A spike in the price of peak-load electricity is fueling discussions about how to contain buildings’ operating costs and options to address Maryland’s energy shortage.
Earlier this year, the annual auction for capacity energy — i.e. the cost of maintaining and accessing additional standby power during peak-load hours — produced a record-high price. Maryland ratepayers, who paid $2.2 billion for that capacity in 2024, would have to pay $14.7 billion in 2025 — an 800 percent increase. Consequently, the average residential BGE customer saw their monthly bill climb by $21, beginning in June.
The increase was the result of major changes in electricity supply and demand throughout the 13-state PJM Interconnection grid. Demand has grown due to the proliferation of data centers, primarily in Northern Virginia, and the growing adoption of electric vehicles and building systems. Meanwhile, the region has retired some fossil-fuel based generation stations and, to date, failed to bring ample alternate electricity sources online.
Those conditions are expected to produce further price hikes in the coming years.
“My own prediction is that we’re going to continue to see prices climb until 2029 or 2030. Beyond that, my crystal ball doesn’t work,” said Michael Powell, a member of the Energy and Environmental Practice Group at Gordon Feinblatt LLC.
Such predictions mean many building owners will need to embark on new efforts to contain their energy costs.
“We have been doing a lot of education with our clients about things they can do to lower their demand during those peak times,” said Christine Ciavardini Devine, Client Relationship Manager with MD Energy Advisors.
A building tune-up, which ensures that existing building systems are operating at their highest efficiency, “can result in a 15 percent decrease in usage and some of that usage is during those peak times,” Devine said.
Upgrading lighting can also “yield anywhere from a 15- to 20- percent decrease in usage,” she said. “People think everybody has already done lighting upgrades, but it’s amazing how many buildings we go into where only part of the building has received lighting upgrades or none at all.”
Energy benchmarking and data monitoring, she added, are key to understanding and reducing a building’s energy consumption. That analysis often reveals inefficiencies, even in newer buildings. It also enables owners to better understand how energy is being used throughout a building and how to best program HVAC systems. In recent years, energy usage and optimal HVAC settings in many buildings have changed due to shifting levels of occupancy and tenant turnover.
“We encourage people to really understand their energy use and how they can control it. Making just a couple of adjustments is hugely impactful…and that can help you retain tenants,” Devine said.
“We advise our clients that self-sufficiency is very important,” said Bert Wilson, Managing Director at Energy Artisans, an Ellicott City firm that helps clients purchase, manage and generate energy.
Concerned that PJM was on track for an energy shortage, Wilson began discussing self-sufficiency measures with several large clients three years ago.
“We had clients who installed very efficient generators and co-generation units to insulate themselves from price hikes,” Wilson said. “The University of Maryland Medical System now self-supplies almost 30 percent of their energy.”
Property owners of any size, he added, can limit the impact of higher energy rates with new technologies, such as the Peak Load Contribution (PLC) tag. The technology enables building systems to lower energy use during peak hours which, in turn, lowers the building’s share of peak capacity costs.
On the broader scale, analysts say Maryland, which sources 40 percent of its electricity from other states, will have to embrace multiple measures to expand its electricity supply.
The state has ensured some continued supply by postponing plans to shut down the Brandon Shores coal-fired plant.
“But we’re paying that plant $148 million to extend their operation until 2029 and we’re giving BGE $1.5 billion to build a new transmission line to bring in power from Pennsylvania once that plant closes,” Powell said.
Large solar farms have provided the state with new sources of inexpensive, renewable power. But solar can’t address peak capacity without the addition of costly batteries and solar now faces new financial challenges due to the termination of incentives and other federal measures.
“One of the sectors that tariffs are putting the most pressure on is solar and batteries because the batteries depend on rare earth minerals from China,” Powell said.
Meanwhile, rising steel prices which began during the pandemic and are also being stoked by tariffs, have challenged the financial viability of offshore wind projects.
Wilson believes Maryland should support the addition of a broad range of new generation plants to its grid, including renewable, natural gas and nuclear. The state should also create a power authority to spearhead development of large generation facilities to meet Maryland’s need for another 4,000 megawatts of power, he said.
Some analysts also suggest that major energy users make a contribution to the energy supply.
“I think there is going to have to be some regulation put in place that requires data centers to generate a big part, if not all, of their own electricity on-site and on their dime,” Devine said. “Right now, the electricity needed to run those facilities comes off the grid which supplies us all and we end paying increased costs.”