Natural gas demand is slowing while battery energy storage becomes “the fastest growing power technology today,” finds a recent report, even as data centres increasingly deploy both together.
The world added 110 gigawatts of new battery storage capacity last year, making batteries the fastest-growing power technology globally, the International Energy Agency wrote in its latest Global Energy Review. That was more new capacity than gas has ever added in a single year.
New battery storage installations rose 40% compared to the previous year, with China responsible for about 60% of the growth. Meanwhile, gas demand gained only 1% in 2025, after stronger growth in 2024. The increase was mostly caused by cold weather raising heating demand in the United States and European Union, as well as Middle Eastern countries using more gas instead of oil.
Across the Asia-Pacific region, gas demand “effectively flatlined.”
High gas prices were a prominent reason for the slowed growth, with trends indicating that prices won’t drop this year. The U.S.-Israeli war against Iran, which has disrupted oil transportation through the Strait of Hormuz, led to a spike in oil and gas prices. The cost of building new gas-fired generation plants also rose sharply by 66% from 2023 to 2025, as prices for gas turbines spiked amid a supply crunch. Though even with the crunch and delayed timelines, BNEF analysts have not seen gas demand drop—the fossil fuel continuing to have appeal for applications like data centres.
At the same time, battery storage has become steadily cheaper, making it an increasingly attractive alternative to gas plants. For example, a battery company in Ontario says it could build a 400-megawatt storage project in New Brunswick for half the cost of a proposed gas-and-diesel power plant, reported CBC News.
About 80% of the new battery capacity in the IEA’s assessment was installed in utility-scale applications. But the report also counted a 30% increase in short-duration battery backup, including at data centres where they are increasingly being paired with gas generators to meet developers’ needs for fast electricity access. BloombergNEF estimates the trend accounts for nearly a third of all announced onsite data centre battery capacity globally.
“I assumed batteries would be a tool for decarbonization,” Michael Thomas, founder of clean energy research firm Cleanview, told Bloomberg. “What we are learning in this new AI era is that they can also be used as a tool for fossil fuel power because their technological advantages make it possible to build and operate an off-grid power plant.”
Even so, the growing use of battery storage is helping renewable energy sources like solar expand more quickly. The IEA said solar was the largest source of new energy growth globally.
The “blistering pace” of battery storage and solar buildout allows renewables to keep winning market share from coal and gas in U.S. power markets, writes the Institute for Energy Economics and Financial Analysis (IEEFA).
Battery storage “is relatively easy to site since it can often be co-located at existing generation sites or substations,” write IEEFA analysts Dennis Wamsted and Seth Feaster. “The components also are readily available and stable or declining in cost, unlike hard-to-purchase and increasingly expensive gas turbines.”
