% more expensive than in the lowest; a gap expected to widen to 250% by 2030, even as every market improves.” Offshore wind is looking good in the region, but with the same cost disparities.
China is the world leader in the cost of grid-scale storage, “with a benchmark LCOE more than 55% below the rest of Asia Pacific average of US$134/MWh. This is driven by domestic supply chain integration and manufacturing at scale.”
In Europe, solar PV remains the least cost generation, with the LCOE predicted to fall even further in the years ahead “as capital costs decline and technology improves.” Offshore wind looks positive for Europe “with rising capacity factors taking over as the primary LCOE driver after 2030, pushing costs to US$60/MWh by 2060.”
The European picture also reflects the overall electric situation in the region. “Europe carries the highest fossil-fuel generation costs of any modeled region,” WoodMac observes, “with levelized carbon costs projected to surpass fuel costs by 2030. Meanwhile, offshore wind costs are expected to decline from the 2030s as supply chains stabilise and turbine prices fall….”
In North America, the picture is distorted by economic and energy policies indirectly referred to as those initiated by the Trump administration in the United States. “Near-term solar costs are under pressure from a wave of tariffs, anti-dumping and countervailing duty actions, and new Section 232 import restrictions, with distributed generation facing the greatest exposure,” according to the report.
In the U.S., “Tax credits continue to provide a competitive advantage for storage, partially counteracting the impact of foreign entity of concern (FEOC) restrictions and supply chain constraints. A cost spike is anticipated following the phase-out of the investment tax credit (ITC) credits from 2038, but over the long-term new battery chemistries, hardware commoditisation and domestic supply chain expansion are expected to drive storage LCOE down 10% by 2060.”
At the same time in North America, natural gas prices are rising, tilting the market toward renewables and storage. The analysis says that “the combination of falling storage costs and world-class renewable resources is closing off the economic case for new gas peaking capacity, while long-term contracted renewables increasingly set the ceiling rather than the floor on power costs.”
The Wood Mackenzie report’s findings consistent with earlier study by the Ember consulting firm, looking mostly at the developing world. The study concluded, “A decade ago, a solar plant could require up to five times the upfront investment of a comparable coal or gas plant per MWh delivered. Solar could still be competitive over its full lifetime through avoided fuel costs; but where capital is scarce, lifetime economics rarely determine investment decisions. Upfront costs do, and on that measure solar used to lose.
“That has now changed. Solar alone is now competitive with fossil power on a pure capital expenditure (capex) basis, and solar-plus-storage is expected to follow by around 2030. By 2035, both will be cheaper to build than new fossil alternatives. It is now fossil fuels, not solar, that carry the burden of capital intensity.”
The Quad Report, covering energy policy and politics