Wood Mackenzie’s latest global analysis of the levelized cost of electricity (LCOE) shows a major transformation taking place in the economics of power generation. Falling renewable energy and battery storage costs are increasingly challenging fossil fuels, particularly gas-fired power plants. One of the report’s most significant findings is that four-hour battery storage is now cheaper than open-cycle gas turbines in all 43 markets where the two technologies were compared.
The shift is particularly striking in the Middle East and Africa. Utility-scale solar is already the region’s cheapest source of new electricity at about $37/MWh. Four-hour battery storage costs around $120/MWh in 2026 but is forecast to decline 33% to approximately $80/MWh by 2035. This would make batteries increasingly attractive for meeting periods of peak electricity demand, traditionally served by gas turbines. Saudi Arabia and the UAE are also emerging as global solar leaders, with solar costs expected to fall below $20/MWh by 2033.
China is setting the global benchmark for energy storage. Its grid-scale storage LCOE is more than 55% below the average for the rest of Asia Pacific, largely because of integrated domestic supply chains and enormous manufacturing capacity. Chinese technology and manufacturing competition are expected to help reduce storage costs elsewhere in Asia Pacific, although countries such as Japan, Australia and the Philippines will continue facing higher costs.
Latin America is experiencing similar changes. Solar PV with single-axis tracking remains the region’s cheapest generation technology, particularly in Brazil, Chile and Mexico. Solar costs are projected to decline 38% by 2060, while onshore wind costs could fall from $73/MWh to $58/MWh by 2030. Grid-scale battery storage is also expanding rapidly as governments introduce storage requirements and procure batteries to improve grid stability. Storage LCOE is projected to decline 42% by 2060.
In Europe, solar remains the cheapest electricity technology despite short-term increases in equipment costs. Battery costs have also temporarily increased as stronger demand and higher lithium prices pushed battery cell prices above their 2025 lows. However, storage capital costs are expected to decline 12% by 2031. At the same time, Europe has the highest fossil-fuel generation costs among the regions studied, with carbon costs expected to exceed fuel costs by 2030.
North America faces a more complicated outlook because tariffs, trade restrictions and policy uncertainty are increasing near-term renewable costs. Nevertheless, tax credits continue to support battery storage, while technological improvements, new battery chemistries and expanding domestic manufacturing should lower long-term costs.
Globally, the report suggests the energy transition is moving beyond renewables simply becoming competitive with fossil fuels. Solar, wind and battery storage are increasingly working together as an integrated power system. Batteries can store inexpensive renewable electricity and release it when demand rises, reducing the need for gas peaking plants.
As manufacturing expands and renewable technologies improve, falling battery storage costs could fundamentally reshape electricity markets. The combination of cheap solar and increasingly affordable storage is weakening the economic case for new gas peaking capacity and changing how countries plan future electricity systems.
www.solarpowerworldonline.com/2026/10/4-hour-battery-storage-is-cheaper-to-install-than-gas-turbines-all-across-globe/