Post: PJM Capacity Auction: what to expect from the December 2025 auction

PJM Capacity Auction: what to expect from the December 2025 auction

PJM’s next electric generation capacity auction opens December 4 and closes December 10 for delivery in 2027-28.  PJM will report the results of the auction on December 17.

In this article we look at recent trends and how businesses could plan their energy strategy.

About the Capacity Market

PJM’s capacity market aims to ensure long-term reliability and stability of the grid by ensuring the appropriate amount of power supply resources (including demand response DR) to meet predicted energy demand. It enables organizations in the PJM region to turn energy from a cost center to a revenue and hedging strategy.

By enrolling customers willing to participate in DR and curtail their energy demand during times when demand for power approaches or risks crossing the maximum supply limit of the PJM grid, you are compensated for being that “standby” flexible resource to keep everyone from rolling blackouts. The amount that DR customers are compensated for their participation in the capacity market is set forth each year in PJM’s capacity auction, or Base Residual Auction (BRA).

Auctions operate with participants submitting sealed bids offering capacity at certain prices. Once the total supply meets the requirement, the auction stops. Everyone who clears receives the same clearing price, regardless of their individual bid. The structure is designed to encourage competition and fairness while pushing inefficiencies and high-cost operators out of the market.

On the other side, capacity prices are one component of wholesale costs that ultimately get factored into the price paid by end-use customers; electric bills also reflect the cost of other wholesale services like energy and transmission, as well as distribution services, state programs, and other fees.

Why is this auction important?

The latest Base Residual Auction (BRA) for 2026-27 secured 134,311MW of unforced capacity generation (UCAP) and demand response to meet projected electricity needs for more than 67 million people across 13 states and the District of Columbia. The auction produced a price of $329.17/MW for 2026-27, compared to $269.92/MW a year ago and $28.92/MW for the 2024-25 auction. This means the auction’s total cost to consumers jumped once again. Auction prices were 21.9% higher across the RTO footprint due to decreased electricity supply caused primarily by a large number of generator retirements, combined with increased electricity demand and implementation of FERC-approved market reforms. Without the cap, PJM said the prices would have been $390.57/MW-day.

The next PJM capacity auction is to occur on December 4-10, 2025 with results delivered on December 17, 2025. This auction will be for the 2027-28 delivery year.

For the 2026-27 and 2027-28 BRAs, the cap has been set at a temporary reduced level of $329/MW-day UCAP and $333/MW-day UCAP respectively. A temporary floor of $177/MW-day UCAP and $180/MW-day UCAP were also introduced for 2026-27 and 2027-28 respectively, as a means to mitigate price uncertainty and maintain suppliers’ interest in future resource development.

This upcoming auction is expected to clear at or above the approved cap due to predicted limited supply, reduced eligible capacity. PJM also expects growth in demand of 4GW and 10GW for the 2026-27 and 2027-28 delivery years, respectively.

AI and data center demand

In a December 3 letter to the Chair of the PJM Interconnection Board, six state governors said PJM’s most recent efforts to deal with AI data center power demands have failed and urged the grid operator to take “decisive action” to avoid “extraordinarily high prices”.

The letter notes 12 proposals for dealing with connecting large loads to the grid were overwhelmingly rejected by PJM stakeholders making it “clear that this effort has fallen well short of consensus, and more importantly, has failed to provide both the reliability and affordability that our communities rely on from PJM.”

The governors called for an immediate extension of the current price collar for one further auction in June 2026 for capacity delivery in 2028-29. “Without measures that protect consumers, the cost in next summer’s auction could double from this July’s record amount while still failing to ensure system reliability––that outcome would be unacceptable.”

What does this mean for customers in PJM?

Capacity prices will already be increasing by 22% starting on June 1, 2026 compared to 2025 as a result of the auction for the 2025-26 Delivery Year.

The price floor/cap for the capacity auction will remain in place for the 2027-28 delivery year, and that we expect for it to clear at the cap. The higher prices in the latest capacity auction and the likelihood of another year or prices clearing at the cap make now a perfect time to consider participating in new value streams. You can leverage your site’s existing flexibility to generate revenue by participating in the capacity market in addition to other programs or you can utilize advanced forecasting to predict capacity peaks and make bill savings by lowing your capacity tag.

The demand response industry has earned its reputation for complexity. But the market works best when customers make informed decisions based on accurate information; not fear, hype, or unrealistic promises. At GridBeyond, we believe transparency isn’t just good ethics, it’s good business. We’re committed to transparency, education, and delivering exactly what we promise.

Our utility-backed model allows us to offer terms that other providers can’t match; genuine 100% revenue sharing, robust operational support, and a partnership approach that aligns our success with yours. We’re not the provider making the biggest promises. We’re the provider delivering on them.

Contact us today to maximize your DR revenues by participating in the capacity market or assess what other programs and revenue streams you may qualify for that align with your demand schedule.