Understanding PJM Market Changes in 2025: What Hotels Need to Know and How to Prepare

PJM Interconnection—a regional transmission organization managing electricity in 13 states and Washington, D.C.—is undergoing significant changes in 2025. For hotel chains, these developments could translate into higher operational costs and shifting energy strategies. Let’s break down what these changes mean, their specific impact on hotel operations and guests, and actionable steps hotels can take to adapt.

What’s Changing in the PJM Market?

PJM’s capacity market, which ensures grid reliability by compensating power producers for being available to meet demand, is experiencing sharp cost increases. Here’s what’s driving these changes:

Higher Capacity Prices: The clearing price for capacity in PJM’s 2025–2026 Base Residual Auction surged to $269.92 per megawatt-day (MW-day)—an 800% increase from the previous $28.92/MW-day. This spike reflects rising demand, increased retirements of coal and nuclear power plants, and stringent reliability standards aimed at preventing outages during extreme weather events.

Grid Modernization Investments: PJM is introducing measures to stabilize the grid, including incentives for renewable energy integration and modernizing infrastructure. While beneficial in the long term, these changes result in short-term cost hikes.

Environmental Regulations: Tighter emissions standards and state mandates for clean energy transition are reshaping the energy mix, driving up prices as utilities retire outdated plants and invest in renewables.

How Will This Impact Hotel Chains?

The anticipated rise in energy costs will have a direct and significant impact on hotel operations, particularly for those located within the PJM territory. Electricity costs, which already constitute a substantial portion of operating expenses, are expected to climb by up to 30% starting in mid-2025. For hotels managing tight budgets, this increase could lead to tough decisions about reallocating funds or adjusting pricing structures to maintain profitability.

Hotels that operate under fixed-rate energy contracts may initially avoid the brunt of these rising costs. However, once those contracts expire, renewal rates are likely to reflect the heightened capacity prices, creating potential financial strain. For properties on variable-rate contracts, the impact will be more immediate, with fluctuating costs adding complexity to budget forecasting and financial planning.

The rising costs will also challenge how hotels approach long-term capital planning. Allocating resources for energy efficiency upgrades, such as LED lighting or smart HVAC systems, becomes an even more pressing concern as energy expenses continue to grow. Hotels that fail to invest in these upgrades risk falling behind competitors who capitalize on cost-saving technologies.

Beyond operational costs, the changes in energy prices may also influence how hotels interact with their guests. To maintain profitability, some hotels might consider raising room rates or introducing energy surcharges, especially during peak seasons. While necessary, these adjustments must be handled thoughtfully to avoid alienating guests or damaging the brand’s reputation. Communicating the reasons behind such changes, particularly if they tie into broader sustainability initiatives, will be essential in managing guest expectations and maintaining loyalty.

Hotels that embrace proactive strategies, including energy procurement optimization and efficiency investments, can turn these challenges into opportunities. By focusing on both immediate cost management and long-term sustainability, hotels can not only weather the impact of rising energy prices but also position themselves as forward-thinking, eco-conscious businesses.

What Should Hotels Do to Prepare?

Preparing for the rise in energy costs requires a proactive and strategic approach. The first step for hotel chains is to conduct a comprehensive energy audit. By identifying inefficiencies in major systems such as HVAC, lighting, and kitchen equipment, hotels can uncover opportunities to significantly reduce energy consumption. Partnering with energy consultants or utility providers can help pinpoint problem areas and implement cost-effective solutions.

Another critical measure is optimizing energy procurement. Hotels with existing fixed-rate energy contracts should evaluate renewing them early to lock in favorable rates before market prices climb further. Additionally, joining an energy aggregation group, where businesses pool their purchasing power to negotiate better rates, can provide substantial savings. These strategies create a buffer against market volatility and give hotels more predictable energy expenses.

Investing in energy-efficient upgrades is also essential for mitigating rising costs. Replacing traditional lighting with energy-efficient LED bulbs can lead to substantial savings, as LEDs use up to 75% less energy and last longer. Similarly, smart thermostats and automated building management systems help optimize heating and cooling, ensuring energy is not wasted in unoccupied rooms or during non-peak hours. Hotels can also enhance their building insulation and seal windows and doors to reduce heating and cooling losses, further lowering energy bills.

Participating in demand response programs offers another effective way to offset energy costs. By reducing or shifting energy usage during peak demand periods, hotels can earn financial incentives while contributing to grid stability. For example, scheduling energy-intensive activities such as laundry or kitchen operations during off-peak times can minimize costs without disrupting daily operations. In cases where energy reduction isn’t possible, on-site backup generators or battery storage systems can help bridge the gap during high-demand events.

Exploring renewable energy solutions is a longer-term strategy that offers both cost savings and environmental benefits. Installing on-site solar panels allows hotels to generate their own electricity, reducing reliance on the grid. For properties unable to install solar, entering into a power purchase agreement (PPA) with renewable energy providers ensures a consistent and often lower-cost energy supply while demonstrating a commitment to sustainability.

In addition to internal measures, communicating these energy-saving initiatives to guests can transform operational changes into marketing advantages. Highlighting efforts such as smart room designs, EV charging stations, or green certifications in marketing materials can attract eco-conscious travelers. Transparency about sustainability efforts not only enhances brand reputation but also fosters goodwill among guests who value environmentally responsible practices.

How Will These Changes Affect Guests?

While the rising energy costs primarily affect a hotel’s operations, the impact will inevitably extend to guests. Many hotels may need to adjust their pricing to maintain profitability. This could mean slight increases in room rates or introducing energy surcharges during peak seasons. Communicating these adjustments transparently can help guests understand the necessity of these changes, especially when coupled with information about the hotel’s sustainability initiatives.

Sustainability practices, which often arise from energy-saving measures, will also influence the guest experience. For example, hotels may implement programs that encourage guests to reuse towels and linens to reduce laundry costs and conserve water and energy. Automated energy systems, such as motion-activated lighting and smart thermostats, may become more common, helping hotels manage consumption without compromising guest comfort. These changes can also enhance the guest experience by showcasing the hotel’s commitment to environmental stewardship, a value increasingly appreciated by travelers.

Additionally, some hotels may invest in amenities that align with modern traveler expectations, such as electric vehicle (EV) charging stations or rooms powered partially by renewable energy. These features not only reduce the property’s carbon footprint but also appeal to guests who prioritize eco-friendly travel. By marketing these efforts effectively, hotels can turn energy-saving measures into selling points, strengthening their competitive edge in the hospitality market.

Looking Ahead: Adapting for Long-Term Success

The energy market changes in the PJM territory represent both a challenge and an opportunity for hotels. Adapting to these shifts requires thoughtful planning, but proactive measures can yield long-term benefits. Staying informed about regulatory updates and market trends is critical, as is fostering strong relationships with energy providers to take advantage of incentives or rebates.

Hotels that embrace energy efficiency, renewable energy, and sustainable practices can not only mitigate rising costs but also position themselves as leaders in the hospitality industry. By aligning operational goals with guest expectations for sustainability, hotels can maintain profitability while enhancing their brand’s reputation.

Finally, proactive communication with guests is key. Whether explaining rate changes or highlighting energy-efficient amenities, transparency fosters trust and loyalty. Travelers are more likely to support businesses that take meaningful steps to address environmental challenges while offering value.

Partner with Energy Now for Guidance

Navigating these changes doesn’t have to be overwhelming. Energy Now specializes in helping businesses like yours develop tailored energy strategies to control costs and stay ahead of industry shifts. Contact us today for a consultation to explore energy solutions that work for your business.