Webinar Analysts: PJM Capacity Auction, LNG Exports and the Impacts of a “Real” Winter
During the February Constellation monthly Energy Market Intelligence Webinar, Constellation’s Commodities Management Group (CMG) provided comprehensive coverage of current and future factors significantly affecting the energy landscape, including the impact of a “real winter” on energy markets, key natural gas fundamentals, LNG updates and European impacts and an update on PJM’s pending capacity market price floor and cap that has been proposed to FERC.
Weather Report
Chief Meteorologist Dave Ryan provided an in-depth analysis of the weather and its impact on the energy market. The winter has been unusually cold, with a warm December followed by a January that saw significant arctic outbreak that has brought snow and rain since then. The projection for the rest of February shows continued cold weather, especially in the Midwest, Ohio Valley, and the entire East Coast. This winter is expected to be one of the coldest in recent years, with population-weighted heating degree days (HDDs) higher than the 30-year average. The cold weather pattern is expected to continue into March, but forecasts have moderated since the webinar with potential cold snaps lasting 3 to 4 days. The American weather model predicts a very aggressive return of cold air in early March, while the European model shows a more variable pattern. Overall, the winter is expected to extend for at least another four weeks, but the forecasts have moderated over the weekend of February 22 and 23.
All Things Economic
Chief Economist, Ed Fortunato, provided an analysis of the economic landscape and discussed an Executive Order signed by President Trump on February 3 supporting the creation of a sovereign wealth fund similar to countries like Norway, Saudi Arabia and Australia that are typically funded by natural resources, surplus budgets, and other assets.
Ed expressed concerns about the potential risks and benefits of such a fund. He highlighted that the United States’ financial system is sophisticated and primarily privately held, unlike other countries with state-owned assets. Ed emphasized that the U.S. stock market has historically been a premier wealth creation tool and warned that disturbing this system could have significant ramifications. Greg offered a counter viewpoint that professional money managers could offer guidelines for managing energy and mineral resource sales into investment vehicles.
Natural Gas Fundamentals
After 23 consecutive months of storage being relatively stable, there have been some shakeups in the natural gas space. Currently, natural gas storage levels are 386 Bcf (-15.5%) below year ago and 118 Bcf (-5.3%) below the five-year average. This is due to the unusually cold winter, which has increased demand for furnace heating and power generation.
The Energy Information Administration (EIA) has projected that the end-of-season storage levels will be around 1.8 trillion cubic feet. This is a notable decrease from the 2.3 trillion cubic feet recorded at the end of last winter. Some third-party vendors have even lower projections, averaging around 1.66 trillion cubic feet. While this doesn’t indicate an immediate shortage, it does represent a significant reduction in available supply compared to the previous year.
The ongoing cold weather is expected to continue impacting storage levels, with forecasts indicating a prolonged and durable winter. This situation is likely to keep natural gas prices elevated as demand remains high.
Additionally, the team highlighted that the ongoing cold weather in Europe has also caused a significant drawdown in their natural gas storage levels. This situation has led to strong demand for LNG from the United States to replace the reduced supply from Russia. The expiration of the gas transport agreement between Russia and Ukraine at the end of January further exacerbated the situation, adding an additional 30 billion cubic feet (Bcf) per month of natural gas that needs to be sourced from other suppliers.
As a result, there has been a considerable increase in calls for U.S. LNG shipments to Europe. This increased demand for LNG (which recently reached 16.5 Bcf/d) is expected to continue as Europe seeks to displace Russian gas and manage the ongoing cold weather.
PJM Capacity Auction
The 2025/2026 PJM Base Residual Auction (BRA) auction cleared at $269/MW-day. In an effort to mitigate upward price pressure in upcoming auctions, Pennsylvania Governor Josh Shapiro negotiated with PJM to set a price floor and cap for the 2026/2027 and 2027/2028 and at $175/MW-day and $325/MW-day, respectively. The governors of Maryland, New Jersey, and Delaware supported this motion at FERC. Additionally, two units in Maryland, Brandon Shores (coal) and Wagner (gas/oil) that are under Reliability Must Run (RMR) contracts with PJM, will be included in the 2026/2027 auction at $0/MW-day cost, with any revenue from the capacity auction going back to load customers.
PJM submitted the proposed price and floor comprise to FERC on February 20 for FERC approval with the stipulation that the compromise floor and cap are only to be in place for the 2026/27 and 2027/28 auctions.
Overall, the main takeaways from the PJM capacity auction include the establishment of a price floor and cap for the next two auctions, the inclusion of certain Maryland units at zero cost, and ongoing discussions about the potential impact on new investments in generation.
Market Trends and Temperature
The team concluded the webinar by looking at forward power charts, discussing “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, March 19 at 2 pm ET. Constellation energy experts 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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