We appeared on the Energy Central podcast this week, where we discussed the causes of rising prices, utility green plating, and that there is no easy way out of the affordability pickle we find ourselves in.
Please take a second to check it out by clicking this YouTube link. We would like to crush the competition with respect to total views, and every click counts. Thank you for your attention to this matter.
On March 3rd, JPMorgan Chase released its 16th Annual Eye on the Market Energy Paper. This year’s report, written by Michael Cembalest, is titled “Fighting Words,” and it is a 98-page analysis with hundreds of graphs and charts on the state of the energy industry.
It spans most aspects of the energy industry, but as with all things energy, much of this year’s report centers on the impact of data centers on cost and reliability. Also of note are discussions on the cost of solar and storage, conventional fuels, small modular reactors (SMRs), electricity prices, and battery storage economics.
Here are the nine takeaways we found most interesting from the study, hereafter referred to as the JPMC report.
1. The Data Center Price Debate: A PJM Deep Dive
Data center impacts on customer costs continue to dominate the headlines for electricity affordability. The JPCM report notes:
The PJM region (data center alley: VA, PA, MD, OH) has 67 GW of existing and planned data center capacity, the largest cluster in the U.S. PJM has attracted attention due to spikes in its capacity payments, which are “insurance premiums” paid to generators to commit future supply or commit to demand response reductions during peak demand. Without the cap, the recent PJM auction would have cleared at $530 per MW per day.
While capacity payments take place in wholesale markets, they’re partially flowing through to retail power prices in MD and NJ. Factors driving the spike in PJM capacity payments include retirement of thermal assets, data centers and declines in capacity accreditation for solar and storage.
The reductions in capacity accreditation for solar and storage were overdue, and the recent increase in accreditation for onshore wind seems risky to us, as MISO, which, in fairness, has much more wind capacity than PJM, has the capacity value in the mid-teens.
On a final PJM note, Cembalest seems to think data centers could end the electricity “deregulation” experiment. “Last point: some utilities within PJM are questioning whether re-regulation would be the better option (Exelon, First Energy, PPL, and PSEG); I agree with them.”
2. Data Centers Are Likely Causing Nighttime Load Growth
The JPMC report provides evidence that data centers are materially increasing electricity demand at night, which also happens to be the period when the sun doesn’t shine.
Nighttime loads have increased in Virginia and ERCOT since 2023. Nighttime loads are less influenced by industrial production or population. The increase in nighttime loads in data-center-heavy areas such as the Northern Virginia Dominion Zone and ERCOT suggests these facilities are driving evening demand, as JPMC notes, electric vehicles are not drawing enough power to be significant drivers of demand yet.
Cembalest writes “Nighttime load can be viewed as positive as it represents consistent load that allows utilities to monetize capital deployed assets and does not put additional strain during peak hours; but it’s another sign of rising data center demand.”
3. Specialized Data Center Power Rates Can’t Afford Solar and Storage
The JPMC report notes seven states have passed or proposed measures to apply higher electricity rates to data centers to account for price impacts on generation, transmission, and distribution costs, and require mandatory participation in curtailment programs under certain conditions.
Despite these efforts, these higher data center electricity rates may not be high enough to completely offset their costs and insulate other ratepayers. Wood Mackenzie published a 2025 report concluding that new specialized rates for data centers may not be high enough to cover the costs of the new generation.
The graph below shows base electricity costs and specialized data center rates from various electric utilities, compared with the cost of new generation for combined-cycle natural gas and solar plus battery storage.
As you can see, some of the specialized rates imposed by various utilities would be able to pay for a combined cycle gas plant, but none of them are high enough to pay for a solar plus battery storage facility.
This is particularly true because solar power purchase agreement (PPA) costs keep rising. The JPMC report notes that solar PPA costs, which are subsidized, are over $60 per MWh, a stunning increase from the sub-$30 per MWh deals that were being signed in 2019 and 2020.
It is increasingly looking like the rush to build solar and storage in the United States may go down as one of the largest misallocations of capital in our nation’s history. Data centers are increasing power demand at night, when solar and storage simply can’t do the job, and they are more expensive than dispatchable, non-energy duration-limited alternatives. We’ll be writing more about this dynamic in the near future.
4. The People Want Lots of Gas Turbines
Demand for gas turbines now exceeds the current global production capacity through 2030. After years of soft demand for natural gas turbines, it appears gas is back in a big way, which is unsurprising given the cost of gas compared to solar and storage.
Cembalest writes, “Three companies each have 20 to 25 percent of the global turbine market share: GE Vernova, Siemens, and Mitsubishi, and each is planning to expand production. Mitsubishi plans to double production capacity within two years; GE Vernova will ramp annual output from 16 GW in 2023/2024 to 22 GW later this year and to 26 GW by mid-2028; and Siemens Energy is investing $1 billion in US manufacturing, lifting its large turbine production capacity by ~20 percent.”
It remains unclear if this will be enough to clear backlogs as demand is simultaneously increasing.
5. Nameplate Capacity is Not Always Reliable Capacity
Electricity demand rose 2-4 percent annually from 1950 through 2006. While grid planners managed to keep pace with this increase, this was a time when fuel-based resources made up a majority of all resource additions.
Unfortunately, this isn’t the case anymore. Even though the U.S. is building more new capacity annually than ever before, it’s not equating to reliable, firm capacity because new capacity builds are increasingly made up of intermittent wind and solar resources, while coal, natural gas, and nuclear additions have fallen to roughly 10 percent of new additions.
As Cembalest notes:
Whether the same pace can be maintained today is another question, particularly given shortages of skilled energy labor, shortages of transformers, breakers and other equipment and tariffs on grid equipment which do not benefit from the kind of exclusions granted to semiconductors and computers. As shown in the second chart, new US power capacity looks like it’s surging but is a lot more gradual after adjusting for reliability and intermittency (i.e., derating of solar and wind). In other words, not all megawatts are created equal.
We described the same trend in a recent piece, Watt, Me Worry?, where we add-on the fact that not only are reliable generators making up less of the share of new capacity additions, but that these additions aren’t keeping up with retirements. The result is that “the U.S. is now at pre-2005 levels of firm capacity on the grid at a time when electricity demand is projected to have the largest increases in over a decade due to data center and AI growth and electrification efforts.”
6. The Economics of Small Modular Reactors (SMR)
There is plenty of optimism for SMR technologies to mature into affordable options for the grid, and investors continue to express this optimism with their wallets. SMR stocks have stabilized and annual venture funding remains high.
However, as Cembalest notes, investor optimism doesn’t mean cost-effective, and “burden of proof for economic viability still lay with the SMR industry.”
We stress the fact that any decarbonization campaign is an expensive one, whether using renewable or nuclear technologies. In the case of nuclear, this is because of the incredibly high up-front capital cost to build nuclear power plants.
As noted in the report, “A 2025 paper from the former chair of the US Nuclear Regulatory Commission reviewed four SMR types and estimated SMR levelized costs of $200 to $400 per MWh,” and that these surpass that of Light Water Reactors (LWRs) due to diseconomies of scale. Cembalest includes a Tennessee Valley Authority (TVA) analysis of a “first of its kind SMR,” resulting in a price of $196 per MWh—over 50% higher than Cembalest’s upper limit of what he considers “affordable” of $130 per MWh.
7. Blue States High Rates (And Others)
Cembalest also describes several factors that are correlated with higher electricity prices, including the fact that “Democratic states have higher power prices.” Our readers will know that we have noted the same thing.
The remaining four factors include:
Deregulated states have higher prices than regulated states, which surpassed regulated states in 2022.
States with more nuclear and hydro have lower prices.
Wealthier regions have higher prices.
Regions that rank low in business friendliness have higher prices.
8. Correcting EMBER’s Baseload Solar Analysis
Our readers will remember that Ember, a pro-wind and solar think tank, published an analysis last year claiming that “baseload” solar was now competitive globally with other forms of generation.
Cembalest is very direct in his criticism of EMBER’s report, concluding that “our analysis mostly rejects EMBER’s thesis and finds that their report understates the economic tradeoffs of deeply decarbonized solar + storage systems in cities like Las Vegas.”
Cembalest notes: “On this kind of topic, stick to peer-reviewed pieces in publications like Joule. EMBER’s article is more a reflection of the world the authors want to exist rather than the world as it really is.”
We actually spoke with Cembalest and his team about Ember’s analysis after we published our article, The “Baseload” Solar Beatdownand our findings were very much aligned, with JMP estimating the cost of 90 percent solar 10 percent gas around $210 per MWh, compared to our estimate of $193 per MWh.
On a final note, the JPMC report examines what would have to happen for solar and storage costs to actually fall below natural gas. Here’s what they found:
What would it take for the unsubsidized cost curve to be flatter, implying a more even economic tradeoff between an all-gas system and the max penetration solar+storage system? Something like this: gas prices rise to $8 per mmbtu, AND solar capital and operating costs fall by 70%, AND 4-hour storage capital costs fall by 70%. While learning curves have been steep, $335 per kW for solar and $68 per kWh for storage seem a long way off, at least in the US. The impact of US tariffs raises the uncertainty further.
ERCOT’s batteries are starting to resemble the Donner Party—more capacity is flooding the market and cannibalizing the buy-low/sell-high spreads that made storage profitable in the first place.
As the JPMC report notes: “2025 was a bad year for battery revenues. The reason: 9 GW of new battery capacity in ERCOT saturated Ancillary Services and pushed storage into diurnal energy market competition, compressing spreads across the grid and increasing storage capacity by 70x since 2020.”
Falling arbitrage revenue could eventually reduce the incentive for new entrants to the market, and leave the ERCOT region short of juice when it is needed most.
As we have noted previously, ERCOT is in a precarious reliability situation because the system has added no dispatchable resources, on net, since 2004, largely because subsidized wind and solar have driven down wholesale power prices to the point where natural gas investments don’t pencil out.
Battery storage capacity in ERCOT has skyrocketed, from virtually no storage in 2021 to over 12,000 megawatts in 2025. But there is a problem: solar and storage do a pretty good job of meeting summer peak demand, but short-duration storage is entirely unequipped to handle winter storms.
Texas continues to gamble with its grid.
Conclusion
There is a lot to digest in the report, but there is no doubt that data centers have entirely reshaped the contours of the energy debate in just 18 months. Gone is the primary focus on decarbonization, and back in vogue is the need for reliable, dispatchable power at a price people and industries can afford.
We notched a nice shoutout from the Ayotte administration in New Hampshire this week when they cited our report as the basis of their support for nuclear power:
In her State of the State address in February, Ayotte billed new nuclear generation as a forward-looking way to address the high energy costs faced by New Hampshire residents. New Hampshire is not a stranger to nuclear power: More than half of the energy generated in the state already comes from Seabrook Station.
Thanks to Seabrook, New Hampshire already generates more power than it consumes. In her executive order, Ayotte writes that increasing the share of nuclear power on the regional grid would lower rates more effectively than increasing reliance on renewable energy sources.
According to a spokesperson for the governor’s office, that conclusion is based on a 2026 report by consultant Always On Energy Research, released by a group of New England free market think tanks including the Josiah Bartlett Center for Public Policy, Americans for Prosperity Foundation, the Maine Policy Institute, and others.
The report concludes that increasing generation with a mixture of nuclear and gas generation would ultimately reduce costs for ratepayers.
Not sure the cost of the land mass it takes for wind & solar & loss of that land for other uses factors in. Additionally these land masses are typically far away from the end users
Not sure the cost of the land mass it takes for wind & solar & loss of that land for other uses factors in. Additionally these land masses are typically far away from the end users
"ERCOT’s batteries are starting to resemble the Donner Party." Love it! 😂