Webinar Analysts: Capacity Auction Impacts, Trade Negotiations and High Natural Gas Production
During Constellation’s September Energy Market Intelligence Webinar, the Commodities Management Group (CMG) provided comprehensive coverage of current and future factors affecting the energy landscape, including the influence of trade negotiations on energy exports, high natural gas production, offshore wind industry challenges and the impacts of recent capacity auctions in PJM and MISO.
Weather Report
The Constellation weather team provided a look back at the summer, which has ended as the 10th hottest summer on record primarily driven by warm overnight temperatures rather than extreme daytime highs. The tropical storm season has been unusually quiet, although an increase in tropical activity is anticipated later in September.
The team then looked at the fall and winter weather outlooks. The El Niño Southern Oscillation (ENSO) signal is currently neutral to weak La Niña, suggesting a colder weather pattern in the Fall and variable weather in the winter. A more accurate winter outlook is expected at the end of September.
All Things Economic
Chief Economist Ed Fortunato discussed some geopolitical factors that are impacting energy trade. The U.S. has been leveraging natural gas and oil exports in trade negotiations to reduce tariffs with major trading countries. Countries such as South Korea, India, Mexico and the EU have committed to increasing their energy purchases from the U.S. in exchange for reduced tariffs. This shift is significant for the EU, which is diversifying from Russian natural gas. To meet this increased demand, the U.S. liquefied natural gas (LNG) export capacity has increased from 8.5 Bcf/day during the first Trump administration to nearly 17 Bcf/day today. Recent trade negotiations have resulted in over $1 trillion in commitments to buy U.S.-sourced energy by the end of the decade. Whether the U.S. energy industry can scale to meet this demand remains an open question.
Natural Gas Supply & Demand Fundamentals
As natural gas markets have stayed balanced, with prices hovering around $3/MMBtu, natural gas production has remained robust throughout the summer, averaging around 107 Bcf/day in August. Due to the high production numbers, storage levels have also been strong, leading to storage levels slightly below last year’s numbers, but still above the five-year average. The Energy Information Administration (EIA) projects that storage levels will reach around 3.9 Tcf by the end of the injection season.
Offshore Wind Projects Face Roadblocks
In-progress and planned offshore wind projects have faced significant setbacks due to new federal policy actions. Various Executive Orders have halted offshore wind leasing and permitting processes, causing many projects, like Empire Wind and Revolution Wind, to stop development. Other offshore wind projects in Maryland and New England, including South Coast Wind and New England Wind, also face potential halts. These projects represent nearly 8 GW of expected capacity.
As of Monday, September 22, a federal judge has ruled that Revolution Wind can resume construction.
Capacity Auction Results
The PJM capacity auction for the 2026-27 power year cleared at the price cap of $329 per MW-day, which was a 22% increase over the previous auction. This increase was driven by a rise in capacity requirements and growing data center loads. The reserve margin procured for the entire RTO, which includes FRR load, was 18.9%, or 0.2 percentage points lower (or 309 MW ICAP lower) than the target reserve margin of 19.1%. Energy efficiency measures were excluded from participation and demand response remained flat. Without the price cap, auction prices could have reached $389 per MW-day.
MISO announced a software error in its planning reserve margin calculations since 2017, where an all-hours approach was used instead of a daily peak hour methodology, resulting in overstated reserve margins. This affects the 2025-26 planning year auctions. Instead of rerunning auctions, MISO will recalculate reserve margins and reliability-based demand curves, likely lowering clearing prices. Resettlements will be phased through November to December 2025, with adjustments communicated to market participants.
Market Trends and Temperature
The webinar concluded with a look at forward power charts, including conversations about “the right time to buy,” the “Market Temperature” and other factors affecting the energy market.
We invite you to join us for our next Energy Market Intel Webinar on Wednesday, October 8 at 2 pm ET. Constellation will offer detailed and timely updates on factors affecting the energy landscape such as weather, natural gas storage and production, and domestic and global economic conditions. Register by visiting www.constellation.com/marketintelwebinar.
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