Post: Capacity price comes in at the cap 

Capacity price comes in at the cap 

Power prices ​in PJM Interconnection’s latest annual capacity auction held near record highs at about $325/MW-day, the maximum allowed under ‌a temporary price cap. This means households and businesses will pay a record $16.4B to secure electricity starting in 2028. But despite the increased costs, the auction did not manage to secure enough supply to meet projected demand. While the grid needs a 20% reserve margin to ensure reliability, the auction only cleared 14.7%. PJM will need to procure more supplies through incremental follow-up auctions. 

PJM Interconnection’s 2028-29 Base Residual Auction secured 138,318MW of unforced capacity generation (UCAP) and demand response. Regions under the Fixed Resource Requirement (FRR) acquired an additional 10,864MW in UCAP, for a total of 149,182MW in UCAP available to serve forecasted peak electricity demand, plus a reserve margin. UCAP represents a generation resource’s maximum output adjusted for its estimated ability to reliably perform at times of highest system risk. 

PJM established a price cap and floor, or collar, for four capacity auctions to protect both consumers and investors from market volatility. This was the third consecutive auction with the price collar. The price came in at the FERC-approved cap, $325/MW-day (UCAP) for the entire PJM footprint, a 2.5% decrease from the 2027-28 Base Residual Auction cap of $333.44/MW-day. The cleared supply procured in the auction times the clearing price totals $16.4B.  

Source: PJM 

The cleared resource mix in this auction includes: 46% natural gas, 20% nuclear, 18% coal, 5% demand response, 4% hydro, 2% wind, 2% oil and 1% solar. Natural gas increased 5,639 MW UCAP primarily from an increase in accredited UCAP factors, coal units that converted to natural gas and units that participated in this auction that did not participate in the last auction. Coal decreased 2,941 MW UCAP primarily from retirements or conversion to natural gas. Solar increased 651 MW UCAP from new or planned resources.  

For ​the second auction in a row, PJM fell short of its reliability requirement, meaning it is at higher risk of electricity shortfalls that could ​lead to blackouts during times of high demand. The capacity of the resources procured in the auction, plus FRR resources, is short of PJM’s reliability requirement by 6,831MW, meaning that the committed supply is less than what would be required to meet the one-event-in-10-year reliability standard. 

PJM continues to hold a reserve margin of 14.7% for the 2028-29 Delivery Year and has said it plans to seek FERC approval to hold a “Backstop Procurement” auction in September to help address the near-term shortfall in electricity supply. 

Source: GridBeyond, based on PJM data