The rapid evolution of U.S. power markets is increasingly defined by the role of natural gas, and new forecasts from Karbone Research show why.
No other fuel so effectively aligns with the capacity accreditation methodologies adopted by market operators. By mirroring historic waves of gas additions into price forecasts through 2050 this scenario shows that gas may be the only effective way to limit long-term price inflation for capacity in the SPP power market.
This starkly different scenario from the other forecasts run by Karbone as part of our capacity merchant curve modeling shows the divergent reality for energy investors. Gas additions quell capacity price inflation, even as limited capacity upside may dissuade developers from building the needed gas.
Against a backdrop of heightened focus on gas-fired generation, Karbone Research’s Gas Scenario presents a forward-looking view of how capacity markets could reshape in response to a prolonged gas buildout. This scenario mirrors the late-1990s and early-2000s dash to gas, capturing a potential future where gas infrastructure dominates the supply stack, influencing volatility, price trajectories, and investment strategies.
Near-term capacity markets in this SPP gas forecast reflect familiar volatility, shaped by existing infrastructure constraints, policy uncertainty, and shifting demand patterns. However, from the early 2030s onward, an accelerated wave of gas-fired generation enters the stack, tightening reserve margins and driving a sustained price increase until the early 2040s.
The pricing shift forecasted in this period is defined by market participants recalibrating expectations in response to a gas-centric buildout, replacing a decade of stalled renewable growth.
This transition pushes capacity prices into a structurally higher range compared to historical norms, with markets repricing risk as gas secures a greater share of marginal capacity. While this deployment alleviates short-term reliability concerns, the long-term implications remain nuanced.
Compared to the Core Scenario, the Gas Scenario exhibits the most dramatic shifts in price formation. The market experiences sustained upward pressure for a decade before a rebalancing period emerges, underscoring the cyclical nature of infrastructure deployment and market equilibrium.
This reinforces the strategic importance of forward-looking capacity procurement strategies, as market participants seek to optimize risk exposure across this pronounced cycle.
