Highlights from Our Spring Energy Market Update
Three IGS experts offer insights into key energy market dynamics.
Our energy landscape is evolving, and staying informed is crucial for commercial energy consumers looking to make strategic decisions for their businesses. In late April, three of IGS Energy's experts came together to host our 2025 Spring Market Update, offering insights into key market dynamics.
This recap highlights important takeaways to help commercial energy consumers better understand the challenges and opportunities in the current energy landscape.
1. Summer Weather Outlook
Brent Rice, IGS Energy’s Quantitative Analyst and Meteorologist Lead, kicked off the webinar with insights into the upcoming summer weather forecast and long-term trends affecting energy markets.
Key insights:
- Rising temperatures: Over the past decade, summers have consistently trended warmer than the 30-year historical norms, increasing the demand for cooling across the U.S.
- Neutral ENSO conditions: Current neutral patterns in the El Niño-Southern Oscillation (ENSO) region are projected to hold steady through summer, contributing to higher-than-normal temperatures nationwide.
- Regional variations: Forecasts from the National Oceanic and Atmospheric Administration (NOAA) indicate elevated chances of above-normal temperatures across the western U.S., New England, and Florida. The same trend is expected to continue throughout June, July, and August, with June leaning slightly warmer than the rest of the summer months.
What this means for commercial energy customers:
Weather is a key driver of electricity prices, as warmer-than-average summers often lead to increased cooling demand and a tighter energy market, so it’s crucial for businesses to plan for potential price volatility.
2. Shifts in Power Markets
Joe Haugen, Senior Director of Power Supply, shed light on power market trends, including evolving generation sources and demand growth.
Key insights:
- Natural gas dominance: Natural gas is still the leading energy source in the PJM region — which operates across 13 states and the District of Columbia — setting power prices 60 to 70% of the time this past winter.
- Coal-to-gas conversions: Some retired coal plants are being transitioned into natural gas facilities to meet rising demand, especially demand from data centers being built throughout the Midwest.
- The uncertain impact of renewables: While renewable generation from wind and solar dominates interconnection queues, tariffs and supply chain challenges could delay battery storage projects, impacting grid reliability.
- Increased demand and load growth: PJM’s updated long-term forecast highlights a significant rise in load demand, driven by data center build-outs, widespread electrification efforts, and reshoring of American manufacturing.
Last summer, PJM's capacity auction — for the capacity year June 2025 to May 2026 — cleared at an all-time high. This significant event has far-reaching implications for all 65 million customers within PJM’s footprint.
What this means for commercial energy customers:
The record-breaking auction outcome is an indicator of our growing energy challenges ahead — and could mean higher energy prices for millions of customers.
3. Natural Gas Market Dynamics
Paul Leanza, Director of Gas Supply, shared his insights into the natural gas market and highlighted factors driving volatility and price trends.
Key insights:
- Production and price volatility: Natural gas storage has not kept pace with growing demand, leading to recurrent price spikes in situations of undersupply.
- Peak winter demand: Power plants, industrial buyers, and importers of American liquefied natural gas (LNG) now compete for gas supply during winter months, driving winter prices higher.
- Producer behavior: Producers are consolidating and prioritizing shareholder gains, resulting in tighter control over production increases, even when demand soars.
- LNG expansion: With several LNG facilities under construction or in the final planning stages, U.S. LNG export capacity is expected to grow from 14 billion cubic feet a day (Bcf/d) to 25 Bcf/d by 2028. The steep 2025 climb in LNG demand will require producers to ramp up output significantly.
What this means for commercial energy customers:
For commercial energy customers, this growth signals potential upward pressure on prices and a need for strategic procurement planning.
4. Key Considerations for Commercial Energy Consumers
Across all energy markets in the U.S., the growing demand for power and shifts in generation sources highlight the likelihood of market volatility and the importance of creating a sound energy strategy that meets a business's unique needs.
Tips for commercial customers:
- Partner with an experienced energy advisor to explore options that align with your organization's risk appetite.
- Consider your contract length and locking in favorable pricing when markets dip below historical percentiles.
- Invest in demand-side management solutions to optimize consumption during peak energy price periods.
5. Looking Forward
With expected volatility in natural gas and power markets, businesses can benefit from expert guidance and forward-thinking strategies. To discuss how IGS Energy can support your team's energy needs with tailored solutions, connect with us today.