Dive Brief:<\/p>\n
Capacity prices in the PJM Interconnection\u2019s latest capacity auction hit\u00a0a $329.17\/MW-day price cap across its region, up 22% from a year ago for most of PJM, the grid operator said Tuesday<\/a>.<\/p>\n PJM expects the increase to record-high capacity prices for the 12-month period that starts in June 2026 could lead to 1.5% to 5% bill increases for some ratepayers, depending on what state they are in.<\/p>\n PJM estimates that without a price cap that was established in an agreement with Pennsylvania Gov. Josh Shapiro, D, the capacity price for the 2026-27 delivery year would have been nearly $389\/MW-day, or about 18% higher.<\/p>\n Dive Insight:<\/p>\n A year ago, PJM\u2019s capacity auction sent shockwaves<\/a> through its 13-state region when prices for the delivery year that started June 1 soared to $269.92\/MW-day for most of its footprint, up from $28.92\/MW-day. Prices in that auction hit zonal caps of $466.35\/MW-day for the Baltimore Gas and Electric zone in Maryland, and $444.26\/MW-day for the Dominion zone in Virginia and North Carolina.<\/p>\n The 2024 auction\u2019s total cost jumped to $14.7 billion from $2.2 billion. The cost of this year\u2019s auction, which opened July 9 and closed July 15, climbed even higher to $16.1 billion, up 9.5% from a year ago. Capacity costs make up a relatively small part of electric bills, according to PJM.<\/p>\n PJM capacity costs hit a record high<\/p>\n The cost of PJM’s capacity auction in billions of dollars.<\/p>\n In the auction, PJM bought 134,311 MW for the capacity year that starts June 1, according to the grid operator\u2019s auction report<\/a>. About 135,192 MW was offered in the auction, a decline from last year. PJM secured enough capacity to have an 18.9% reserve margin as forecast peak load grew by about 5,500 MW, mainly from data centers.\u00a0<\/p>\n Gas-fired generation accounted for 45% of the cleared capacity, followed by nuclear at 21%, coal at 22%, hydroelectric at 4%, wind at 3% and solar at 1%, according to PJM. Demand response offered in the auction was essentially flat at 8,010 MW, PJM said.<\/p>\n The auction\u2019s high capacity prices are signs that supply and demand conditions in PJM are tight, according to Stu Bresler, executive vice president for market services and strategy at PJM.<\/p>\n However, there are signs that the market is responding to PJM\u2019s capacity auction last year when prices took off, Bresler said during a media briefing.<\/p>\n The latest auction included new generation and uprates of existing power plants totaling 2,669 MW of \u201cunforced capacity,\u201d a measure in a resource\u2019s accredited value, according to Bresler. PJM\u2019s last three auctions didn\u2019t include new generation or uprates, according to the grid operator.<\/p>\n Also, 17 generating units with about 1,100 MW in interconnection rights have withdrawn retirement notices since the previous auction, Bresler said.<\/p>\n However, the pace of building generating resources isn\u2019t keeping up with rising electric demand, according to Will Sauer, Exelon vice president of federal regulatory affairs. Instead of building power plants, there is ongoing consolidation in the power sector in PJM, he said in an interview.<\/p>\n The consolidation affecting PJM includes Constellation Energy\u2019s plan to buy Calpine, NRG Energy\u2019s pending deal to buy a fleet of LS Power power plants and Talen Energy\u2019s proposed transaction<\/a> to buy two gas-fired power plants in PJM.<\/p>\n With supply chains \u201cout of whack\u201d \u2014 partly because of import tariffs \u2014 power plant developers cannot get needed parts to build generating units, according to Tyson Slocum, director of Public Citizen\u2019s Energy Program.<\/p>\n So instead, they \u201cplow money into making big energy players even bigger through consolidating existing natural gas generation assets,\u201d Slocum said. \u201cIt’s a mad rush right now, and I don’t think it’s over.\u201d<\/p>\n Exelon and its utilities, which operate in states that bar utilities from owning generation, are considering \u201call options\u201d for getting more power supplies into PJM, including getting back into rate-regulated generation, according to Sauer.<\/p>\n