Posted: January 16, 2026, 1:31 pm

Datacenter Capacity Market

Hitting the tape last night was a new plan introduced by the Trump administration to help address the capacity needs in the Mid-Atlantic and Northeast, specifically PJM, arising from compute power demand. In simplest terms, the recommendation is for a capacity like market for dedicated generation to datacenters. Frankly, like everyone else, we’ve had limited time to digest the news and form an opinion, but our initial hours of pondering have us somewhere between an astute and asinine idea.

The details have yet to be studied, but basically the plan calls for a 15 year purchase price agreement (PPA) between a generation asset and a datacenter assuring the draw on the grid is being met. Our initial thought is 15 years is too long and requires too much capital commitment from the off take (datacenter). For instance, if you want to set up a 25MW datacenter running 90% of the time for 15 years, buying that electricity at a market rate of $40/MWh would require a commitment around $120 million dollars. Setting up the process of a bilateral (PPA) trade between two counterparties for 5 MW for one year can create a dizzying amount of redlines by legal, risk, and trading departments. If all that can be sorted and agreed upon, there is still the $120 million. It’s 2026, and for the most part these days, we round $500 million to a BILLION, but $120 million is still $120 million in some circles.

MSFT- Building Community

Given the new generation/datacenter plan, in a very coincidental move….if you’re a person that doesn’t believe in coincidence then call it happenstance, providence, irony, whatever, this week Microsoft announced its Building Community-First AI Infrastructure initiative. In the presser, there was some patriotic mention of America’s 250th year of independence and like America, Microsoft will continue to innovate. As “Datacenter” inches closer to being the new “coal plant” of the electricity and environmental world, it appears Microsoft is attempting to slow that narrative. The plan is built around five key pillars below. If interested, there is more detail in the blog post…enjoy.

Natural Gas Market Commentary

provided by

We’re on the brink of the coldest weather so far this season, and the natural gas futures market doesn’t seem to care. Since last week, temperature forecasts for the back half of January have trended significantly cooler, and despite a brief pop higher on Monday, nearby natural gas futures have plunged to new multi-year lows in recent days. This disconnect between near-term conditions and forward pricing doesn’t make much sense on the surface, but it highlights a key difference between what we’ll call “NYMEX Cold” and “Gas Daily Cold.”

Think about it like this: NYMEX Cold is intense, persistent, and—most importantly—has a lasting impact on underground storage. This is the type of weather that can meaningfully influence the forward curve. The market starts to reprice future months based on the risk that inventories will exit winter at historically low levels and need to be aggressively refilled. In this scenario—at least in theory—higher prices reduce demand from power generators and help entice more production into the market.

That’s why during the early December cold snap, the Summer 2026 strip was more than $1.00 per MMBtu higher than it is today. At the time, the market was pricing in the risk that sustained cold would do significant damage to inventories and ripple through the rest of the year. As it turned out, the second half of December and the first half of January were mild enough to completely ease those fears. As of the most recent report, inventories are back to a surplus versus year-ago levels and still hold a healthy cushion above the five-year average.

In short, there’s enough gas underground at this point in the winter to absorb some run-of-the-mill January cold without triggering panic in the futures market. This isn’t NYMEX Cold.

What we have on tap for the next two weeks, however, is very much Gas Daily Cold. Pipeline capacity in the Upper Midwest and East is finite and, on heavy-demand days, very much subject to physical constraints. While we don’t expect any truly historic cold in the coming weeks, the setup does look conducive to increased volatility in spot pricing across these regions. Where prices ultimately land remains to be seen, but it’s reasonable to assume that anyone exposed to spot markets will feel at least a little bit of pain for the balance of January.

So, this may have turned into “NYMEX Cold” after all. The long weekend saw weather models shift materially colder for the next 10-14 days, with no clear end in sight. This added more than 200 Bcf of expected demand to the balance of the month and could result in a 350 Bcf+ storage draw for the week ending January 30. While this doesn’t put us in an emergency situation, it does start to reintroduce some significant balance-of-season risk, especially in the case that February also comes in colder than normal.

These developments have the full attention of the futures market, with February 2026 trading on Tuesday morning more than 80 cents above Friday’s settlement and March up nearly 50 cents so far on the day.