What’s Shaping the Energy Market in August 2025

As grid reliability, extreme weather, and AI-powered demand reshape the landscape, energy suppliers are under pressure to not only keep pace but stay ahead.

From PJM’s latest capacity auction results to new emergency orders and storage policy developments, August delivered a wave of regulatory and operational updates worth tracking. Let’s unpack the headlines and what they mean for your business.

PJM Capacity Auction Results Signal Higher Costs and Higher Stakes

Back in July, PJM Interconnection released the results of its 2026/2027 capacity auction, which cleared at $329.17/MW-day—a 22% increase over the previous auction. While not as dramatic as last year’s 800% price spike, the new price could translate to 1.5% to 5% bill increases for some ratepayers, depending on their state.

Key drivers include:

• Rising electricity demand, largely from AI data centers
• A capped price (thanks to an agreement with PA Gov. Josh Shapiro) that kept the auction below the uncapped forecast of $389/MW-day

PJM secured 134,311 MW in capacity, which is enough to meet demand with an 18.9% reserve margin, fueled by:

• 45% gas-fired generation
• 22% coal
• 21% nuclear
• 4% hydro
• 3% wind
• 1% solar

Notably, Constellation and Vistra increased their cleared capacity year-over-year, reflecting how large power producers are benefiting from the auction structure.

Why It Matters for Suppliers

If you’re building your forward-looking retail energy pricing strategy, these rising capacity costs and their potential to drive up retail bills must be factored into your models. Aligning your hedging, forecasting, and margin strategies with capacity auction cycles is more important than ever.

DOE Issues Emergency Orders to Keep Retiring Plants Running

As temperatures across the eastern U.S. soared, DOE invoked Section 202(c) of the Federal Power Act to keep key plants online past their planned retirement dates.

Emergency Orders Issued:

• Talen Energy’s H.A. Wagner Unit 4 (400 MW) — Extended through Oct. 26, 2025, with potential to run through year-end
• Constellation Energy’s Eddystone Units 3 & 4 (760 MW total) — Operating through Aug. 28, 2025, only when called upon by PJM

Section 202(c) has now been used 18 times since 2020, a reflection of tightening grid conditions and the reality that even inefficient or high-emission plants remain critical in peak periods.

What Energy Companies Should Watch

While these units run a small fraction of the time, their availability under emergency orders reflects a key trend: grid resilience is taking precedence over environmental targets, at least temporarily.

If you’re involved in resource planning or compliance, understanding how emergency operations affect emissions reporting, capacity availability, and market pricing will be essential for both regulatory and financial forecasting.

NY Launches a Novel Energy Storage Incentive

On July 28, New York Governor Kathy Hochul and NYSERDA announced a Bulk Energy Storage RFP that leverages a new Index Storage Credit (ISC) mechanism.

How It Works:

• The ISC is modeled after RECs and ORECs but applies to energy storage.
• It compensates projects based on operational availability—not just capacity.
  
  
• Storage operators are incentivized to participate in energy and capacity markets while securing long-term contracts (15–25 years).
  
  

Key Deadline:

• Step One Eligibility Applications are due by Sept. 4, 2025, for load-serving entities and other proposers.

What Suppliers Should Know

For suppliers participating in NYISO or looking to enhance their renewable offerings, the ISC offers revenue certainty for dispatchable storage assets, a critical component as intermittent renewables grow. Expect similar frameworks to emerge in other states as storage becomes a more mainstream reliability resource.

AI, Data Centers, and the Capacity Challenge Ahead

The POWWR team recently attended the NARUC Summer Policy Summit in Boston, where federal and state regulators convened to discuss infrastructure and policy.

One theme rose above the rest: The AI boom is reshaping demand forecasts and infrastructure needs.

As Peter Lake from the National Energy Dominance Council shared, supporting AI-enabled data centers isn’t just about supplying power but about designing infrastructure that can handle unpredictable, large-scale loads while keeping rates reasonable for all customers.

For energy suppliers, this presents both a challenge and an opportunity:

• Challenge: How do you plan for unpredictable, high-intensity loads without overcommitting resources?
• Opportunity: Can you develop flexible pricing or risk products to serve this growing customer segment?

Strategic Takeaways for Energy Suppliers

The story this month isn’t just about auctions and policy, but about a rapidly evolving grid. Here’s what energy suppliers should keep in mind:

• Factor higher capacity costs into long-term pricing models and customer contracts.
• Watch DOE emergency actions. They signal shifting priorities and may influence future compliance.
• Evaluate participation in new programs like New York’s ISC if storage is part of your strategy.
• Anticipate AI and data center load growth, and consider how your business can respond to emerging infrastructure gaps.

Stay Informed. Stay Competitive.

In an industry where regulation, reliability, and innovation are converging, staying ahead of policy shifts is key to protecting your margins and powering smarter decisions.

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