IGS Expert Shares Insights for the Retail Industry
The following article recently published in Total Retail. You can access the original article on the magazine's website here.
For more insights from IGS Energy, visit our Energy Resource Center.
Rethink Your Energy Strategy to Reduce Risk and Protect Profitability Heading Into 2026
As the price of power climbs across much of the U.S., you can view your business's energy spend as an operational headache or as a competitive advantage.
As retailers gear up for the critical end-of-year shopping season, a perfect storm of energy market volatility is brewing. Recent PJM capacity auctions hit record highs at $329.17/MW-day for 2026–2027, signaling dramatically higher electricity costs on the horizon for commercial users. For retailers operating on thin margins, this isn't just another budget line item to manage; it's a direct threat to profitability that demands immediate strategic action.
The Energy Risk Reality: Why Retailers Can't Afford to Wait
Rising power costs are crushing retail margins at the worst possible time. With Q4 representing up to 40 percent of annual revenue for many retailers, unpredictable utility bills for stores and distribution centers can create budget chaos. Refrigeration costs for perishables are spiking just as holiday inventory peaks, while supply chain disruptions triggered by economic volatility are compounding an already complex operational landscape.
Why is the cost of electricity on the rise? Three macro trends are driving costs higher:
- Surging demand from electrification: Data centers and other electrification efforts (e.g., EV charging) are consuming unprecedented amounts of power.
- Shrinking supply capacity: Power plant retirements and supply chain constraints are reducing available generation.
- Extreme weather unpredictability: Heat waves and storms add another layer of risk.
Strategic Actions to Secure Your Energy Future
The most successful retailers won't just react to energy volatility, they'll anticipate and plan accordingly. Here are the high-impact strategies smart operators are implementing before 2026:
1. Lock in stability before volatility peaks.
Choosing the right contract for your business's risk appetite should be your first line of defense. With capacity auctions signaling higher costs ahead, securing stable pricing through an all-in rate contract can help protect against future spikes. A capacity adjustment contract helps maximize current market opportunities to plan for long-term price certainty with low risk.
It's critical to have an in-depth discussion now with your energy partner, as understanding how to prepare can help businesses stay ahead of the curve and better manage costs now and in the future.
2. Turn peak demand into profit opportunities.
Demand response programs reward businesses for strategic energy usage shifts. These programs pay retailers to reduce or shift consumption during peak hours, turning operational flexibility into revenue streams. For retailers unable to shift usage patterns, efficiency upgrades like LED lighting and smart HVAC controls deliver long-term savings that compound over time.
3. Leverage advanced energy analytics.
Data-driven energy management transforms cost centers into profit centers. Modern energy analytics platforms help retailers identify usage patterns, predict costs, and optimize consumption across their entire footprint. This visibility enables proactive decision-making rather than reactive bill-paying.
4. Integrate energy strategy with supply chain continuity.
Weather-related disruptions require aligned energy and disaster preparedness strategies. Retailers that integrate energy planning with supply chain continuity planning can maintain operations while competitors struggle with outages and emergency power costs.
5. Partner with an energy expert.
Working with experienced energy advisors provides access to market intelligence and strategic guidance that internal teams often lack. These partnerships help retailers navigate complex energy markets, secure favorable contracts, and implement comprehensive risk management strategies before volatility peaks.
Your Competitive Advantage Starts Now
The energy landscape is shifting rapidly, and retailers that act decisively will be stronger. Having the right energy strategy in place ensures a sustainable and cost-effective path forward for Q4 as well as to anticipate the challenging market conditions ahead in 2026 and beyond.