CBRE Says 10% Energy Price Cycles Doubled Since 2022, Urges Continuous Hedging
Updated
Updated · Environment+Energy Leader · Aug 12
CBRE Says 10% Energy Price Cycles Doubled Since 2022, Urges Continuous Hedging
1 articles · Updated · Environment+Energy Leader · Aug 12
Summary
$15 million separated two Northeastern U.S. buyers of nearly identical 12-month power contracts, with the later buyer paying about $5 million versus $20 million solely because it contracted months later.
CBRE said that gap shows traditional renewal-based procurement concentrates market timing into one high-stakes decision just as volatility has intensified: 10% rally-and-correction cycles in power, gas and crude occurred about twice as often in 2022-2026 as in 2018-2021.
The firm recommends layered procurement and a continuous cost-at-risk framework, letting companies hedge portions of future electricity and gas demand over time instead of fixing most exposure at contract expiry.
That approach can mix supply contracts with futures, swaps, options, PPAs, onsite generation, storage and demand flexibility, while governance sets hedge limits, approved instruments and reporting to avoid turning hedging into trading.
The stakes are rising as U.S. electricity use is projected to grow for a fourth straight year in 2027—the strongest four-year demand stretch since 2000—with data centers and record summer 2027 power-sector gas demand adding uncertainty.