In a new analysis, Wood Mackenzie claims that the LCOE of four-hour battery storage is now cheaper than open-cycle gas turbines across 43 markets assessed
Analysts expect battery storage costs in the Middle East and Africa to fall 33%, from $120/MWh in 2026 to $80/MWh by 2035
The analysis also finds that solar PV remains a cost-competitive power generation technology, while falling battery storage costs strengthen the economic case for renewables
Four-hour battery energy storage systems (BESS) are now cheaper than open-cycle gas turbines (OCGTs) on a levelized cost basis in all 43 markets where both technologies were assessed, says Wood Mackenzie.
Expanding battery manufacturing capacity is helping lower storage costs, while gas turbine shortages and fuel price volatility are increasing the cost of gas-fired peak power generation. The global benchmark cost for a 4-hour battery project dropped 27% YoY to $78/MWh in 2025, according to a BloombergNEF report from February 2026 (see Battery Storage Project Costs In 2025 Dropped To Record Lows Since 2009).
“The economic shift is decisive and widening,” said Ahmed Jameel Abdullah, Principal Analyst at Wood Mackenzie. The findings are part of the research firm’s latest levelized cost of electricity (LCOE) analysis, covering Europe, North America, Latin America, Asia Pacific, and the Middle East and Africa.
In the Middle East and Africa region, analysts project the cost of four-hour battery storage to fall 33% from $120/MWh in 2026 to $80/MWh by 2035. Utility-scale solar is already the region’s lowest-cost power generation technology, with an LCOE of $37/MWh for projects using single-axis trackers. Wood Mackenzie expects solar costs in Saudi Arabia and the UAE to fall below $20/MWh by 2033.
As storage ‘cements’ its role as the enabling technology for solar and wind integration, Wood Mackenzie analysts said, “This shift means storage is displacing open-cycle gas turbines on cost in every gas market across the region, marking a significant structural turning point for power system planning across both the Gulf and Africa.”
In North America, analysts see near-term solar costs to increase due to tariffs and import restrictions, with distributed solar projects facing greatest pressure. Utility-scale solar remains partially protected by 168 GW of safe-harbored capacity. However, module prices are expected to rise around 5% annually through 2030.
Battery storage continues to benefit from investment tax credits (ITC), which partly offset the effects of foreign entity of concern (FEOC) restrictions and supply chain constraints. Once the tax credits expire in 2038, costs may spike, but storage LCOE will drop 10% by 2060, driven by long-term new battery chemistries, hardware commoditization, and domestic supply chain expansion.
Growing electricity demand from data centers is further strengthening the long-term case for renewables and battery storage in North America, they highlight.
Across Latin America, solar PV with single-axis trackers remains the lowest-cost generation technology in 2026. Wood Mackenzie expects average costs for solar to decline by 38% by 2060, and for storage to drop by 42% driven by storage requirements for renewable energy projects, standalone procurement and maturing regulatory frameworks.
Solar PV remains Europe’s cheapest power generation technology, with fixed-tilt costs projected to fall 22% by 2060 despite a near-term increase in capital expenditure. Onshore wind costs are also expected to decline, reaching $60/MWh by 2060 as turbine performance improves. Battery storage capital costs in Europe rose 2% in 2026 due to higher battery cell prices and lithium costs but are forecast to fall 12% by 2031. Meanwhile, Europe’s fossil-fuel generation costs are expected to rise, with carbon costs projected to exceed fuel costs by 2030, according to Wood Mackenzie.
Utility-scale solar PV remains the cheapest power generation source in Asia Pacific, although costs vary significantly across markets. China has the region’s lowest grid-scale battery storage costs – a benchmark LCOE that’s 55% lower than the rest of Asia Pacific average of $134/MWh – supported by domestic supply chains and large-scale manufacturing.
Analysts project average storage costs across the rest of Asia Pacific to fall to $92/MWh by 2036, though Japan, Australia, and the Philippines are expected to remain more expensive.
