Power Markets Are Failing at Record Prices, EnergyStrat Analysis Warns

HOUSTON - Dec. 19, 2025 - PRLog -- Power markets worldwide are entering a period of structural stress in which record capacity prices are no longer delivering adequate system reliability, according to a new analysis published by EnergyStrat, an energy markets advisory firm.

The analysis examines the recent PJM Interconnection capacity auction in the United States, where prices cleared at the regulatory cap for the third consecutive year but still failed to procure sufficient capacity to meet reliability standards. EnergyStrat describes the outcome as a warning signal for power systems globally rather than a region-specific anomaly.

High Prices Are No Longer Enough

Traditionally, high prices in power markets have been expected to attract new investment and restore balance between supply and demand. EnergyStrat's analysis finds that this mechanism is increasingly ineffective.

Across regions, new generation and transmission projects face prolonged development timelines due to interconnection bottlenecks, permitting delays, rising capital costs, and public opposition. As a result, supply has become structurally inelastic, unable to respond quickly even under strong price signals.

In PJM, only limited new capacity cleared despite record pricing, and reserve margins fell below target levels. Similar dynamics are emerging in Europe, Asia, and the Middle East, where grid expansion and firm capacity additions are lagging rapid demand growth.

Market Design Meets Political Constraints

The analysis highlights growing tension between market design and political intervention. Administrative price caps and regulatory controls, while aimed at protecting consumers, often suppress the investment signals needed to attract new capacity.

EnergyStrat points to a widening "missing money" problem, where markets demand reliability but are not consistently allowed to pay for it. This challenge is becoming structural across both liberalised and regulated electricity systems.

AI-Driven Demand Is Reshaping Risk

A key driver of current stress is the changing nature of electricity demand. AI-driven data centres, electrification, and advanced manufacturing are creating large, concentrated, and highly reliability-sensitive loads that traditional planning models struggle to accommodate.

As reserve margins tighten, reliability risk is no longer theoretical. EnergyStrat concludes that elevated capacity costs and reliability risks are likely to persist through the late 2020s, pushing power markets toward hybrid models combining partial market signals, greater bilateral contracting, self-supply, and continued regulatory intervention.

The full analysis, "When Power Markets Fail at Record Prices: A Global Warning from PJM," is available on the EnergyStrat website.

About EnergyStrat
EnergyStrat provides strategic advisory and market intelligence on power market economics, reliability risk, and long-term energy planning across global markets.

Find the analysis here: https://www.energystrat.consulting/when-power-markets-fai...