Energy Markets Update

Editor’s Note: In this update, we provide analysis of major changes at FERC, US LNG exports, net metering programs in California, and an overview of how batteries are positioned for growth in the coming years. We’re admittedly out of our depth on the pros and cons of a nuclear reactor on the moon and while it allows us to have fun with some AI generated renderings, we eagerly await any major announcements of a new nuclear reactor project here in the USA! 

Table of Contents

• Market Update
• We Told You 2025 Could Be Big for Nuclear - We Were Hoping for Projects Closer to Earth
• Christie Steps Down at FERC, warns of “insiders’ game”
• Charged Up: Batteries Dodge the BBB Axe and the Race Is On
• The U.S. LNG Surge: New Routes, New Partners, New Capacity
• NEM 3.0 Gets Another Day in Court

Weekly Natural Gas Inventories

Source: EIA

Market Update

• Gas markets continued their slide this week; the 2026 NYMEX forward strip, now at $3.85 per MMBtu, is down more than 11% over the past month. The 2027 and 2028 strips have been more sticky, declining 6% and 3.7% over the same period.
• The recent bearish sentiment reflects an underlying shift in market fundamentals – production is up roughly 3 bcf/d month over month, and demand is down by about the same. Net of LNG production, there has been a ratable net increase in supply of about 4 bcf/d so far in August. This is a departure from projections earlier this year that production would remain stagnant amidst growing demand.
• As we cover in great depth below, LNG export capacity is expected to expand by as much as 5 bcf/d over the next 18 months, so there will invariably be a sink for excess gas in the future, but timing plays a central role in the market balance. Ultimately this is a bearish turn that many were not expecting.  
• Power forwards have also declined in kind. We see some markets with only modest forward premiums as compared to settled prices over the trailing 12 months. Notably, New York, Boston, and Chicago offer forwards a premium of 6-20%. 
  
  
• Not unsurprisingly, markets with the cheapest spot rates over the past years show the highest forward premiums.
• Spot prices in July lifted in most markets outside of ERCOT and to a lesser extent, CAISO. Maintenance on the Algonquin gas pipeline into New England buoyed prices in July. 
  
  
• In other news: Massachusetts Department of Energy Resources delayed its fifth offshore wind procurement until at least 2026 “due to uncertainty surrounding federal permitting and tax credits.” DOER accepted offers from roughly 2700 MW of offshore wind capacity in September 2024, though those offers are also in jeopardy as no contracts have yet been agreed to by the utility offtakers.  
• PJM initiated an expedited stakeholder process to reform how it interconnects large datacenter loads amid a surge in hyperscale interconnection requests. The Critical Issue Fast Path (CIFP) aims to establish clear-cut reliability triggers, and explore solutions such as adjusting capacity cost allocation, deploying rapid demand response capability, and accelerating interconnection of new self-supply generation.
• California NEM 3.0 reversal: a high court ruling in California sent a revised compensation schedule for residential solar projects back to the drawing board. More below. 

We Told You 2025 Could Be Big for Nuclear - We Were Hoping for Projects Closer to Earth

“This could be the start of something big.” That’s how we closed our 2024 year-end newsletter, reflecting on a wave of unexpected momentum in nuclear energy: plant restarts, new SMR startups, and a policy climate finally warming to the atom. “What was looking like the beginning of the end for the nuclear industry,” we wrote, “may have actually just been the end of the beginning.” Below we cover the industry’s current status as of August 2025, based on some recent developments.

• The loudest industry buzz last week (8/4) was the announcement by NASA’s acting Administrator, Sean Duffy, that the agency intends to deploy a nuclear reactor on the moon by 2030. It sounds like science fiction, but according to NASA, it's been on their radar for some time. The agency is fast-tracking plans to install a 100-kilowatt fission reactor on the lunar surface - marking a strategic shift in how the U.S. approaches both power generation and space infrastructure.

• The trending story this week, however, went in the opposite direction of space…enter the jellyfish below sea level. On Monday, at France’s Gravelines nuclear plant, four reactors were shut down after jellyfish clogged the cooling water intake systems, according to EDF, France’s main electricity generation and distribution company. It’s a fresh reminder in 2025, as the world experienced in 2011 with the Fukushima-Daiichi nuclear accident in Japan, that even well-established facilities are vulnerable to nature, climate, and poor public perception.

• But not all the headlines in August have been as fishy or code-switching as sci-fi. In a two separate announcements this month, the Department of Energy selected Standard Nuclear for their Advanced Nuclear Fuel Lines Pilot Program and another 11 projects for the New Reactor Pilot Program which according the DOE announcements, establishes the goal to construct, operate, and achieve criticality of at least three test reactors using the DOE authorization process by July 4, 2026.

• August 2025 hasn’t followed the script we previously hinted at with the resuscitation of a mothballed reactor or the first new orders in a generation, but it undeniably remains a turning point. If the lunar reactor succeeds, it could become more than a technological milestone - it could be the model for how nuclear is done: fast, focused, and fit for the 21st century.

• The question our analysts continue to contemplate is whether the rest of the industry can rise to meet the moment as our national demand for more power via the AI revolution, or if it will be left looking up at the Moon, wondering what could have been. Which of the hyperscalers will be the first to backstop a new nuclear reactor? 

Christie Steps Down at FERC, warns of “insiders’ game”

After nearly 5 years of service at the Federal Energy Regulatory Commission (FERC), and only 5 months remaining on his term, Chairman Mark Christie has stepped down from his position. His departure was announced last month, 7 months after Christie had been elevated from his commissioner position to Chairman by President Trump. The move came after the President declined to appoint him for a second term. Christie is known for his advocacy on behalf of ratepayers in utility forums, pushing FERC to scrutinize retail rates.

• With Christie gone, FERC is left with only three sitting commissioners and no chairman, just above the voting quorum threshold. Should FERC lose its voting quorum (three or more sitting commissioners), the agency would be unable to vote on new policies or advance decisions on applications (i.e.: utility mergers & acquisitions, natural gas pipelines, LNG terminals, or hydroelectric projects).
• FERC's current board  maintains the minimum of three commissioners with staggered ends of terms: David Rosner (D, 2027), Lindsey See (R, 2028), and Judy Chang (D, 2029). The last time in the recent era that quorum was lost was in Feb 2017 for 6 months (see the Commission’s status timeline and projection without any new member replacements below).
  
  
  Source: FERC
• To address electric demand growth, which is expected to increase at rate of 1.7% annually through 2026 and led principally by construction of massive datacenters, Christie believed that FERC and local regulators needed to proportionately assign charges to these large loads so that increased costs are not shifted to other consumers. One solution he posed was to adjust interconnection costs and transmission costs for large loads, making their costs proportional to their grid stress contribution.
• During Christie’s term as chairman, FERC ruled against the colocation of data centers with generators in PJM. The ruling was based on concerns about the market operator’s ability to equitably allocate costs and appropriately account for the impacts to grid reliability. By achieving colocation with nuclear, data centers would essentially retire these generation assets from the rest of the grid system. The colocation requests would have also allowed data centers to bypass the distribution and transmission costs that most customers typically pay for, large or small. Most analyses conclude this would result in higher costs for the rest of a grid region’s consumers due to higher levels of congestion and constrained supply.
• FERC’s dissent on the colocation of data centers and nuclear plants was also held by Christie’s predecessor Willie Phillips. In November 2024, FERC’s Chairman Phillips ruled against PJM’s Susquehanna Nuclear facility being connected directly to an abutting datacenter. Phillips resigned in April of this year, while his term was set to end in June 2026.
• The White House has signaled their intention to appoint David Rosner as interim Chairman. The move suggests strategic positioning to influence FERC's datacenter colocation policy while navigating Humphrey's Executor constitutional constraints which we covered a few issues back.
• Former Chairman Neil Chatterjee believes that the appointment of Rosner could be related to the issue of collocating data centers at power plants. Chatterjee further theorized that the White House “is doubling down on data center co-location and is looking to seat a [FERC] majority that will support that framework.”   

Charged Up: Batteries Dodge the BBB Axe and the Race Is On

Last month’s One Big Beautiful Bill (BBB) upended large parts of the Inflation Reduction Act’s clean energy incentives - especially for wind and solar, as we noted in our last newsletter. Batteries, however, emerged relatively unscathed. The standalone storage Investment Tax Credit (Section 48E) remained intact, preserving the 30% credit for projects meeting labor and domestic content requirements. That said, BBB did add more bite to FEOC (“foreign entity of concern”) sourcing restrictions, potentially limiting the supply of compliant battery cells and inverters. In other words, the prize is still there - but the hurdles are higher.

Where the Growth Is Happening

• Over 65% of currently operating U.S. battery capacity is in California, according to Clearview Energy Partners - making CAISO the clear front-runner in storage buildout and its paying off.
• The chart below illustrates a milestone achievement on August 5, 2025, when battery deployment in the Golden State reached its all-time high. The prominent purple section in the visualization demonstrates the substantial contribution of battery storage to the electrical grid during evening peak demand periods, precisely when solar generation (the yellow blob) drops off. 

Source: GridStatus.io

• This strategic deployment effectively captures high-value pricing opportunities. California's leadership in battery storage capacity proves particularly advantageous given the state's fluctuating evening electricity demand patterns and profitable peak-hour pricing structure.
• Storage is quickly becoming the hedge against solar’s compressed timelines and interconnection challenges. Developers unable to hit solar tax credit deadlines may pivot into battery-only or hybrid projects that can still capture ITC benefits.

Investor Shifts & Business Opportunities

Source: Yahoo Finance

Opportunities are clustering where ISO rules, queue dynamics, and market pricing favor fast-track deployment:

• CAISO: Soaring storage capacity with lucrative evening peak pricing.
• ERCOT: Minimal permitting friction and high volatility make it ideal for merchant storage.
• PJM: Queue reforms and capacity market changes could give batteries premium value for reliability services.

Risks Not to Overlook

• Supply chain compliance: FEOC restrictions could delay projects dependent on Chinese or other restricted components.

• Queue bottlenecks: Batteries share interconnection queues with renewables; “standalone” doesn’t mean “skip the line.”

• Overbuild risk: ISO saturation could compress margins if storage deployment outpaces market needs.

What This Means for Veolia Clients

• Act early: If you’re considering battery integration, the next 12–18 months will be the sweet spot for securing tax credits before supply chains tighten further.
• Location matters: Target ISOs with favorable economics and faster queue timelines (CAISO, ERCOT, PJM).
• Leverage hybrids: Pairing storage with existing or planned generation can unlock value stacking in multiple market products.
• Stay investor-aware: ETF and capital flows are signaling that batteries aren’t a niche play - they’re becoming the anchor of clean energy portfolios.

The U.S. LNG Surge: New Routes, New Partners, New Capacity

An aggressive build-out of export terminals by American producers and developers, new infrastructure in South America, and a slate of long-term supply deals with JERA are reinforcing the U.S.’s position as the world’s top LNG exporter. 

• Last month, U.S. liquefied natural gas exports soared to 9.1 million metric tons in the wake of plant maintenance completions (Elba Island LNG) and new project ramp-up (Plaquemines and Corpus Christi LNG).
• Recipients of bolstered US LNG Exports - July 2025
  • • Europe: 58%
    • Asia: 20%
    • Latin America: 11%
    • Egypt: 6%
    • Left U.S. Ports (no clear destination, available for order): 5%
• As Europe approaches their maximum critical reserves stored for the upcoming winter, LNG purchasing has diminished. Where 66% of U.S. producer LNG was fed to the continent last month, that figure dropped by 8% in response to the approaching storage surplus.
• U.S. LNG exports to Latin America and the Caribbean were up last month due to colder seasonal weather conditions in the region (year-over-year increase of 9.7% due to overall growing demand for electrical generation and industrial use).
• Though exports to Asia only grew by 1% since June, pre-secured purchasing agreements between Japan’s JERA and multiple upcoming LNG projects could result in increased quantities of LNG to the region.
  • The Department of Energy announced a $200 billion deal with JERA (Japan’s largest power generation company) that includes four different 20-year partnerships with US-based LNG owners like Commonwealth, Cheniere, Sempra, and NextDecade. JERA has arranged to pre-purchase roughly 5.5 million tons of LNG per year over the duration of the contracts. 
• Terminal expansions saw a buzz of activity over the last month, with some projects approaching peak operationality while others were given financial “OKs.”
  • Examples of U.S. LNG Project Momentum: Venture Global’s CP2 LNG in Louisiana secured a positive FID, becoming the third U.S. capacity addition to start construction in 2025, with 14.4 mt/year targeted for mid-2027; Plaquemines LNG maintained record-high feedgas of 3.2 Bcf/d with 75% of units approved for LNG production and full operations expected by Q4 2025; and Cheniere advanced prefilings for major Corpus Christi expansions, aiming to add four new trains and boost capacity by 24 mt/year via expanded pipeline infrastructure.
• Because of these new liquefaction endeavors, the American LNG market will continue to expand as sites reach full functionality and begin global cargo shipments.

Source: EIA

• Aware of Plaquemines’ rapid rise to 100% utilization, all eyes have turned to Golden Pass LNG - the new kid on the block. LNG exports are expected to begin in Q1 2026, and the facility will provide the ability to transport an impressive 18.1 million tons of LNG per year.
• The joint owners of this venture in ExxonMobile and QatarEnergy have stated that they will independently market the site’s LNG reserves based on a previously established contractual split (70% belonging to QatarEnergy while the remaining 30% defaults to ExxonMobile). In other words, no pre-secured buyers have been disclosed at this time. The destination of Golden Pass’ LNG depends entirely on the marketing strategies and intentions of its ownership.
• If Golden Pass follows a similar accelerated export path to that of Plaquemines LNG (employing phased train completion and robust technological processes), it could achieve maximum function well ahead of traditional timelines, reshaping the U.S. export balance by late 2026.

Source: Constellation

NEM 3.0 Gets Another Day in Court

• Last week, California’s Supreme Court handed environmental groups a victory in their challenge to the CPUC’s 2022 net energy metering proceeding (“NEM 3.0”) which dramatically reduced bill credits for new-build solar projects across CA’s three major IOU territories (PG&E, SDG&E, SCE).
• The ruling, which took effect in April 2023, slashed the value of new solar by 50-75% through a restructured compensation system and added participation fees.
• The previous regime compensated customers at full retail rates for excess power sent back to the grid (“one-to-one” net metering). NEM 3.0 introduced a time-of-use (TOU) structure, where the value of electricity fluctuates hourly and daily. On average, the TOU rates come out to ~25% of the retail electric rate during those same hours.
• This policy change more than doubled average solar payback periods, striking a devastating blow to California’s solar market. Post-implementation, solar sales declined 77-85% year-over-year.
  

Source: California Solar & Storage Association, 2023

• The California Supreme Court’s unanimous ruling requires the Court of Appeals to examine NEM 3.0 under stricter legal scrutiny, specifically evaluating whether the CPUC had legal basis to cut the compensation rates.
• While the Supreme Court didn’t overturn NEM 3.0 outright, this intervention arrives at a critical time for the solar industry, which faces economic headwinds and uncertainty around federal tax incentives and grants. The decision also establishes precedent for stricter oversight of the PUC.
• The Court of Appeals hearing is estimated to take place within 3-4 months, giving NEM 3.0 another opportunity in court!

Market Data

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