As we start off 2026, energy markets are sending clear signals that demand attention. In this blog, we break down the key drivers shaping Q1 2026 energy outlook across major markets, and what large energy buyers should be watching as the year unfolds.
The Big Picture
Key principles:
- Electricity demand continues to rise, driven by an increase in data centers, AI, and Bitcoin.
- Market design and settlement mechanics are increasing execution risk.
- Wholesale power costs are resetting higher, with forward prices trending upward.
- Natural gas supply constraints are pushing marginal generation costs upward.
Together, these 4 key points are placing pressure on power prices and capacity values.
ERCOT: Growing Capacity, Persistent Volatility
Key signals shaping ERCOT's 2025 energy outlook include:
ERCOT risk considerations heading into 2026:
- How product structures respond to sudden market spikes, rather than relying on long-run averages.
- The downstream impact of changes to market designs and pricing methods on retail pricing.
- Where concentrated load growth could amplify congestion and nodal price volatility.
Main takeaway: ERCOT may be adding capacity, but price volatility during stress events remains a huge risk for large loads.
PJM: Capacity Prices Are Resetting Higher
PJM presents a different set of risk considerations, yet remains equally important.
Key considerations include:
- How capacity charges are embedded within your energy agreements.
- Locational exposure matters, especially in high-growth zones where capacity prices scale faster.
- Poorly timed renewals can lock in higher capacity exposure, making it critical to align contracts with future capacity years.
- Flexible on-site load offers one of the few durable ways to reduce exposure to rising capacity costs.
Main takeaway: PJM's market is signaling a tightening of the supply-demand balance, and these signals are already being reflected in the 2026-2027 budget.
MISO: Decrease in Reserves, Increase in Capacity Value
Recent capacity patterns all point towards the same direction: decline in surplus, growing reliable capacity.
- MISO’s 25-26 Loss of Load Expectation study projects a summer planning reserve margin of 7.9%. Despite this being above expected, it leaves far less buffer as load growth speeds up and conventional generations continue to fall back.
- In the 2025 Planning Resource Auction, summer capacity surged to $666.50/MW-day, an increase driven by tighter reserve margins and elevated reliability risk.
- Looking ahead into Winter 25-26, ongoing seasonal readiness continues to highlight exposure to extreme cold, limited transmission, and the growing need of managing stress from gas and power systems.
MISO risk considerations heading into 2026:
- Pricing and capacity conditions within MISO vary significantly between the Northern/ Central and Southern regions.
- Winter risk remains closely linked to gas availability, specifically for facilities that rely on interruptible service or dual fuel arrangements.
- Contract design plays an important role in seasonal risk as indexed pricing can vary between winter peak periods and summer.
Main takeaway: MISO is entering a tighter market, where capacity prices increase, reserves decrease, and extreme weather conditions matter.
LōD's Recommendations for C&I Energy Buyers:
As demand continues to outpace grid buildout, energy risk in 2026 will be driven less by average prices, and more by execution, timing, and strategy.
For operators, this requires a mindset shift: treating energy as the primary strategic focus, rather than being solely hash rate focused.
To protect margins and ensure growth, leaders must adopt three core disciplines:
- Operationalize capacity: Teams must treat congestion and capacity as dynamic risks, rather than static line items. In markets like PJM and MISO, your exposure is increasingly defined by not only contract rate, but when and where you consume power.
- Validate in real-time: Leaders must bridge the gap between forward planning and reality. While day-ahead forecasts set the stage, the real value will come from validating assumptions against live grid conditions, to avoid penalties before they materialize.
- Build physical flexibility: Operators must move beyond paper hedges. On-site control and automated response are the most durable tools for navigating ERCOT-style volatility, as well as rising capacity charges.
With 2026 budgets already tightening, energy strategy can no longer stop at sourcing. Execution at the grid edge is now a fundamental requirement for protecting uptime, margins, and long term scalability. Platforms like LōD are built to bridge this gap, turning grid signals into precise, automated action when it matters the most.
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