PJM’s recent capacity auction has competitively procured resources at significantly higher prices to meet the regional transmission organization’s (RTO) reliability requirement for the 2025-2026 delivery year.
This PJM capacity auction, called the Base Residual Auction, procures power supply resources in advance of the delivery year to meet electricity needs in the PJM service area, which covers parts of 13 states and the District of Columbia. The auction produced a price of $269.92/MW-day for much of the PJM footprint, compared to $28.92/MW-day for the 2024/2025 auction.
“The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening across the RTO,” said President and CEO Manu Asthana. “The market is sending a price signal that should incent investment in resources.”
Auction prices were higher across the RTO this year due to decreased supply offers into the auction due mainly to generator retirements; increases in projected peak load; and FERC-approved market reforms, including improved reliability risk modeling for extreme weather and accreditation that more accurately values each resource’s contribution to reliability, according to PJM.
The auction cleared a diverse mix of resources, including 48 percent of gas, 21 percent of nuclear, 18 percent of coal, 1 percent of solar, 1 percent of wind, 4 percent of hydro, 5 percent of demand response, and 2 percent from other resources.
Todd Snitchler, president and CEO of the Electric Power Supply Association (EPSA), said the results of the auction were encouraging, but “the results of one auction do not establish a trend.” He added, however, that the initial market reforms instituted by PJM to address the misalignment issue had a positive impact.
“While there is still work to be done, these price signals recognize the situation PJM faces and should begin to incentivize the investment needed to deliver a reliable system in PJM and in other U.S. markets,” Snitchler said. “Reliability watchdogs, regulators, policymakers, and PJM itself have been sounding the alarm that the misalignment of power resource retirements and additions poses a serious reliability risk to the grid – especially in the face of rising demand spurred by data center and manufacturing growth among other factors like electrification, extreme weather, and policy choices.”
PJM acknowledged that the amount of supply resources in the auction decreased again this year, continuing the trend from recent auctions and underlining the organization’s stated concerns about generation resources facing pressure to retire without replacement capacity being built quickly enough to replace them.
Additionally, the peak load forecast for the 2025/2026 Delivery Year has increased from 150,640 MW for the 2024/2025 BRA to 153,883 MW for the 2025/2026 Delivery Year, according to PJM.
To facilitate the entry of new resources, PJM is implementing its FERC-approved generation interconnection reform, with approximately 72,000 MW of resources expected to be processed in 2024 and 2025.
However, PJM remains concerned with the slow pace of new generation construction, the release stated. Approximately 38,000 MW of resources currently have already cleared PJM’s interconnection queue but have not been built due to external challenges, including financing, supply chain and siting/permitting issues.
“Interconnection process reform is proceeding, but hurdles remain for many projects outside of our process,” said Stu Bresler, Executive Vice President – Market Services and Strategy. “We are considering ways to accelerate those who can successfully overcome those challenges and build.”
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