PJM’s recent capacity auction yielded sharply higher prices to meet the regional transmission organization’s (RTO) reliability requirement for the 2025-2026 delivery year.
“The capacity auction has been a valuable tool over time to help PJM competitively secure resources to meet reliability requirements,” said President and CEO Manu Asthana. “The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening across the RTO. The market is sending a price signal that should incent investment in resources.”
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. Auction prices were significantly 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 annual auction procures power supply resources in advance of the delivery year to meet electricity needs in the PJM service area, which ensures the reliability of the high-voltage electric power system serving 65 million people in all or parts of Pennsylvania, New Jersey, Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, North Carolina, Ohio, Tennessee, Virginia, West Virginia and the District of Columbia.
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.
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.”
PJM Interconnection coordinates and directs the operation of the region’s transmission grid, which includes over 88,115 miles of transmission lines; administers a competitive wholesale electricity market; and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion.
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