Billion-dollar gas power plant trap? Why huge long-term battery storage systems are now the better choice

Secret preference for gas: Will this political decision cost electricity customers billions?

Gigantic price drop: Will large battery storage facilities soon make new gas-fired power plants obsolete?

German energy policy faces a pivotal decision of enormous consequence: How can the electricity supply be reliably secured during periods of the dreaded "dark doldrums" (periods of low wind and solar power generation)? While the federal government's current power plant strategy primarily relies on the massive construction of expensive new gas-fired power plants, a damning analysis by the renowned consulting firm LCP Delta paints a completely different picture. The figures prove it: Long-term battery storage, thanks to an unprecedented price drop, is no longer a niche technology. It is, in some cases, drastically superior to gas-fired power plants, both economically and in terms of climate policy. Replacing just two gigawatts of planned gas capacity with storage could save up to €166 million in subsidies annually. Nevertheless, the current political market design effectively excludes this alternative through rigid regulations. This is an in-depth analysis of why political preferences currently outweigh economic rationality in technology selection – and who will ultimately foot the bill.

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Germany's energy policy stands at a crossroads of far-reaching importance: Should the country primarily rely on new gas-fired power plants to build up secure electricity capacity – or can long-term battery storage be positioned technically and economically to take on a substantial part of this task more cheaply, flexibly, and with less impact on the climate? A study by the renowned British consultancy LCP Delta, commissioned by the battery storage developer Field Energy, provides compelling figures on this topic in April 2026. The answer is not "either gas or battery," but rather: Anyone making a purely economic decision regarding technology cannot ignore long-term storage.

The political framework: Germany's power plant strategy under scrutiny

On January 15, 2026, the Federal Ministry for Economic Affairs and Energy (BMWE), under Minister Katherina Reiche (CDU), reached an agreement in principle with the European Commission on the key points of Germany's power plant strategy. A core element of this agreement is the tendering process for twelve gigawatts of new dispatchable capacity in 2026, which must be connected to the grid by 2031 at the latest. Ten of these twelve gigawatts are subject to a so-called long-term criterion: The subsidized plants must be capable of feeding electricity into the grid continuously for at least ten hours – a requirement that, according to the current state of technology, can practically only be met by gas-fired power plants.

The long-term criterion does not apply to the remaining two gigawatts. Battery storage systems can also participate in these tenders. The ministry was therefore aware from the outset that its design of the tender effectively excludes battery storage as a technology for the largest capacity block. Critics see this not as a technical necessity, but as a political pre-selection for natural gas – even at a time when the cost dynamics of storage technologies have fundamentally shifted in favor of batteries.

The German government had originally aimed for 20 gigawatts of new gas-fired power plant capacity by 2030. Following negotiations with Brussels, this target was reduced to twelve gigawatts. However, the coalition agreement and the government's political self-image demonstrate that the preference for gas-fired, hydrogen-capable power plants is not solely based on technical considerations, but also on industrial policy and strategic factors – as a bridge to a hydrogen economy and as a countermeasure to the politically feared narrative of supply instability during periods of low wind and solar output.

The LCP Delta study: Methodology, client and scope

Against this political backdrop, the LCP Delta study appears as a targeted intervention in a deadlocked debate. The analysts modeled a reference scenario comprising eight gigawatts of new gas-fired power plant capacity, two gigawatts of long-term battery storage, and two gigawatts of conventional short-term battery storage. This scenario allows for a direct system comparison and poses the question of what happens when the two gigawatts of gas are replaced by equivalent long-term storage – while maintaining the same level of security of supply.

The study was commissioned by Field Energy, a British battery storage developer with a pipeline of over eleven gigawatts in Europe. The company has a clear commercial interest in the widespread adoption of long-term storage, so the results should be interpreted with this in mind. LCP Delta itself acknowledges this transparently. However, the cost data used is not based on theoretical analyst estimates, but on the client's actual construction costs – which increases the realism of the figures, but also limits their generalizability to the overall market.

Regarding the scope of the analysis: LCP Delta is one of the most respected energy market consultancies in Europe. The firm has previously been commissioned by the UK Department for Energy Security and Net Zero Emissions (DESNZ) to conduct similar modeling for the UK electricity system. Therefore, the methodological quality of this report cannot be questioned solely on the basis of the client.

The core problem: What does security of supply really mean?

The term "security of supply" often serves in public debate as a political euphemism for a broad spectrum of different risks that would need to be analytically clearly distinguished. In the German context, the scenario of the so-called "dark doldrums" dominates – a weather pattern in which both wind power and photovoltaics produce below-average output for several days, while electricity demand is high. These situations are real, statistically measurable, and actually require controllable capacity.

The Research Center for Energy Economics (FfE) has calculated for the Handelsblatt newspaper that Germany would need to increase the capacity of currently approved storage projects by a factor of 20 to 40 to completely bridge periods of low wind and solar power generation using battery storage alone. This figure sounds dramatic – and from a certain perspective, it is. However, it answers the wrong question, because no market participant claims that battery storage alone, without any other source of flexibility, can or should completely bridge all periods of low wind and solar power generation.

The more realistic question is: In a system that combines gas, storage, imports, biogas, demand response, and, in the future, hydrogen – how much of the planned new gas-fired power plant construction could be replaced more cost-effectively by long-term storage without jeopardizing system security? And this is precisely the question LCP Delta answers: Two gigawatts can be completely substituted, with the same level of security and drastically lower costs.

The German Association of New Energy Industries (BNE) emphasizes that Germany already reliably manages periods of low wind and solar power generation with around 60 percent renewable electricity and the European grid. The grid is therefore not an isolated national island dependent on a single type of power plant, but a dynamic, interconnected European system. This systemic integration is often underestimated in many debates.

The economic system comparison: 31 euros versus 102 euros per kilowatt

The core of the LCP Delta study is the comparison of the funding requirements of both technologies. According to the model, the average annual funding requirement for a long-term battery storage system with a ten-hour storage capacity is €31 per kilowatt. A comparable combined cycle gas turbine (CCGT) power plant, on the other hand, requires €102 per kilowatt – more than three times as much.

This dramatic gap is not an isolated result, but corresponds to a fundamental cost shift in global technology markets. BloombergNEF documented in its annual LCOE report for 2025 that the benchmark levelized cost of electricity (LCOE) for a four-hour battery storage project fell by 27 percent to $78 per megawatt-hour – a historic low since BNEF began its data collection in 2009. At the same time, the LCOE for new gas-fired power plants soared to a historic high of $102 per megawatt-hour – fueled by exploding turbine demand as a result of the data center boom.

The cost of turnkey stationary battery storage systems fell by a further 31 percent from 2024 to 2025, reaching $117 per kilowatt-hour, according to the Volta Battery Report 2025, which is based on BloombergNEF data – a decline of almost 70 percent since 2022. In China, the cost was even lower in 2025, at just $63 per kilowatt-hour, compared to $120 in Europe. This geographical cost divergence is significant from an energy policy perspective because it shows that while European projects are more expensive, they are already competitive – and the gap is narrowing.

For home energy storage systems in the German market, prices for LFP (lithium iron phosphate) batteries fell from €850 to around €440 per kilowatt-hour between 2022 and 2026. According to Aurora Energy Research, installed battery capacity in Europe rose from under ten to over 17 gigawatts between 2024 and 2025; a further increase to more than 80 gigawatts is projected by 2030, with Germany considered the European leader.

The cost superiority of batteries is therefore not a snapshot of a transitional phase, but rather the expression of a structural trend: Overcapacity in Chinese cell production, increasing competition among manufacturers, the adoption of cost-effective LFP chemistry, and continuous improvements in system design are driving prices inexorably downward. Gas-fired power plants, on the other hand, do not benefit from a comparable learning curve: Tight supply chains for turbines, raw material volatility, and structurally high demand from the energy sector make new gas-fired plants structurally more expensive.

System costs and consumer savings: The 166 million euro equation

If just two gigawatts of the planned gas-fired power plant capacity were replaced by equivalent long-term battery storage, LCP Delta calculates that up to €166 million in subsidies could be saved annually – with identical security of supply. This saving would ultimately benefit electricity consumers, as capacity mechanisms always pass on their costs to end consumers via grid fees or levies.

Even more impressive are the cumulative system cost savings over the project's lifetime: A single 100-megawatt battery storage plant achieves net system cost savings of around €270 million between 2031 and 2050, resulting from reduced fuel, CO₂, and import costs. A comparable gas-fired power plant achieves only €70 million in system cost savings over the same period – less than a third. This difference is not only due to the lower capital costs of the battery, but also to its higher utilization rate: Unlike gas-fired power plants, battery storage systems can provide various market services year-round and thereby generate higher revenues.

A 2024 study by Frontier Economics, commissioned by leading battery storage companies, estimates the economic benefit of expanding large-scale battery storage in Germany at at least twelve billion euros by 2050. Large-scale battery storage reduces the wholesale price of electricity by an average of around one euro per megawatt-hour. In 2030 alone, large-scale battery storage could help save 6.2 million tons of CO₂. At the same time, a storage capacity of nine gigawatts reduces the need for new gas-fired power plants by nine gigawatts – thus preventing the construction of 18 additional power plants.

These figures must be evaluated in the context of the planned subsidies: According to analyses by Green Planet Energy and the Forum for Ecological and Social Market Economy, the German Federal Ministry for Economic Affairs and Energy (BMWi) is planning subsidies of up to €15.5 billion for 12.5 gigawatts of dispatchable power plant capacity, the lion's share of which is earmarked for new gas-fired power plants. The annual subsidy requirement for newly constructed hydrogen-capable gas-fired power plants could rise to as much as €1.44 million per megawatt. Compared to these government expenditures, the savings achieved through long-term storage do not appear to be a marginal optimization, but rather a politically significant factor.

Technical equivalence: When is a battery worth a gas power plant?

The central technical question in the LCP Delta study is: How much battery capacity is needed to replace one gigawatt of gas-fired power plant capacity without reducing security of supply? The answer is nuanced and depends on the storage duration.

Assuming an availability of 94 percent for gas-fired power plants and 98 percent for battery storage, the replacement ratio for short storage durations is greater than 1 – meaning that more battery capacity is required than the gas-fired power being replaced. Only with a storage duration of more than 16 hours does the ratio approach 1:1, and with 20-hour storage, it even falls slightly below this, as the higher availability of the battery now outweighs the gas-fired power plant's capacity. This means that while the 10-hour criterion of the power plant strategy is a relevant threshold from the perspective of security of supply, it is not the decisive one. With 16- to 20-hour storage, it would actually be possible to achieve greater security per installed gigawatt than with a gas-fired power plant.

In a study from March 2026, Thema analysts take a more cautious stance: They assume that battery storage alone will not be able to completely replace gas-fired power plants by 2035 and that system security cannot be guaranteed without dispatchable generation. They argue that beyond a battery storage expansion of 70 gigawatts, further expansion would have no additional impact on security of supply. However, the same study shows that 90 gigawatts of battery storage would reduce gas consumption by 14 terawatt-hours and significantly lower the number of price peaks – indicating a considerable relief function, even if complete replacement is not possible.

The multifunctionality of the battery is crucial: While gas-fired power plants primarily act as generators, battery storage systems can simultaneously participate in the energy market, the balancing energy market, as a grid stability instrument, and as an ancillary service provider. This revenue diversification makes them economically more robust than gas-fired power plants, which become unprofitable at low electricity prices and are hardly built without subsidies. The German Association of Energy and Water Industries (BDEW) acknowledges this point and explicitly demands that all options – gas-fired power plants, large-scale battery storage, and demand-side flexibility – be able to compete on an equal footing in a technology-neutral capacity market from 2028 onward.

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The grid connection dilemma: Where ambitions meet reality

As compelling as the economic calculations in favor of long-term storage may be, a serious operational problem remains unresolved: grid connection. An analysis of the European battery storage market by Fieldfisher from 2026 shows that nine out of eleven core European markets are already facing overloaded power grids. The situation is particularly acute in Germany: at the beginning of 2025, transmission system operators received applications for new grid connections totaling a staggering 226 gigawatts – a figure that far exceeds the available capacity. One grid operator has confirmed that no further capacity will be available until 2029.

This structural overload affects battery storage and gas-fired power plants equally, but its impact on the political debate is asymmetrical: Gas-fired power plants, as a well-known and proven technology, are more familiar in the permitting process, and their locations are often planned at existing power plant sites – which reduces bureaucratic hurdles. The Volta Battery Report 2025 explicitly highlights Germany as a particularly problematic market due to long waiting lists for grid connection. The Fieldfisher analysis warns that the projected sixfold increase in European battery capacity to over 100 gigawatts by 2030 depends on accelerated grid expansion, simplified planning processes, and reliable legal frameworks.

For political practice, this means that even if long-term storage were the better alternative to some of the planned gas-fired power plants from a purely technical and economic perspective, the grid infrastructure could become the decisive bottleneck. Anyone who wants to position batteries as a serious alternative to gas-fired power plants in the capacity market must simultaneously exert massive political pressure for accelerated grid expansion. Otherwise, the promise of cheaper kilowatt-hours on paper will remain thwarted by the reality of the grid.

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Climate protection as a neglected argument: The CO₂ dimension

In the public debate about power plant strategy, security of supply dominates as an argument. The climate dimension, by contrast, recedes into the background – which is analytically short-sighted, since the long-term system costs of gas-fired power plants explicitly include the CO₂ component.

According to LCP Delta, a single 100-megawatt battery storage system achieves CO₂ savings of approximately 0.3 million tons over its operating lifetime compared to a gas-fired power plant. Scaled up to two gigawatts, this would correspond to a reduction of six million tons of CO₂ over 20 years. A study commissioned by GESI Germany and conducted by the Fraunhofer Institute for Solar Energy Systems (ISE) determined that a large-scale battery storage system with a capacity of two gigawatt-hours can save up to 60,000 tons of CO₂ per year – cumulatively almost 20 million tons by 2035. For context: Total German electricity generation currently emits 177 million tons of CO₂ per year.

The societal cost calculation for new gas-fired power plants therefore includes not only direct subsidies and ongoing fuel costs, but also the social costs of CO₂ emissions – between €200 and €680 per ton in 2040, depending on the shadow price used. A complete life cycle analysis incorporating these climate costs would further shift the already significant cost difference between batteries and gas, pushing the gas alternative even further to the disadvantage of gas. The current tender design of the German power plant strategy does not include such external costs in its assessment – ​​which amounts to a political subsidization of fossil fuel technology at the expense of future generations.

Market design decides: Technology neutrality as a touchstone

The crucial political question is not whether long-term storage can compete technically and economically with gas-fired power plants – they obviously can, at least to the extent modeled by the LCP study. The crucial question is: Will the market design of the German capacity market be structured in such a way that both technologies can truly compete on an equal footing?

The current design of the first tender round for ten gigawatts, with its ten-hour long-term criterion, effectively excludes battery storage without providing a compelling technical justification. Even the ministry acknowledges that long-term battery storage could, in principle, meet the ten-hour criterion – the problem isn't a lack of physics, but rather a lack of political will to formulate the tender conditions accordingly. The result is a technologically biased market design that systematically eliminates the cost advantages of batteries, thus doubly burdening consumers and taxpayers: firstly, through excessive subsidies for gas-fired power plants, and secondly, through missed system cost savings.

Federal Economics Minister Reiche described the agreement as a "decisive step for security of supply in Germany" and emphasized the creation of "the foundation for a secure electricity supply for the future." What she failed to mention: The decision to define the long-term criterion in such a way that battery storage systems are excluded from the majority of tenders is a political choice – not a technical necessity. It favors a well-established technology at the expense of a cheaper and more climate-friendly alternative.

The capacity market that Germany is planning for 2027 and 2028 is explicitly designed to be technology-neutral. At that point, long-term storage facilities and gas-fired power plants will be directly competing against each other – and based on the available cost figures, the outcome of this competition is likely to be an unpleasant surprise for the gas-fired power plants.

Limitations of the study and necessary distinctions

A fair analysis of the LCP-Delta results requires a critical examination of methodological limitations and open questions. First, the study models the replacement of two gigawatts of gas with long-term storage, a manageable portion of the planned total capacity of twelve gigawatts. The statements regarding system security apply to this specific mixed scenario, not to a complete substitution of all gas-fired power plants. Anyone using the study as an argument for completely abandoning new gas-fired power plants is overstretching its conclusions.

Secondly, the cost data used is based on Field Energy's actual project costs. While these are real and not hypothetical, they are tailored to a single company. Whether other developers can build under comparable conditions is not documented. A diversified market average could partially offset the battery's cost advantages.

Thirdly, the technical availability of battery storage systems over long periods and under extreme conditions, such as weeks of low wind and solar power generation, has not yet been fully tested under real-world conditions. The assumed availability of 98 percent is theoretically plausible, but not yet an empirically validated long-term value for gigawatt-scale systems under German climatic conditions.

Fourthly, the question of hydrogen capability remains. Gas-fired power plants currently fueled by natural gas are to be increasingly converted to green hydrogen by 2035. This would give them a dual function: short-term security of supply with fossil energy and medium-term hydrogen infrastructure. This systemic option is not available to battery storage – at least not in this form. Those who consider the expansion of the hydrogen economy in Germany a priority have a legitimate argument for gas-fired power plants that goes beyond a mere cost comparison.

Fifthly, the European interconnectedness must be taken into account: A German electricity system within a closely networked European market can rely on imports from France (nuclear energy), Scandinavia (hydropower), or other countries during periods of low wind and solar output. These system options reduce the national need for dispatchable domestic capacity – which applies equally to battery storage and gas-fired power plants, but must be considered when setting capacity targets.

International comparative perspective: What can Germany learn from Great Britain?

A look at British energy policy provides instructive comparisons. LCP Delta, in a report for the government, analyzed the UK's electricity system and concluded that long-term battery storage capacity needs to increase from three gigawatts in 2023 to five to eight gigawatts and from 28 GWh to 81 to 99 GWh by 2030. In response, the UK's DESNZ developed a so-called "cap and floor" mechanism for long-term storage – a safeguard that guarantees a minimum return and limits profits, thereby mobilizing private capital without requiring permanent government subsidies.

This British approach is a more elegant market design than the German capacity mechanism, which relies on simple volume tenders. The cap-and-floor model allows investors to plan long-term without having to bear the full brunt of market price uncertainty, while simultaneously providing the state with cost ceilings. It is no coincidence that the UK is now among the leading European markets for large-scale battery storage.

Germany could learn from this model. Instead of opening existing tenders exclusively to gas and only allowing long-term storage facilities to participate equally in the capacity market from 2028 onwards, an accelerated, technology-neutral capacity mechanism with similar revenue guarantee elements would be a more economically rational instrument. Costs for consumers would be lower, CO₂ emissions reduced, and dependence on international gas markets decreased.

The geopolitical dimension: gas prices, supply risks and strategic autonomy

The economic analysis would be incomplete without considering the geopolitical risk structure. Gas-fired power plants are permanently dependent on fuel imports. Before Russia's war of aggression against Ukraine, Germany imported approximately 55 percent of its gas needs from Russia; after the supply halt, sources were diversified, but the structural dependence on imported liquefied natural gas (LNG) and pipeline gas from Norway, the USA, and the Gulf states remains.

Every newly built gas-fired power plant extends this strategic dependency for at least two to three decades. Rising CO₂ prices in the EU ETS, volatile gas markets, and potential future supply disruptions make operating these power plants a long-term economic variance with a significant risk profile. According to Fraunhofer ISE, fuel costs for new combined cycle gas turbine (CCGT) power plants could rise to over 30 cents per kilowatt-hour in a pessimistic scenario. In such a scenario, not only would the economic advantage of battery storage be even greater than currently modeled, but the subsidy requirement for gas-fired power plants would also increase dramatically.

In contrast, battery storage systems have no ongoing fuel costs after the initial investment. Their primary dependence on raw materials – lithium, cobalt, manganese – relates to cell manufacturing, not operation. And even though these supply chains carry their own geopolitical risks, particularly due to Chinese market dominance in cell manufacturing, they are structurally different: A battery storage system is free of operating costs after purchase, whereas a gas-fired power plant never is.

What the numbers demand and what politics owes

The LCP Delta study delivers a clear, albeit deliberately limited, result: Long-term battery storage systems with a ten-hour or longer capacity can replace at least two gigawatts of Germany's planned gas-fired power plant capacity – with the same security of supply and annual subsidy savings of up to €166 million. The long-term system cost savings of a single 100 MW plant exceed those of a comparable gas-fired power plant by almost four times.

This finding corresponds with a broad range of independent research: BloombergNEF, Frontier Economics, Fraunhofer ISE, Aurora Energy Research, and the BNE all reach similar structural conclusions in their respective analyses regarding the growing cost-effectiveness and systemic relevance of battery storage. The economic consensus is clearer than the political debate suggests.

The real challenge for German energy policy is therefore not technological – that has been solved. The challenge is political: to design the tendering process for the capacity market in such a way that cheaper, more climate-friendly, and strategically more autonomous technologies can actually compete. The long-term criterion of ten gigawatts, which effectively excludes battery storage, is not an act of security of supply – it is a political act of technological preference. And consumers, taxpayers, and the climate will foot the bill for this act in the coming decades.

A technology-neutral capacity market that allows gas-fired power plants, long-term storage, demand response, and, in the future, green hydrogen to compete on an equal footing is not an ideological demand of the energy transition movement. It is the consequence of economic rationality in a market where cost ratios have fundamentally shifted. Germany has the technologies. What is needed now is the political will to shape the market in such a way that they can prevail.

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