The $29 Billion Power Bill: Inside PJM’s Capacity Shortfall
Capacity auction results for PJM’s 2028/29 delivery year were consistent. Once again the $325/MW-day price cap was hit. And once again, the desired quantities of capacity fell short of the amount deemed necessary to meet PJM’s planned reserve margin of 20%.
The amount of capacity that cleared the auction was 149,181 MW, 6,831 MW below PJM’ desired 20% reserve margins to ensure grid reliability under worst-case conditions. The shortfall increased by 300 MW from last year.
The total level of new supply was just under 525 MW.
PJM also ran a simulated auction absent the price collar and in all markets except Chicago, the price would have cleared at close to $555. The Chicago area would have been almost $777/MW-day.
That compares to a range of $28.92 to $50 per MW-day for 2022-2025, before massive data center forecasted loads entered the picture.
Data center actual and forecasted load increased costs by $6.3 billion, and by $29.4 over the past four capacity auctions, representing 46% of total capacity-related charges.
The cap stifles potential new investment, which can either go into other markets or into
PJM’s September Backstop Reliability Auction for large loads that pays more and offers longer price certainty.
With turbine manufacturers in sold out positions through 2030, and higher costs to generate power, expect the next auction to achieve similar results: capped prices and limited new supplies.
The big surprise was Demand Response and Distributed Energy resources were also limited. I’m at a loss to explain this one, so perhaps somebody can explain.
FERC chair Laura Swett commented on the supply shortfalls. FERC has scheduled a technical conference on July 23 to address these issues.