Investing.com – Analysts at Wolfe Research have identified 10 key questions for the energy sector in 2025.
These questions concern market performance, regulatory changes, mergers and other factors likely to impact utilities and independent power producers (IPPs).
The first question examines whether the energy sector can sustain its recent streak of outperformance.
In 2023 and 2024, stocks like Vistra, Constellation energy (NASDAQ:) and Talen Energy posted massive gains.
Analysts are watching to see whether this momentum will continue or fade as investor enthusiasm shows signs of slowing.
Next (LON:), Wolfe Research is considering the potential for mergers and acquisitions or new IPOs.
With Constellation’s $29 billion acquisition of Calpine making waves, the question remains whether private portfolios like Lightning Power or Alpha Gen will go public or whether they will instead merge with existing players.
The expansion of data centers remains an urgent issue. Companies like Vistra, NRG Energy (NYSE:), PSEG and Constellation are expected to announce projects to maintain investor confidence.
However, competition between independent and regulated markets could pose challenges.
A key risk to the sector lies in hyperscale spending by companies like NVIDIA (NASDAQ:) and large technology companies like Microsoft (NASDAQ:) and Amazon (NASDAQ:).
Wolfe Research warns that any slowdown in AI-related data center growth could hurt forecasts, particularly for IPPs that rely on these businesses.
The regulatory landscape presents additional uncertainties. The Federal Energy Regulatory Commission has yet to set clear policy on on-site energy generation, an issue that pitted Constellation against Exelon (NASDAQ:).
Resolving this debate will determine how quickly projects in regions like PJM can move forward.
Analysts are also tracking the potential impact of the political landscape, particularly the influence of a new government.
Key questions include whether the Biden administration’s greenhouse gas regulations for power plants will be rolled back and whether there will be new subsidies under former President Trump.
Another focus is on pricing in capacity auctions in PJM markets. Prices for 2025/2026 hit an all-time high of $270 per megawatt day, raising questions about sustainability given rising demand and rule changes.
Tight market conditions are also emerging for regional grids such as ERCOT, PJM and MISO, where reliability risks could drive up energy prices.
Constructing new buildings and deciding what to do with existing assets are structural issues facing the industry.
Key trends include delayed retirements, the transition from coal to gas, and regulated utilities potentially owning power generation.
Recent developments include those in Pennsylvania and Ohio as well as those under the Texas Energy Fund.