The center of gravity in power markets is shifting – away from energy, and toward capacity.
At last week’s S&P Global (Platts) Global Power Markets conference, one theme cut through the noise: energy prices, in most markets, are no longer sufficient to underwrite the infrastructure the grid needs.
As energy markets trend toward structural oversupply – driven by renewables, mild demand growth, and policy pressure – developers and investors are turning their focus to capacity markets as the new engine of revenue.
The distinction is more than semantic. In the old paradigm, energy arbitrage and merchant pricing volatility were enough to support new assets. But in today’s landscape, peakers (fast-ramping, capacity-heavy assets) are commanding valuation premiums.
The forward curves are no longer shaped by energy price expectations alone. Instead, capacity accreditations, auction outcomes, and reliability requirements are forming a new price signal – and a new value stack.
The implications are far-reaching. Project financing, risk management, and asset optimization are all being quietly retooled to reflect this shift. From combined-cycle plants struggling to secure merchant revenue, to storage developers banking on multi-year capacity payments, the power sector is beginning to recognize that the ground has moved. Capacity, not energy, is what moves capital today.
Karbone Research expects this trend to deepen. As demand volatility increases and policy support for firming resources expands, capacity revenue will increasingly define project viability. Many market participants may still be thematically chasing energy – but they are pricing, financing, and operating around capacity.
The value stack has already changed. The market is only now beginning to realize by how much.
