US summer power markets are tightening, with PJM much tighter than ERCOT

Overview

This report tracks prices, supply-demand tightness, demand growth, and generation mix changes in US regional power markets at the start of summer. The core conclusion is that the US power market is tightening overall, but regional divergence is pronounced: PJM is tightening further amid heatwaves, data center demand growth, and supply shortfalls; ERCOT, although still seeing seasonal price increases, has been on a relatively softer path since late 2025 because of supply expansion. On policy, federal support for coal plants and delayed retirements can add some available supply, but they are not enough to fundamentally resolve the power tightness in 2026-2028 and beyond.

Core views

First, PJM month-roll price increases are significantly above historical averages, reflecting market pricing of supply-demand tightness during the summer peak; second, ERCOT's month-roll increase and price level are relatively mild, indicating marginal softness in the Texas market; third, data centers are an important driver of medium-term electricity demand growth, with notable expansion in Virginia, Texas, Ohio, and other states; fourth, the supply increment from coal policy is constrained by physical, financial, and policy factors, and is more about delaying retirements than adding large amounts of capacity; fifth, changes in the generation mix across natural gas, coal, hydro, nuclear, and wind will continue to affect thermal generation shares and regional prices.

Analysis framework

The report uses a data-tracking framework that cross-checks regional forward power price month-roll changes, effective reserve capacity, year-over-year demand growth, data center capacity changes, coal retirement plans, and generation mix. On the price side, it observes summer tightness expectations through the month-roll change in PJM and ERCOT 1-month forward contracts from late May to early June; on the supply side, it assesses available capacity using delayed coal retirements, the DOE emergency order, and generation mix changes; on the demand side, it gauges medium-term growth momentum using total power demand, commercial and industrial electricity use, data center capacity, and construction employment indicators.

Methodology notes

• Power market supply and demandForward power price month-roll analysis

  Compare the price change when the 1-month forward contract rolls from the June delivery contract to the July delivery contract.

  The month-roll increase reflects market expectations for tight summer peak power supply and demand, as well as marginal fuel costs for generation. PJM's increase is above historical averages, while ERCOT's absolute increase is below historical averages, indicating a divergence in tightness between the two markets.

• Power market supply and demandEffective reserve capacity

  Calculate reserve headroom using daily peak-hour electricity demand and monthly effective generation capacity.

  The report treats effective reserve capacity below 15% as a key tightness signal; if above 100%, it indicates a very loose market, and such points are not shown in the chart.

• Policy impact assessmentCoal retirement delay scenario

  Compare the year-over-year change in US coal power installed capacity under the July 2025 plan and the current plan.

  Delays in coal plant retirements effectively increase supply over the next few years, but further delays are constrained by aging equipment, maintenance costs, financing scale, and policy uncertainty beyond 2028.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• PJM power market

  Core beneficiary or pressure region

  Strengths

  Concentrated data center demand, strong summer price month-roll increases, and clear capacity tightness signals.

  Weaknesses

  Supply growth is slower than demand growth, and reserve capacity could fall quickly during heatwaves.

  Comparison

  Compared with ERCOT, PJM enters summer with higher price increases and tighter conditions.

  Risks

  If demand comes in below expectations, weather is mild, or new supply accelerates, tight pricing could ease.

• ERCOT power market

  Relatively loose region

  Strengths

  Supply expansion is relatively fast, and early-summer 2026 power prices remain weaker than a year earlier.

  Weaknesses

  Seasonal peaks can still trigger short-term price volatility.

  Comparison

  Compared with PJM, ERCOT has been on a softening path since late 2025, and its absolute month-roll increase is below the historical average.

  Risks

  Extreme weather, transmission constraints, or demand that exceeds expectations could push prices higher again.

• Coal-fired power assets

  Marginally policy-supported assets

  Strengths

  Federal funding and the DOE emergency order help delay some retirements and increase available supply in the short to medium term.

  Weaknesses

  Aging units, insufficient maintenance, low capital spending appetite, and long-term policy uncertainty limit incremental gains.

  Comparison

  Compared with new clean energy or natural gas generation, coal policy is more oriented toward keeping supply online and extending asset life than toward long-term expansion.

  Risks

  Policy changes after 2028, maintenance costs exceeding budget, or retirement plans that cannot be delayed further.

• Data center power demand

  Medium-term demand driver

  Strengths

  Data center capacity and construction activity continue to expand in Virginia, Texas, Ohio, and other states.

  Weaknesses

  Concentration in certain regions may intensify local grid and capacity-market pressure.

  Comparison

  Commercial sector electricity growth is stronger than other sectors and is a major contributor to total demand growth.

  Risks

  Project delays, grid interconnection constraints, efficiency improvements, or a slowdown in AI infrastructure investment could weaken demand growth.

Key data

• PJM month-roll absolute increase+28 USD/MWhMonth-roll increase from late May to early June 2026, above the 2016-2025 average of +15 USD/MWh.
• PJM month-roll percentage increase+44%Above the 2016-2025 average of +30%, and continuing the uptrend since 2020.
• ERCOT month-roll absolute increase+24 USD/MWhBelow the past decade average of +30 USD/MWh.
• ERCOT month-roll percentage increase+61%Slightly above the historical average of 56%, but the report notes that market structure differences make it not directly comparable with PJM on an absolute basis.
• PJM data center demand share39%PJM hosts about 39% of US data center power demand capacity, and demand growth continues to outpace supply growth.
• Coal power support fundsnearly USD 700 millionThe US government plans to support coal power and coal exports, mainly to delay or cancel planned coal retirements.
• TVA delayed retirement capacity4.1 GWCoal capacity in Tennessee that was originally scheduled to retire by the end of 2028 has been delayed, but the retirement plan after that remains unchanged.
• Total US power demand growthMarch 2026 YoY +2.3%Below the full-year 2025 YoY growth rate of +2.4%.
• Commercial sector electricity growthJan-Mar 2026 YoY +2.7%The report says the commercial sector remains the strongest driver of power demand growth.

Impact & implications

For investment and industry assessment, regions such as PJM with high data center exposure and insufficient supply growth may continue to face higher power prices and capacity tightness, which is favorable for companies with available generation assets, capacity market exposure, or power infrastructure investment opportunities; ERCOT, by contrast, is seeing relatively eased price pressure because of supply expansion. In the short term, coal support policy helps stabilize supply, but it is more of a tool to delay retirements and relieve extreme tightness than a core solution to the long-term supply-demand gap. Data center expansion, heatwaves, fuel prices, and the generation mix will continue to determine regional power price volatility.

Risks

• Coal policy effects fall short of expectations and fail to delay more retirements or maintain available capacity effectively.
• PJM supply growth continues to lag data center and commercial electricity demand, causing power prices and capacity tightness to exceed expectations.
• If ERCOT supply expansion comes in below expectations or extreme weather hits, the current view of looseness could reverse.
• Changes in natural gas, coal, hydro, nuclear, and wind output could alter marginal generation costs and regional price trends.
• Regulatory and policy uncertainty after 2028 could discourage maintenance, upgrades, or expansion investment in coal units.

What to watch

• PJM and ERCOT 1-month forward power prices and Calendar Year 2027 contract trends.
• Whether PJM daily peak-hour effective reserve capacity remains below 15%.
• DOE coal emergency order, the rollout progress of federal coal funding, and changes to coal retirement plans.
• New data center capacity additions and interconnection progress in Virginia, Texas, Ohio, and other states.
• Monthly YoY growth in US commercial, industrial, and total power demand.
• Relative competitiveness of natural gas and coal, thermal generation share, and YoY performance of hydro and nuclear output.