Data Center Dissent

Energy Markets Update

Editors Note: 

Summer is officially just days away, so we’re adjusting our format this week to bring you broader market coverage in a quicker, more digestible read. Our goal? Giving you interesting energy market topics you can discuss around the picnic table or by the pool with friends and family (don’t forget it's Father’s Day on Sunday!). This week, we're leading with a deep dive into the data center conundrum by our market analyst, Nick Keohan, followed by a roundup of a handful of stories that caught our attention since we last published.

At the bottom, you'll find a quick reader survey - we want to know which types of articles are catching your attention, too.

Table of Contents

• Energy Market Update
• Data Center Dissent: How the Residents, Politicians, and the Vatican are Reining in AI’s Power Grab
• Natural Gas Notebook: Outlook + Developments
• Electricity Notebook: Spotlight on Recent Activity

Weekly Natural Gas Inventories

Source: EIA, Veolia

Energy Market Update

• The U.S. and Iran have reached a preliminary deal to end the war and reopen the Strait of Hormuz. Several ships have passed through the Strait since the announcement of the deal, carrying ~5 million bbl of oil. The exact terms of the agreement will be made public closer to its official signing this Friday, however there is optimism that an agreement will stick. Over 100 tankers still remain stuck inside the Gulf, waiting for a guarantee of safe passage.
• Oil prices retreated in response to the news. Brent crude prices have fallen below $80/bbl at the time of writing, roughly an 11% drop since last week. This compares to a high of $120 per barrel in April and low $60s prior to the start of the war. Physically traded values remain elevated.
• In a previous newsletter, we covered the potential of an El Niño pattern developing in 2026. Last week, NOAA issued an El Niño Advisory as temperatures in the equatorial pacific have been 0.5°C above average for several consecutive months. NOAA predicts that the pattern will intensify by September, likely surpassing 2.0°C – what some are calling a “godzilla” El Niño. Winter typically sees the most pronounced impacts; producing above-average temperatures, decreasing heating demand, and creating bearish market conditions for natural gas use, and prices, all else being equal.

 Source: NOAA

• After a brief heat wave in the Northeast last week, where PJM flirted with a 5CP tag day, short-term temperature forecasts remain relatively mild throughout much of the lower-48. We expect weather patterns to hold downward pressure on NYMEX prices until the cooling season is in full swing.
  
  
• Near-term gas markets have remained under sustained downward pressure in recent months, influenced by a “bearish trifecta” of mild weather forecasts, robust production topping 109 Bcf/d, and depressed LNG export flows. The past two weeks have brought modest relief for market bulls as seasonal maintenance concluded and LNG exports rebounded 13% to a six-week high of 19.3 Bcf/d.
• NYMEX is essentially flat month-over-month and continues to trade in the bottom quartile of the two-year range for the near-term. The CY 2027 NYMEX strip has held support around $3.50/Dth and has maintained a 5-7% discount to CY 2028 & 2029 since late April. Our takeaway is that the current curve structure suggests a stronger buying signal to hedge the balance of 2026 and 2027, while the outer years are trading closer to the historical two-year midpoint and appear less compelling on a relative basis.
• Supply fundamentals remain constructive for producers but bearish for prices. The EIA recently raised its 2026 US dry nat-gas production to 111.0 Bcf/d from its May estimate of 110.6 Bcf/d. Current storage inventories sit 5% above the 5-year average, signaling an adequate gas supply. Readers can find a more detailed review in the Gas Notebook below.
• In our last newsletter we unpacked a “tale of two Citygates,” explaining how gas and power prices – commodities that are historically highly correlated – have recently diverged. This pattern has continued throughout most major RTOs since late March, as NYMEX prices have fallen sharply while wholesale power remains elevated (see chart below). The markets show strong buying signals for gas while those looking to fix power are holding their breath.

• For 18 years, ISO-NE conducted auctions to secure power commitments three years in advance. This model was designed around summer peak demand and predominantly natural gas plants. The new model instead adopts a prompt auction structure (CAR-PD), discussed in a previous article. Beginning June 1, 2028, auctions will occur shortly before the commitment period, enabling decisions based on more current supply and demand projections. It will also transition from an annual to a seasonal structure (CAR-SA), with separate summer and winter auctions to better address seasonal reliability challenges, and resource performance differences. Federal regulators approved CAR-PD (Docket No. ER26-925-000) in March 2026, while the final CAR-SA rules are expected to be filed later this year. When procuring power, consider the upcoming capacity market changes and plan accordingly, as many suppliers are unwilling to fix capacity prices beyond spring 2028 without significant premiums. ISO-NE has been mulling the development of a bilateral capacity market, which would allow load and supply to hedge for periods of up to 2 years, and 1 year out from prompt. Please contact your energy market advisor for information about this developing program, which could be transactional a year from now.

 Data Center Dissent: How the Residents, Politicians, and the Vatican are Reining in AI’s Power Grab 

The data center industry is facing unprecedented opposition from residents, state politicians, and even the Vatican. As governments pause incentive programs and consider moratoriums amidst increasing cancellation rates, the ripple effects are already reshaping electricity markets and capacity planning across the country. Large power consumers should be examining their risk tolerance and flexibility in both load and procurement approach. 

• There is little question that the data center market remains frothy and is poised for exponential growth. In North America, power demand from the sector is expected to increase from 386 TWh in 2025 to 755 TWh by 2030, according to 451 Research. However, opposition to the projects is growing in 2026. Anxieties around cost allocation have started to percolate and give yield to new tariffs, processes, and accountability. They’ve also started to tamper some of the more ambitious datacenter timelines.
• At least 20 data center projects representing 3.5 gigawatts of demand have already been canceled in Q1 2026 alone due to local opposition. This is a massive increase in the trajectory of cancellations, with only ~25 projects cancelled in all of 2025. With recent polling revealing that 70% of Americans oppose this construction in their area to support AI, these cancellations are expected to climb.
• The aggressive growth of data centers has triggered a rare theological intervention, as Pope Leo XIV’s encyclical Magnifica Humanitas critiques the industry's massive electrical requirements. With data center demand already sitting at 4% of US load and projected to double to 150 GW within three years, this Vatican-backed opposition provides a unifying voice to some local advocates and has encouraged regulators to restrict grid access for these high-load facilities.
• In a decisive regulatory pivot, Illinois has suspended state-level data center incentives, signaling a major shift in how high-load infrastructure is managed. This suspension includes a proposal to establish a distinct rate class for these facilities, ensuring they bear their full financial weight of their immense energy appetite and grid impacts. Within PJM, where data center demand has already driven up costs in the Mid-Atlantic region by $13 billion, state officials are looking for the brakes.

 Source: Heatmap Pro

• While skepticism surrounding inflated US load forecasts driven by datacenters has already yielded its own terminology, "vaporwatts", the current regulatory and religious pushback suggests a growing concern. Previous assumptions that ~30% of projected data center demand would never materialize are being revised upward as projects face an intensifying wall of opposition.
• Hyperscalers have exerted significant pressure on PPA markets as well, accounting for 90% of PPA volume in 2026 alone. As data centers are increasingly required to "bring your own generation" (BYOG), this concentrated demand, along with expiring tax credits, has become a catalyst for rising prices across the PPA sector.
• Facing mounting opposition, data center developers are responding with innovative infrastructure solutions in deploying microgrids, battery storage, and dedicated generation to bypass grid constraints. States like Ohio, West Virginia, and Utah have enacted legislation incentivizing this shift toward self sufficiency, with projects like Scale Microgrid's Ohio facility demonstrating how the industry is proactively addressing energy challenges while maintaining growth momentum.

Natural Gas Notebook: Developments & Outlook

• Supply/Demand - Updated Stats According to the EIA's Short Term Energy Outlook (STEO) released in June, here are the updated projections for 2026 and 2027. EIA raised forecasts for both dry nat gas production and domestic consumption, while the LNG exports still maintain a record-breaking outlook with continued decline in coal production:

• Rig Counts: U.S. drilling activity is gradually improving in 2026, with total rig counts slightly higher than last year, driven by producer confidence in higher global oil prices and improving market conditions. Producers remain cautious despite stronger oil prices, suggesting that any significant increase in oil and natural gas production will likely occur later in 2026.
  
  

Source:  AGA 

•  U.S. LNG feedgas demand rebounded this week after a four-month low of 16.0 Bcf/d in late May and early June due to seasonal maintenance at major Gulf Coast terminals, including Freeport, Sabine Pass, Cameron, and Golden Pass. We are monitoring how quickly we get back to April's highwater mark of 18.8 Bcf/d, on average.
  
  
• Pipelines: U.S. developers plan to add about 44.9 Bcf/d of new natural gas pipeline capacity in 2026–27. Nearly 70% is already under construction. Texas makes up roughly two-thirds of the additions - helping move more gas out of the Permian, ease Waha Hub bottlenecks, and supply rising Gulf Coast LNG demand. These are some of the most consequential projects in the energy landscape right now with respect to price formation; the Permian is highly constrained and which coincides coincidence with high oil prices and has resulted in increasing price dislocations and gas flaring. Louisiana is the state with the second highest planned capacity additions, at 19%. 

 Source:  EIA 

• On the business side of the news, Delfin Midstream approved a final investment decision for Delfin FLNG 1, the largest global project of its kind and the first floating LNG export facility in U.S. history, located in Gulf of Mexico offshore from ⁠Louisiana. The facility is expected to export 4.4 million tonnes of LNG annually beginning in 2030.
  

Electricity Notebook: Spotlight on Recent Activity

Source: DOE, Infographic by Veolia

While both include carbon capture systems, the core story is clear: federal dollars are now funding new coal generation planning at a scale not seen in over a decade.

1. Federal regulators granted a waiver to speed up the grid reconnection of the former Three Mile Island nuclear plant, now the Crane Clean Energy Center (835-MW), which is expected to resume operations in 2028. The restart, tied to serving Microsoft-linked data centers, is one of the clearest signs of the growing bond between AI data centers and the nuclear power industry.
2. Reuters reported last week that the Canadian generator TransAlta will buy two Colorado gas-fired peaker plants (combined 318-MW) from Blackstone for ~$1 billion. The deal is a reversal of a recent trend we covered last September: instead of private equity buying dispatchable power assets, Blackstone is now selling these gas-fired plants to a company that specifically deals in power generation.
   

Speaking of summer almost being here - last Thursday (6/11), for the first time this season, PJM’s grid peak grid demand approached a level that neared 2025’s lowest. At 145GW, last Thursday would have cleared for 2023 and almost 2024 (see Chart Below).

Source PJM, created by Veolia

If you haven't already mapped out a curtailment strategy, there is still time to act and lock in future cost reductions - especially if those forecasts hold. And if you haven't yet, register for our Peak Load Alerts email chain (commodity@veolia.com) so you're never caught off guard.

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Market Data

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