The PJM Interconnection Board of Managers has informed stakeholders of its support for undertaking immediate actions to provide for resource adequacy in light of the continuing and rapid tightening of grid power supplies versus growing demand for electricity, PJM said on Dec. 10.
A capacity shortage may affect the PJM system as early as the 2026/2027 Delivery Year, when the 2025 Long-Term Load Forecast is taken into account, PJM Board Chair Mark Takahashi noted in a Dec. 9 letter to stakeholders. As outlined in the letter, this imbalance of future electricity supply and demand is being driven by the following trends:
- Electrification coupled with the proliferation of high-demand data centers resulting in material forecasted load growth for the foreseeable future
- Retirement of thermal generators at a rapid pace due to policy and economic pressures
- Slow new entry of replacement generation resources due to a combination of industry forces, including siting, permitting and supply chain constraints
- The significant volume of resources in the new services queue that are being processed pursuant to the Federal Energy Regulatory Commission's order on PJM’s interconnection process reform, with a high proportion of intermittent resources that don’t have the same capacity value and operational characteristics as the retiring thermal generating fleet
To mitigate the risk of a capacity shortage, the letter said that the Board "supports the efforts outlined here that are intended to (1) bring capacity online more expeditiously through the interconnection queue; and (2) make sure price signals accurately reflect current supply-demand fundamentals.”
These efforts include:
- Capacity Interconnection Rights (CIR) Transfer Reforms: Stakeholders supported a reform package that will facilitate an expedited interconnection process for a replacement resource seeking to utilize the CIRs of a deactivating resource. As endorsed, the Replacement Generation Interconnection Process would stand alone outside of the PJM cycle process and operate in parallel. PJM plans to make this filing in early 2025.
- Surplus Interconnection Service (SIS): PJM presented a proposal to streamline existing SIS Tariff provisions to allow for new generators that do not trigger transmission system upgrades to use an existing generator’s unused interconnection capability and avoid being processed through the generation interconnection queue. By taking a less restrictive approach to SIS, PJM will be in a better position to maximize system benefits and enhance resource adequacy without the need for additional network upgrades.
- Reliability Resource Initiative (RRI): The RRI represents a narrowly tailored, limited-duration proposal designed to expedite the interconnection of a limited number of shovel-ready generating resources that are not presently in the Transition Cycle #2 (TC2) interconnection queue. This proposal reflects the growing urgency to connect generating resources that have a high likelihood of being able to materially support resource adequacy and maintain grid reliability in the near term.
- Capacity Market Adjustments: PJM is consistently seeking to perfect the capacity market because it is conscious that consumers ultimately will pay for the auction’s results. Thus, the market should reflect supply-demand fundamentals and evolve as the system evolves. PJM staff has presented reforms that are modest and sensible and reflect system realities. These reforms were initially proposed by a combination of load interests and generation owners – a pairing of interests that is atypical in the PJM sphere.
The proposal on capacity market adjustments was filed with FERC on Dec. 9. The filing for the Reliability Resource Initiative (PDF) was made Dec. 13.
The filing for Surplus Interconnection Service is to be made soon after the posting of the Board’s Dec. 9 letter, the Board stated. The filing for CIR transfer will be made in early 2025.
Other Capacity Market Reform Requests
PJM and stakeholders are pursuing other capacity market reforms in separate forums. These include:
- Enhancements to the Effective Load Carrying Capability framework have been brought to the stakeholder process via a new Problem Statement/Issue Charge. The Board’s goal is to have these enhancements in effect for the 2027/2028 Base Residual Auction.
- PJM would like to explore a sub-annual market construct with the stakeholders. This is a longer-term endeavor that will require more analytical rigor, but PJM hopes to move this effort forward soon.
- PJM staff recently indicated the desire to make a separate filing on a must-offer requirement for all resources with CIRs and related Market Seller Offer Cap changes in time for the 2026/2027 Base Residual Auction. The Board supports PJM staff’s exploration of the matter and its desire to consult with the stakeholders. The Board has yet to make a determination as to whether it supports such a filing. Rather, the Board wants to hear stakeholder feedback prior to making any such decision.
