Batteries Are Taking the Gas Peaker’s Best Hours

Gas peakers have always had one decisive economic advantage: they were relatively cheap to build.A peaking plant could sit idle for most of the year, then start when demand and electricity prices surged. Its fuel was expensive and its efficiency often mediocre, but low upfront costs made that acceptable. The owner did not need thousands of operating hours to recover an enormous initial investment.Australia has now crossed an important threshold. The country’s CSIRO, working with the Australian Energy Market Operator, finds that batteries have become cheaper than gas for supplying routine peak demand. Four-hour battery systems have moved below open-cycle gas turbines on capital cost, while their operating characteristics are better suited to the short, sharp evening peaks increasingly created by abundant daytime solar.This does not mean gas has become useless. It means batteries are taking the part of the flexibility market that gas peakers were best paid to serve.Two Cost Curves Have CrossedBattery costs have not declined smoothly. Lithium prices, inflation and supply-chain disruption pushed project costs upward in 2022 and 2023. But manufacturing continued to expand, material constraints eased and competition intensified.CSIRO’s latest GenCost assessment concludes that battery costs are again falling and that added storage capacity is already helping reduce Australia’s evening peak prices.Gas turbines are moving in the opposite direction. US data-center developers and utilities are ordering turbines faster than manufacturers can produce them. CSIRO says open-cycle gas costs are rising rapidly because demand exceeds manufacturing capacity and does not expect costs to normalize until around 2035. Reuters has reported that turbine lead times can exceed five years, while costs for larger combined-cycle projects have more than doubled in parts of the US market.The crossover is therefore more consequential than a single cost comparison suggests. A gas peaker’s cheap construction previously compensated for its continuing fuel bill. A battery has no fuel in the conventional sense. It buys electricity when prices are low—sometimes negative—and sells it when prices are high. Its economics include charging costs, round-trip losses, degradation and eventual cell replacement, but no exposure to a lifetime of gas purchases or carbon costs.Once the battery also becomes cheaper to build, the peaker loses its main defensive wall.Batteries Do More Than Energy ArbitrageA gas turbine and a battery can both inject power during an evening peak, but they are not operationally identical.A battery responds in fractions of a second. It can support frequency, stabilize voltage, absorb surplus solar, relieve local network congestion and switch rapidly between charging and discharging. The same asset can earn revenue in several markets during one day.Gas turbines generally respond more slowly and cannot consume excess electricity. They are generators, not two-way flexibility assets.This revenue stacking explains why batteries first captured frequency-control markets before expanding into wholesale arbitrage and network services. As battery duration increased, developers moved toward larger systems designed to shift midday solar into the evening.Australia’s investment pipeline shows how quickly capital is responding. AEMO reported in October 2025 that grid-scale batteries represented roughly half of all proposed new capacity. The battery pipeline had risen 79% in one year, from 14.6 GW to 26.1 GW. Around 18.2 GW was designed with grid-forming capability, allowing batteries to provide some of the system-strength services traditionally associated with spinning thermal machines.The Waratah Super Battery in New South Wales is being developed at 850 MW on the site of a former coal plant. Part of its capacity acts as a shock absorber for the transmission system, allowing existing lines to carry more power while the battery stands ready to respond instantly to failures. Victoria’s 300-MW Big Battery similarly supports an arrangement that unlocks additional transfer capacity between Victoria and New South Wales.A peaker produces electricity when called. A battery can also increase the amount of electricity the existing grid can move.Gas Is Losing Dispatch Before It Loses CapacityThe easy mistake is to look at the continued need for gas capacity and conclude that batteries are not replacing gas.Four-hour batteries are excellent at moving solar generation from afternoon to evening, covering short peaks and handling sudden system disturbances. They are not an economical way to supply several windless days in winter. Adding duration requires adding many more battery cells, so cost rises with the amount of energy stored.A gas plant can continue operating as long as fuel arrives. Existing gas infrastructure can therefore remain valuable during prolonged renewable droughts, extreme weather or unexpected outages. CSIRO still expects gas technologies to contribute approximately 3–7% of Australian electricity generation by 2050.But that is a narrower role than traditional peakers have played. Batteries can take the daily evening ramp, frequency services and many short scarcity events. Gas is pushed toward rare periods when storage is exhausted or renewable output stays low for too long. Its annual running hours decline even if governments retain the same nameplate capacity for reliability.Commercially, this can hurt gas before it removes gas. Peakers recover much of their investment during a limited number of high-price hours. If batteries discharge into those hours, the price spike is flattened. Gas plants run less often and earn less when they do. New projects then require higher capacity payments—revenue simply for being available—or other long-term guarantees to remain financeable. The system may still need the turbine, but the energy market may no longer pay for it.Flexibility Is Becoming a PortfolioBatteries will not be the only technology squeezing conventional peakers. Demand response can reduce consumption during scarcity. Interconnectors can move electricity between regions. Pumped hydro and reservoir hydro can store larger quantities for longer periods. Thermal storage can shift heating and cooling demand, while electric vehicles can increasingly charge when power is abundant.Longer-duration batteries may eventually address multi-day requirements. Some systems may retain turbines but use biomethane, hydrogen or synthetic fuels during rare emergencies.The emerging architecture is therefore not batteries replacing every gas plant one-for-one. It is a portfolio replacing most of the gas peaker’s operating hours, one service at a time.Australia is a particularly visible test because abundant solar creates large intraday price spreads. The same pattern is appearing in California, Texas and parts of Europe. Wherever cheap solar produces an afternoon surplus followed by an evening peak, four-hour storage has a natural market.Gas once owned flexibility almost by default. It now has to compete separately for ramping, reserves, frequency control, network support and long-duration backup. It will not win every category.The Peaker Is Becoming an Insurance PolicyCSIRO expects Australian wind and solar to provide as much as 93% of electricity by 2050, supported by storage, transmission, hydro and a limited amount of gas or hydrogen. That future will still contain dispatchable combustion capacity.It simply will not use it very often.This matters for investors and policymakers. Building large volumes of new gas capacity on the assumption that peakers will earn yesterday’s scarcity revenues risks creating expensive, underutilized assets. Reliability mechanisms should procure the specific duration and service the system needs rather than favoring a familiar technology.Batteries are not making gas redundant. They are doing something more immediate: taking its customers.The gas peaker is moving from everyday flexibility to emergency insurance. Insurance remains valuable—but it is a much smaller business than selling power every evening.By Leon Stille for Oilprice.comMore Top Reads From Oilprice.comADNOC Gas to Supply LNG to TotalEnergies Under Five-Year DealIndian Refiner BPCL Buys U.S. WTI Crude Oil CargoDubai Benchmark Slips Into Contango for the First Time Since July