Across both SPP and MISO, Noreva’s updated merchant curve modeling reveals the fastest thermal buildout in over a decade.
Noreva’s latest capacity model refresh signals a decisive rebalancing across the Midcontinent and Southwest Power Pool (SPP), one that redefines scarcity, reshapes investor risk, and reestablishes dispatchable generation as the anchor of regional reliability.
Following months of headline optimism around renewable growth, the Q4 2025 update underscores a deeper structural truth: the next decade of capacity pricing will be defined not by constraint, but by coordination.
A Market in Recalibration
Natural gas queue volumes have expanded fivefold – from roughly 6 GW to 30 GW in SPP and 8 GW to 25 GW in MISO – while battery realization rates have been revised upward to 30%, reflecting the emergence of standardized, increasingly financeable storage assets.
The result is a structural shift toward dispatchable dominance, where firm resources are once again driving marginal capacity pricing. The supply stack is growing deeper and more deliverable, producing tangible downward pressure on forward curves.
This recalibration is not a sign of weakening fundamentals, but of maturing market logic. After years of scarcity-induced price inflation, capacity markets are rediscovering equilibrium.
Thermal Reawakening and Financing Realism
The return of gas-backed capacity is not simply a technology story; it’s a financing one. Over the past 18 months, developer pipelines have translated into bankable projects, aided by more liquid debt markets and widening lender comfort with merchant exposure.
Noreva’s model reflects this financing normalization, adjusting realization rates to mirror the shift from speculative queue volumes to actionable construction schedules. The revised supply outlook now incorporates a higher share of projects expected to achieve commercial operation.
At the same time, the growing track record of operational battery projects have transformed the storage sector from a “proof-of-concept” to a creditworthy capacity resource. Batteries are now increasingly financed on the strength of multi-revenue models – energy arbitrage, capacity payments, and ancillary services – flattening the cost of capital and reinforcing grid flexibility.
Diminishing Scarcity and the Compression of Returns
The higher-than-expected supply credibility has led to pronounced downward repricing of capacity curves across both ISOs. In SPP, summer equilibrium prices are now modeled at nearly 50% below prior expectations, before easing back to high single digits through the 2030s.
In MISO, forward trajectories have flattened as well, with the north summer curve down approximately $10/MW-day relative to Q2, while south and shoulder seasons exhibit tighter dispersion and reduced volatility.
For investors, this represents a critical pivot. Projects financed under assumptions of persistently high capacity prices may face contracting margins. While this compression narrows speculative upside, it also lowers volatility and potentially enhances credit quality.
Regulatory Friction and Long-Horizon Risk
Policy remains both an enabler and a constraint. The Noreva-devised 21.6% deployment reduction for selected renewables under the One Big Beautiful Bill Act (O3BA) introduces moderate tightening to capacity availability, but not nearly enough to offset the broader easing driven by thermal and storage supply growth.
Meanwhile, interconnection bottlenecks and permitting friction continue to delay project timelines, even under accelerated market constructs. Much of the capacity now entering the queue will not be online until late in the decade, underscoring the temporal disconnect between near-term demand and long-term infrastructure realization. Markets will need to navigate several more years of localized tightness before the full benefits of this rebalancing are felt.
