Podcast: Why grid power prices are surging—and what it means for U.S. manufacturers
Key takeaways
- Electric capacity charges may spike 20–30%, driven by auction prices and tightening grid conditions.
- Coal and gas plant closures reduce baseload supply, raising risk of price shocks and outages.
- Renewables require 2–4x capacity to match fossil baseload, stressing reliability planning.
- Review power bills closely—grid changes can hit manufacturers with unexpected energy costs.
In this episode of Great Question: A Manufacturing Podcast, Robert Brooks, editor in chief of Foundry Management & Technology and American Machinist, speaks with Brian Reinke, president of TDI Energy Solutions, about the sharp rise in electricity costs facing manufacturers, driven largely by surging capacity charges. The conversation explores the complex dynamics of grid operators like PJM and MISO, highlighting how market structures and regulatory pressures are straining supply. Brian explains the compounding effects of aging fossil fuel infrastructure, policy shifts toward renewables, and growing energy demand from sectors like data centers. The episode offers valuable insights for manufacturers seeking to understand—and prepare for—rapidly changing energy economics.
Below is an edited excerpt from the podcast:
RB: In your new article, which is titled Dealing with Surging Grid Power Prices, you open with a warning that manufacturers’ electric charges are about to climb—possibly very high. And you attribute this to capacity charges. So tell me, what are electric capacity charges and why are they rising?
BR: Well, I was searching for a good definition of this because I didn’t want just my interpretation of what the capacity market is. So I found a quote from the President and CEO of America’s Power. They participate in this, and I thought it was appropriate. So I’ll just read this to you—it’s two paragraphs:
“PJM held its periodic base residual auction this summer to make sure its 13-state region has enough electric generating capacity to satisfy electricity demand during delivery year 2025 through 2026, starting in June 2025. Power plant owners submit competitive bids based on what they are willing to accept to make sure their power plants will be available when needed. The purpose of this bidding process is to acquire capacity at the lowest cost.
The results of this auction made headlines because of the sky-high prices that electricity consumers in the PJM region will have to pay to ensure that enough electric generating capacity is available to keep the lights on. The cost of capacity increased from $2.2 billion in the previous year’s auction to $14.7 billion in the most recent auction—an increase of almost 570%. The cost of capacity auctions over prior years varied between $2.2 billion and $10.9 billion. Many experts think high capacity prices will continue in the future—and we’ll touch on reasons for that, I’m sure, as we go along.”
You know, this is really the heart and soul of the grid—those generating companies that provide the power when you turn on the switch. And one of the other quotes I ran into was, “Capacity is the canary in the coal mine.” And it didn’t make it.
RB: That's a pretty vivid description. Let's put a pin in this for a second. PJM is a grid operator that covers multiple electric utilities on the East Coast of the United States, if I got that right?
BR: That is correct. And much of what we’d term the Rust Belt has an awful lot of metal casting facilities in there. But it's not restricted to PJM. MISO is another one that's having—well, all of them are having problems, right? PJM and MISO are really in the news at this point.
RB: MISO is the grid operator that co-occupies most of the central Mississippi Valley and west of the United States—but not Texas.
BR: Texas is ERCOT. It's its own entity. But yes, MISO straddles the Mississippi River.
RB: A lot of manufacturers are caught in the MISO grid as well. So we've got PJM and MISO as the two primary grids that are the focus of our attention—not so much the focus of our attention, but the focus of our understanding of this problem.
BR: Right. And they actually serve as a couple of very good examples of very different marketplaces, because much of PJM is in a deregulated territory. So the utilities have uncoupled from generating resources, which means if you're in a deregulated space, your utility has to get its power from the grid. MISO’s a different story. Most of the utilities in that grid operator's territory own some generation assets, so they have some control over their capacity.
What this all boils down to is: when you try to estimate what the impact on somebody is going to be, it becomes like three-dimensional chess very quickly, because there are so many moving parts. And everybody’s using different amounts of power, when they’re using it, seasonal factors enter into it—so it’s almost impossible to predict what an individual customer is going to experience. Which is why I started the article with: take a very close look at your electric bills, because it’s going to go up. Nobody knows how much, but there are some estimates out there that it could be between 20 to 30% overall higher.
RB: And as you pointed out in that quotation you read, there was roughly a 500% increase in the bid price that the utilities offered for buying electricity from PJM in the last cycle—in the last auction that they conducted.
BR: Right. And of course, MISO has their own issues with that. But I think using 500% as a lower threshold is probably the appropriate way to look at it, because I've seen some numbers over 800% of an increase.
RB: So coming back to basics, if we can—we've got a supply issue and a demand issue ongoing here, and they’re both affecting those price increases. So let us examine: if you will, tell us—why is electric generating capacity declining?
BR: Well, up until fairly recently, over half of our generating capacity has been coal-fired, which has been under enormous pressure to be derated—basically discontinued. And so a number of those facilities—also, they’re over 50 years old, many times—so the owners of those facilities opted not to provide the capital for the required upgrades to meet things like new EPA regulations, etc. And so they just decided, no, we don’t want to make additional investments into this existing asset because they don’t know what the future has to offer. And they don’t want to put large amounts of capital into achieving compliance and end up with what they call stranded assets.
RB: And you also make the point that they have been indirectly, or even directly, encouraged in this by state and federal regulators' treatment of coal power generating capacity, and natural gas power generating capacity. Expand on that, if you will.