2025 was a year of sharp contrasts in energy markets. Record LNG exports met declining crude prices. Capacity markets tightened in some regions while reforms dampened price signals in others. Offshore wind projects were halted at the federal level even as New York advanced pipeline infrastructure and embraced a more balanced energy strategy.
At the same time, affordability moved to the center of political and regulatory conversations nationwide. From PJM’s record capacity prices to Con Edison’s scaled-back rate case, the pressure to deliver reliable power at a reasonable cost is shaping market structure, policy decisions, and long-term investment.
Below is our review of the key developments that defined 2025, along with our outlook for 2026 and the forces most likely to drive volatility, opportunity, and risk in the year ahead.
NATIONAL ENERGY MARKET TRENDS
1. Increased LNG exports: The U.S. set a new monthly LNG export record five times during 2025, seeing substantial growth in both monthly export quantities and total export capacity. Additional facilities will continue to come online over the next three years, bringing export capacity to 28.7 Bcf/day in 2029, compared to current daily values of around 19 Bcf/day. The current natural gas forward market consensus believes additional supply quantities will adequately meet increased demand, resulting in a backwardated forward curve for natural gas. Given the massive increase in export capacity and no changes to natural gas storage capacity, we see a significant risk of increasing natural gas price volatility, driven not only by domestic North American demand and weather patterns, but by increasing influence from European weather patterns and macro-economic and geopolitical factors.
www.reuters.com/business/energy/us-sets-new-lng-export-records...
www.eia.gov/todayinenergy/66384
2. Declining Crude Oil Prices: Crude oil prices (WTI in the U.S. and Brent in Europe) continued their downward trend in 2025, reaching their lowest annual average price since 2020. Current forward prices for West Texas Intermediate (WTI) are near or below $57. Given the recent events in Venezuela, the largest oil reserves of any country at over 300 billion barrels, any increase in capital expenditures to increase production would only put additional bearish pressure on oil prices. As it relates to natural gas and power prices, the Permian Basin in West Texas is the largest oil-producing play in the U.S., and the only major growth region in natural gas production, most of which is associated gas derived from oil production. If a continued drop in crude oil prices lowers production in West Texas, this could further tighten natural gas markets.
www.eia.gov/todayinenergy/66944
3. Shifts in Capacity Markets Across the Country: In the 2025–2029 demand curve reset, NYISO endorsed using a 2-hour lithium-ion battery energy storage system (BESS) as the reference peaking source underlying the demand curve – the technology used to shape the curve and estimate the cost of new entry (CONE). Because a 2-hour BESS generally has lower fixed costs than a traditional simple-cycle combustion turbine (CT), using the 2-hour battery reduces the “cost of new entry” signal embedded in the demand curve, which has lowered near-term capacity clearing prices relative to a curve that is based on the cost of a CT asset.
This change in NYISO is happening alongside a broader wave of capacity market reforms in neighboring ISOs. MISO implemented a reliability-based demand curve in early 2025, and ISO-NE has an active Capacity Auction Reform initiative under development for filing with FERC. Meanwhile, PJM’s recent capacity auctions have produced record-high prices in the region ($270/MW-day for 2025-26 and later auctions reaching the $325/MW-day cap), reflecting tightening supply and demand and rapid load growth pressures.
www.nyiso.com/documents/20142/46865072
www.nyiso.com/documents/20142/47366127
www.reuters.com/prices-biggest-us-power-grid-auction-hit-new-record...
4. Generation Owner Consolidation: 2025 saw a significant increase in M&A activity among power generation companies. The largest transaction was Constellation’s purchase of Calpine for $26B. Constellation is the nation’s largest generation owner, and Calpine is the largest operator of natural gas-fired generation. Vistra Energy also announced two acquisitions, the first was a $1.9B purchase of 2,600 MW of generation capacity from Lotus completed in October. The second was announced in late December, the $4.7B purchase from Cogentrix of 5,500 MW of natural gas-fired assets in the PJM, New England, and Texas markets. Lastly, NRG Energy acquired 18 natural gas power plants totaling 13GW for $12B from LS Power. This trend reflects the increased value placed on deployable generation assets in these deregulated markets. These transactions could be taken as a bullish indicator of future prices.
www.spglobal.com/constellation-shares-soar...
www.utilitydive.com/ferc-nrg-ls-power-gas-fired...
5. Energy Affordability Emerges as a Central Political Issue in 2025: Multiple, major statewide elections signaled a broader voter shift toward cost-of-living concerns. In Virginia, Abigail Spanberger’s successful gubernatorial campaign highlighted electricity and energy costs as key issues, emphasizing fairness in cost allocation and relief from rising utility bills. Similarly, in New Jersey, Mikie Sherrill centered her campaign on addressing higher energy prices, proposing aggressive state action to curb rate increases and accelerate cost-reducing clean energy investments. Across both races, voter sentiment showed that energy costs rivaled traditional ideological issues, underscoring that affordability had become a decisive factor in electoral outcomes and a central driver of energy policy discussions heading into 2026. As discussed below, energy affordability remains a key issue in New York State as well.
www.phillyvoice.com/new-jersey-democrats-energy-costs...
FEDERAL POLICY AND REGULATORY SHIFTS
6. Department of Interior Halts to Offshore Wind Projects: On December 22, 2025, the Department of the Interior ordered the immediate pause of all large-scale offshore wind projects under construction in the United States. The order was based on a finding that such projects constitute ‘national security risks.’ This halted 5 projects: Vineyard Wind 1 (806 MW, MA), Revolution Wind (794 MW, RI), Coastal Virginia (2,600 MW, VA), Sunrise Wind (924 MW, NY), and Empire Wind 1&2 (1,200 MW, NY). The most immediate impact of this action is on the Coastal Virginia project and Virginia's renewable energy goals. The project’s developer, Dominion Energy, a regulated utility, has spent $8.9 billion on the project to date and estimates delay costs $5M per day. In addition, Virginia was looking to this project to provide an annual 9.5 million MWh of clean power, needed to meet its renewable goals. If Dominion is required to purchase 9.5 million RECs to replace Coastal Virginia (current REC prices are $26 MWh), it would cost Virginia's consumers $250 million per year. The delay in the other projects will cause a material reduction in needed emission-free generation. However, unlike Virginia, the cost of the other projects is borne by the developers, not the ratepayers. Legal proceedings to address the validity of this stoppage are ongoing, with key court hearings scheduled to be held in mid-January 2026.
www.utilitydive.com/trump-halts-offshore-wind-projects-interior
www.doi.gov/pressreleases/trump-administration-protects-us-national-security...
7. Department of Energy Halts Retirement of Fossil Fuel Plants: In May, the Department of Energy (DOE) asserted its right under Section 202(c) of the Federal Power Act to order certain fossil fuel generation facilities that were scheduled to retire to keep operating. DOE maintains that its action is needed because of a shortage in generation supply. There is a growing list of fossil fuel plants operating under Section 202(c) orders. The current list of plants includes: Campbell (1,420MW, coal, MI), Eddystone (760 MW, oil/gas, PA), Wagner (397 MW, oil/gas, MD), Craig (464 MW, coal, CO), Centralia (730 MW, coal, WA), Culley (104 MW, coal, IN), and Schahfer (847 MW, coal, IN).
Historically, this provision of the Federal Power Act was only used in times of war or similar emergencies, such as when a hurricane or extreme cold threatened supply. It was also done in conjunction with state regulators. In this instance, DOE is using 202 (c) to compel the continued operation of old fossil fuel plants against the objection of state regulators that typically control interstate generation assets. Various states and other groups have challenged the DOE’s action in court.
www.statepowerproject.org/challenges-to-doe-202c-orders
8. FERC Asserts Control: FERC, under the direction of the Department of Energy, is asserting its right to implement policies that will expedite the interconnection of large data center loads. These efforts are consistent with the President’s executive orders focused on winning the AI race; “Winning the AI Race: America’s AI Action Plan” issued on July 23, 2025, and Executive Order 14179, “Removing Barriers to American Leadership in Artificial Intelligence,” issued on January 23, 2025. In October, at DOE’s direction, FERC issued an Advance Notice of Proposed Rulemaking (ANOPR). The ANOPR identifies a legal framework for FERC to assert control over large load interconnections. The rulemaking proposes various policies designed to standardize and expedite the interconnection of large loads, including loads that are co-located with new or existing generation. The DOE requires FERC to take final action on this proposal by April 30, 2026. This is a very aggressive timetable. We expect that FERC’s effort to assert this broad authority will be challenged by various states and other interest groups.
2026 OUTLOOK
Given the trends of the past 12 months, it is difficult to see some of these themes not continuing to drive conversations and thoughts in 2026. This is particularly important during a mid-term election year. Solving the problem associated with the goal to “win the AI race” versus the power and gas demands of data centers will likely continue to play out in market regulations, and regulatory uncertainty will drive increased volatility in electricity prices. It is possible that regulations that drive down capacity prices in PJM and surrounding ISOs could put additional upward pressure on wholesale power prices, as the risk assumed by generators must be incorporated somewhere.
Crude oil prices seem most likely to continue to loosen, given current geopolitical trends, with OPEC likely needing to reverse trends before that market can recover. Until then, softening crude prices are not likely to support gas or power markets and are more likely to be slightly bullish than bearish. The reason for this is lower oil production reduces the production of associated natural gas. Despite U.S. efforts to ramp up oil production in Venezuela, we do not expect any material near-term changes in the oil market.
Global LNG prices could continue to be under pressure with supply increasing faster than demand. This could put downward pressure on domestic natural gas prices; however, low LNG prices could also impact future LNG projects as they struggle to reach the Final Investment Decision phase. Material delays in such projects could be bullish to LNG prices.
We feel it is likely that a solution will be reached on the DOI offshore wind halt, although the delay will materially increase the cost of these projects. New project announcements are extremely unlikely, and there is increased risk that projects in early stages of development will be cancelled.
Solar and Battery installations will still be the largest increase in generation capacity in 2026, as the technology will remain the quickest to market and the lowest CONE in most U.S. markets.
In deregulated markets, regulators facing pressure on energy prices will continue to explore different ways to incentivize new generation, including allowing regulated utilities or state agencies to develop power projects. The legal and regulatory challenges to such efforts will be significant. For the states that have already made the decision to deregulate, we feel the risks of state-owned or controlled generation (political and economic) outweigh any possible gains.
TURNING OUTLOOK INTO ACTION
The common thread across these developments is clear: reliability and affordability are now inseparable from energy transition goals. In deregulated markets, especially, policy shifts and market design changes will continue to influence pricing signals, investment decisions, and risk allocation. As 2026 unfolds, stakeholders who understand both the regulatory landscape and the market fundamentals will be best positioned to navigate volatility and identify opportunity.
