Blog — Sept. 10, 2025
The Future of Energy: Balancing Reliability and Rising Costs
By Steve Piper
Explore the key insights from the Energy transition crosscurrents: The pivot to reliability confronts growing costs webinar. Based on the latest quarterly S&P Global Market Indicative Power Forecast findings, this webinar review the challenges and opportunities in the evolving energy landscape, including rising capital costs, demand forecasts, and the shift towards renewable energy.
1. Power demand surges as data centers drive US electricity growth
Demand forecasts are updated quarterly, with significant increases expected by 2040. US electricity demand is projected to increase by 11% by 2035, with data centers playing a crucial role. MISO anticipates a 17% increase in demand, reaching 158 gigawatts by 2040, driven by data center loads, electric vehicle adoption, and industrial development. In ERCOT, data center loads alone are expected to account for 30% of the total demand increase. This growth highlights the need for reliable energy sources to meet future demand.
2. Rising capital costs challenge energy generation projects
Capital costs for energy generation are rising, particularly for gas turbines. In the first half of 2025, US gas turbine orders totaled 17.8 GW, surpassing the 14 GW ordered in all of 2024. According to the presentation, combustion turbine costs are projected to reach $3,000 per megawatt in 2030, up from $1,100 in 2025. This trend reflects increasing economic pressures on energy providers. Forecasts indicate that capital costs for natural gas generation are under pressure due to high merchant risks and low spark spreads, potentially impacting the financial viability of new projects.
3. The Shift Away from Gas in Capacity and Generation Mix
The Q2 S&P Global Market Indicative Forecast shows a notable shift toward battery storage, accompanied by a decrease in new gas capacity. Battery storage is emerging as a viable alternative to gas turbines, as costs decline due to technological advancements. Despite tariffs on Chinese lithium, battery storage technology costs have continued to fall, driven by improvements and economies of scale.
4. Capacity Market Dynamics
PJM's recent auction cleared at $329 per megawatt-day. Between the 2024–25 and 2025–26 auctions, PJM implemented its new effective load carrying capability (ELCC) accreditation. Despite these capacity credit changes, only 426 more megawatts cleared in this auction than previously. The changes to the capacity market may not sufficiently incentivize new builds, while also increasing costs for customers. This situation is aggravated by a compressed timeline, as PJM plans to return to a three-year forward market.
5. Corporate Clean Energy Deals - No signs of slowing
Between February and July 2025, approximately 11.5 gigawatts of clean energy deals were signed in the US by nonutility offtakers, with more than 10 gigawatts sourced from wind and solar projects. This trend underscores the continued dominance of renewables in corporate energy procurement, with the tech industry accounting for nearly 80% of these deals. Overall, about 90 gigawatts of clean energy deals have been signed by the tech sector, representing approximately 68% of total corporate clean energy capacity in the US, up from 60% three years ago.
Conclusion
Based on the Q2 2025 S&P Global Market Indicative Power Forecast, a reduced geographic footprint for new gas projects is expected. Energy storage is expected to compete with gas turbines as a reliability resource, driven by its declining cost profile. Retail customers will need to respond to elevated power prices, which may remain insufficient to incentivize new development. As hyperscalers increasingly explore firm, zero-carbon options, more nontraditional corporate deals involving geothermal, nuclear, and hydropower projects are likely to emerge.
By leveraging the S&P Global Market Indicative Power Forecast, energy providers can gain the clarity and foresight needed to navigate evolving market dynamics. S&P Global solutions offer comprehensive insights into market trends, enabling stakeholders to make informed decisions and optimize energy strategies.
Disclaimer: This content may be created with the assistance of an artificial intelligence (AI) tool. While the AI tool may provide suggestions and insights, the final content was composed, reviewed, edited, and approved by a human at S&P Global. As such, S&P Global claims full copyright ownership of this AI-assisted content, in accordance with applicable laws and regulations.
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