The latest PJM capacity auction has dramatically increased prices, reflecting a tightening supply and demand balance across the region. The auction, which secures power supply resources from June 1, 2025, through May 31, 2026, saw capacity prices rise nearly tenfold compared to previous years.
Key Highlights:
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- Capacity Secured: PJM procured 135,684 megawatts of capacity.
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- Price Surge: The clearing price for much of the PJM footprint reached $269.92 per megawatt-day, up from $28.92 per megawatt-day in the previous auction.
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- Total Cost: The auction procured a record $14.7 billion capacity.
- Resource Mix: The generation mix included 48% gas-fired power plants, 21% nuclear, 18% coal, and 13% from other sources, including solar, wind, hydro, and demand response.
Factors Driving the Price Increase:
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- Load Growth: Increased electricity demand has put additional pressure on the grid.
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- Generation Deactivations: Many generator retirements have reduced the available supply.
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- Risk Modeling Changes FERC-approved market reforms, including improved reliability risk modeling for extreme weather, have contributed to higher prices by more accurately valuing each resource’s contribution to reliability.
Regional Variations:
Two regions, including the BGE zone in Maryland and the Dominion zone in Virginia and North Carolina, reached their zonal price caps due to local constraints and insufficient resources.
Implications for Consumers:
The substantial increase in capacity prices is expected to lead to higher electricity bills for consumers across PJM’s 13-state region and Washington D.C. This price signal is intended to incentivize investment in new generation resources to ensure long-term grid reliability.
PJM’s Response:
PJM is implementing generation interconnection reforms to facilitate the entry of new resources, with approximately 72,000 MW expected to be processed in 2024 and 2025. However, financing, supply chain issues, and siting/permitting hurdles remain.
Manu Asthana, President and CEO of PJM, stated, “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.”
For more detailed information about the auction results and their implications, please visit the PJM website.
Your TPI Consultant is prepared to help you navigate this development. We understand this may impact your business operations and are committed to helping you navigate these changes. Please reach out for more information and resources to help you manage your energy usage and costs effectively.
