Energy storage facilities are pulling the plug on gas plants

Giant batteries that provide a stable power supply by balancing intermittent renewable energy sources are becoming cheap enough that developers are abandoning large numbers of projects for gas-fired generation around the world. The long-term economics of gas-fired plants used to compensate for the intermittent nature of wind and solar power are changing rapidly, according to interviews with more than a dozen power plant developers, project finance bankers, analysts and consultants.

Energy storage facilities are replacing gas power plants

According to reports, energy storage facilities built on batteries have already started to provide backup power to the grid at a price that can compete with gas power plants. It is stated that this means less gas will be used.

According to data from the non-profit Global Energy Monitor, 68 gas power plant projects were suspended or canceled worldwide in the first half of 2023. Power plant developer Competitive Power Ventures, which was among the latest cancellations, cited low electricity prices and a lack of government subsidies, without providing financial details. Similarly, British independent Carlton Power announced that it was abandoning its $997 million gas power plant plan. Considering that economic conditions have changed in favor of energy storage, the company put into action plans to build one of the largest batteries in the world. Many energy companies are also shifting to energy storage systems instead of gas plants supporting the grid.

Costs have dropped significantly

According to BloombergNEF, the cost of lithium-ion batteries dropped by more than half from 2016 to 2022, while the cost per kilowatt-hour of battery energy storage decreased to $151. At the same time, renewable energy production reached record levels. According to Ember’s European Electricity Review, wind and solar power produced 22% of EU electricity last year, almost doubling its share from 2016 and surpassing the share of gas generation for the first time.

Of course, gas power plants are still being built, but their costs may increase further in the future with regulatory laws. For example, European Union rules that came into force at the beginning of this year require gas plants that want to access green financing to be built with carbon capture or switch to using low-carbon gases such as hydrogen from 2035.