Capacity prices in the PJM Interconnection’s latest capacity auction have reached a record high of $329.17/MW-day, up 22% from last year. This increase is expected to lead to 1.5% to 5% bill increases for some ratepayers, depending on their state.
The price cap was established in an agreement with Pennsylvania Governor Josh Shapiro and would have been nearly $389/MW-day without it. PJM’s capacity auction has seen significant growth over the past year, with total costs increasing from $2.2 billion to $16.1 billion.
The auction revealed that gas-fired generation accounted for 45% of cleared capacity, followed by nuclear at 21%, coal at 22%, hydroelectric at 4%, wind at 3%, and solar at 1%. Demand response offered in the auction was flat at 8,010 MW.
PJM’s executive vice president, Stu Bresler, attributed the high capacity prices to supply and demand conditions being tight. However, analysts note that there is ongoing consolidation in the power sector, with some companies considering rate-regulated generation as an option.
Consumer advocates have expressed concerns about rising costs being passed on to the public, while power plant owners hailed the results as a sign of progress in PJM. The grid operator plans to hold a base capacity auction for the 2027-28 delivery year in December.
Analysts predict that clearing at the cap is probable for the next auction due to limited supply response and reduced eligible capacity. However, political intervention could affect pricing.
Source: https://www.utilitydive.com/news/pjm-interconnection-capacity-auction-prices/753798