At the recent Retail Energy Conference ( Energy Marketing Conferences ), Panel 1: "Wholesale Meets Retail" featured Gustav Beerel , Joel Glassman , R. Scott Helm, Michael Salinas Jeffrey Levin , and Mike Smith , who discussed the collision of wholesale and retail markets in an era of energy transition and soaring demand. The panel unpacked the challenges posed by capacity shortages, delayed interconnection of renewables, and rising costs—all of which have left retailers struggling to manage risk and educate consumers.
The Pressure is Building: Capacity Constraints and Delays
Gustav Beerel from Customized Energy Solutions painted a sobering picture of how capacity prices in PJM have surged to unprecedented levels, clearing at over $100,000 per megawatt—nearly ten times what they were in previous years. This sharp rise stems from planned fossil fuel plant retirements and delays in renewable energy projects waiting in interconnection queues.
“There’s almost double the peak load of generation waiting to be interconnected, but 97% of that is wind and solar,” Beerel noted. Yet, the structural challenges in PJM are creating a situation where consumers are shouldering $14 billion in extra costs.
Interconnection bottlenecks are a key issue here, as it can take years for new renewable projects to connect to the grid. Similar issues are being observed elsewhere, like Minnesota, where a coal plant is being replaced by solar but faces delays due to interconnection timelines. This echoes the broader struggles across the U.S. energy landscape, as referenced in a recent CNN article, where delays in interconnections are holding back clean energy projects, slowing down the energy transition, and exacerbating capacity shortages.
Retail suppliers, caught in the middle, will feel the heat. As Joel Glassman of Catalyst Power pointed out, the increase in capacity prices will likely lead to retail price hikes of 2 to 3 cents per kilowatt-hour. This rise will strain already thin profit margins. “That’s more than most retailers' profit margins,” Glassman emphasized. “Retailers will need to manage cash flow very carefully to survive this transition.”
The High-Stakes Game: Musical Chairs in Energy Markets
With energy demand outpacing supply, particularly given the slow deployment of new renewable projects, the situation is starting to resemble a high-stakes game of musical chairs—and when the music stops, not everyone will have a seat. Retailers are particularly vulnerable, exposed to price volatility while also needing to communicate the reality of these price increases to customers.
“If retailers aren’t educating their customers now, they’re going to be in trouble,” emphasized Scott Helm of American PowerNet. “Most consumers don’t understand how capacity markets work or how these price hikes are going to affect their bills. By the time the price spikes hit, it will be too late.”
Jeff Levin highlighted the growing unpredictability of weather-related events, adding another layer of complexity. “We’ve gone from once-in-100-year events to once-in-100-day events,” Levin noted. He stressed the need for retailers to adopt strategies that can withstand the increased volatility.
Storage Isn’t a Silver Bullet: The Role of Energy Storage
Energy storage is often cited as a potential solution for energy market volatility, but Michael Salinas of Engie Energy Marketing cautioned that while storage is growing, it is far from solving the broader capacity issues. “We’re adding about 10 gigawatts of energy storage in ERCOT and California over the next few years, but that’s just 10% of peak load,” Salinas explained. “Batteries can help mitigate some of the volatility, but they aren’t a perfect hedge against rising capacity prices.”
Conclusion: Who Will Be Left Standing?
Between rising demand, delayed renewable generation, capacity constraints, and price volatility, the energy market is facing unprecedented pressure. Retail suppliers are in a precarious position, and the key to surviving this energy crunch is a combination of education, risk management, and forward-thinking strategy.
The market is starting to look like a game of musical chairs—and when the music stops, someone will inevitably be left paying the bill.
Comments