The PJM Interconnection will open its annual capacity auction June 30 for the delivery year beginning June 2028.
“Once followed mainly by industry insiders, PJM’s capacity auction is now receiving broader attention from policymakers and consumers alike. That reflects a more fundamental shift: Recent auction results have become one of the clearest indicators that electricity demand is growing faster than new generation can be built to supply it,” wrote Adam Keech, Sr. Vice President – Market Services at PJM in a recent post.
The primary driver of that growth is data centers, he said. “New data center facilities and expansions of existing sites can be developed quickly, up to two to three times faster than many of the electricity generation technologies that are necessary to serve them and allow PJM to maintain the reliability customers expect,” wrote Keech.
The tightening balance of supply versus demand has contributed to higher capacity prices and raised concerns about the long-term ability of the system to deliver reliable service on a 24/7 basis.
“We recognize both the urgency of this challenge and the impact that higher electricity costs can have on households and businesses. In coordination with the governors of all 13 PJM states, PJM implemented a price cap and floor for the previous two auctions and extended those parameters to this auction and the next one in December 2026 to help limit volatility for consumers and investors alike,” Keech said.
The offer window for the 2028/2029 capacity auction will open on June 30 and close on July 7, and results will be posted after 4 p.m. on July 14. Prices are capped at approximately $325/MW-day, with a floor of $175/MW-day. In practical terms, that means prices are unlikely to change significantly from year to year under the current structure.
“While the price cap and floor may reduce volatility, they do not solve the underlying supply-demand imbalance. Addressing that challenge requires either bringing more resources onto the system or moderating the pace of demand growth,” wrote Keech.
In his post, he listed the following with respect to what PJM is doing:
• Streamlining the generation interconnection process, including a collaboration with Google’s Tapestry to leverage AI to reduce study timelines
• Procuring additional resources through a Reliability Backstop Procurement to address near-term reliability needs and allocate the costs consistent with state preferences
• Maximizing the performance and availability of existing generation resources
• Developing frameworks that allow large new loads, such as data centers, to connect to the system but operate flexibly when needed to limit disruptions to other consumers
What’s Next?
On June 30, PJM will enter the final phase of its Critical Issue Fast Path process, which will lead to filings with FERC in July.
These filings are expected to include:
• A “backstop” central procurement process, similar to an auction, which PJM has proposed to conduct in September and October to help address the anticipated capacity shortfall for the 2028/2029 Delivery Year. This process would focus on new resources and provide options for states to tailor the cost allocation to those they deem appropriate.
• A “Connect and Manage” framework in which PJM would collect information regarding new large loads in its footprint and provide that information to Transmission Owners and distribution companies to allow them, in conjunction with the states regulating them, to make decisions on service priority when the system is stressed.
"In addition, reflecting strong stakeholder interest, on June 9 PJM began facilitating new bilateral, long-term agreements between large load customers and generation providers," Keech noted.
These contracts – often spanning 10 years or more – would allow buyers to secure supply from new generation, storage or demand-side resources. PJM issued a Request for Proposal to support this matching process, while market participants remain free to pursue such bilateral arrangements independently.
"The challenges facing the electric system will not be solved overnight. But PJM is pursuing a range of near-term and long-term solutions aimed at maintaining reliability, supporting economic growth and enabling regulators to protect consumers," he said.
