Electricity markets used to be predictable. In 2025, they’re anything but.
Coal is enjoying a revival, natural gas generation is down, and renewables are forging ahead despite political headwinds. Some of that is driven by annual idiosyncrasies like weather, which increased electricity demand this year, and President Donald Trump’s dismantling of environmental regulations and the Inflation Reduction Act.
But most of the market’s upheaval is due to wider economic trends that burst into full view this year — namely, the growth in U.S. exports of liquefied natural gas and rising electricity demand from data centers.
“I feel like we’re at the edge of the storm,” said Ric O’Connell, the executive director of the consulting firm GridLab. “The storm is the load growth that is showing up in the next couple of years. The IRA is going away, and gas prices are potentially going to spike. The next couple of years could be messy.”
The trends mark a fundamental shift from the previous decade, which was defined by stagnant power demand, low natural gas prices, coal plant retirements and a wave of renewable installations.
Firing up coal
Coal generation was up 13 percent through the end of September compared with the same time last year, according to U.S. Energy Information Administration data. Part of the increase is due to a cold winter and hot summer, said Andy Blumenfeld, an analyst who tracks coal markets at the consulting company McCloskey by OPIS.
But high natural gas prices and growing demand for electricity are playing a bigger role in stoking demand for coal. Last year, natural gas prices averaged $2.20 per million British thermal units, while this year they are on track to average $3.50 per MMBtu. Next year, gas prices are expected to increase to an average $4 per MMBtu, according to EIA.
When utilities see gas prices like that, they tend to fire up coal.
Coal has enjoyed mini-revivals before, most recently in 2022. What makes this year different is that coal’s rebound is playing out at a time when the U.S. is shipping more gas abroad while demand for power grows at home.
American LNG shipments are expected to increase 25 percent this year, putting upward pressure on domestic natural gas prices.
“LNG is tying us more to global markets that pay more than we do for gas,” said Joshua Rhodes, a research scientist at the University of Texas, Austin. “That has to put more upward pressure on gas.”
Power-hungry AI
At the same time, technology companies and data center developers are hoovering up all the megawatts they can find.
Analysts predict the artificial intelligence boom will need 106 gigawatts of power by 2035, drastically driving up U.S. energy demand. Electricity demand nationwide was up 2 percent through the first nine months of the year, according to EIA data.
All that is a recipe for generating electricity from coal plants that once sat idle. In 2023 and 2024, coal plants ran at 42 percent of their capacity. This year, they are running at almost half capacity.
Growing electricity demand has been “good news” for coal plant operators, Blumenfeld said.
“Coal is low-hanging fruit,” he said, noting it is easy for utilities to fire up existing plants.
Even so, there are limits to how much coal can grow. In the fuel’s heyday, coal plants typically operated around 60 percent of their capacity, Blumenfeld said. That gives coal plants some more room to grow production. But hitting those numbers will be hard for coal plants given large seasonal jumps in renewable production, he said.
Indeed, wind and solar generated 646 terawatt-hours of electricity in the U.S. through September, eclipsing the 561 TWh produced by coal. Gas, meanwhile, was down 4 percent to almost 1,384 TWh.
The strong renewable numbers stem in large part from another strong year for solar installations. But GridLab’s O’Connell expects those numbers to fall starting in 2027 because of Trump’s moves to end clean energy tax credits and make it more difficult to build wind and solar projects.
O’Connell’s chief concern is that the U.S. will find itself in a position where it is more exposed to global fluctuations in gas prices at the same time power demand is rising and renewable installations slow.
“Those are going to be felt in five years when projects that should have come online don’t come online,” he said. “This is perfect storm. We took away support for clean energy when we needed it most and we needed to get it online quickly.”
This story also appears in Climatewire.
