PJM 2028/2029 Capacity Auction Clears at $325/MW-d: High Costs and Tight Reserves Continue
At first glance, PJM’s latest capacity auction result may look like a small improvement. The 2028/2029 Base Residual Auction cleared at $325/MW-day, down 2.5% from the previous auction’s $333.44/MW-day.
But the lower number does not signal meaningful relief.
The auction again cleared at the maximum price permitted under the temporary FERC-approved price collar. More importantly, PJM secured 6,831 MW less capacity than its reliability requirement—slightly worse than the shortfall in the prior auction. The result reinforces the same message businesses have been hearing for several years: electricity demand is growing faster than reliable supply, and elevated capacity costs are not going away.
Auction Highlights
PJM’s 2028/2029 auction secured 138,318 MW of generation and demand response through the capacity market. Combined with resources committed through Fixed Resource Requirement plans, PJM will have approximately 149,182 MW available for the delivery year beginning June 1, 2028.
Key results include:
Clearing price: $325/MW-day across the PJM footprint
Delivery year: June 1, 2028, through May 31, 2029
Reliability shortfall: 6,831 MW
Total reserve margin: 14.7%, compared with PJM’s 20% target
New generation and generation uprates: Approximately 525 MW
Total auction value: $16.4 billion
A Slight Decrease Does Not Mean Capacity Is Becoming Affordable
The $325/MW-day result is 2.5% below last year’s price. That may sound encouraging, but in reality, capacity remains near historic highs.
For a simplified example, consider a business with a 500 kW Peak Load Contribution.
At $325/MW-day, the annual capacity calculation for 2028/2029 will be approximately $325 × 0.5 MW × 365 days = $59,313.
That is slightly below $60,853 at the 2027/2028 rate. However, it remains more than eleven times the $5,366 calculation for the 2024/2025 delivery year.
This example illustrates that this auction did not reverse the capacity cost increase. It extended it into another planning year. PJM’s own auction history shows capacity moving from $28.92/MW-day in 2024/2025 to $269.92, $329.17, $333.44 and now $325 over the following four delivery years.
What Does the 6.8 GW Shortfall Mean?
PJM’s capacity market is designed to secure sufficient resources to meet forecasted peak demand, plus a reserve for extreme weather, unexpected plant outages, and other system stress.
For 2028/2029, PJM procured a total reserve margin of 14.7% instead of its 20% reliability target. This does not mean outages are expected or that PJM will be unable to serve customers. It means the grid is planning to operate with a smaller cushion and greater risk when conditions create additional stress on the grid .
PJM plans to seek federal approval for a special backstop procurement to address the gap. The proposal is still being developed, so the final procurement method and cost allocation are not yet known.
Why the Imbalance Persists
The auction included more offered supply than the prior auction, but demand requirements also continued to rise. PJM’s forecasted peak load increased by approximately 2,000 MW, reflecting the addition of large loads such as data centers.
At the same time, the auction cleared 525 MW less than the prior by way of new generation and upgrades to existing resources. Likewise, demand response participation declined modestly.
In other words, the grid added some supply, but not enough to keep pace with the increase in expected demand. The price cap limited how high the auction could clear, but it did not correct the underlying imbalance.
What Businesses Should Do Now
Capacity is no longer a dismissable line item that can be treated as unavoidable overhead. For many commercial and industrial customers, it is a major budget exposure tied directly to when the facility uses electricity.
Businesses cannot control PJM’s auction price, but they can influence the amount of capacity assigned to their accounts. Practical strategies include:
- Reviewing Peak Load Contribution tags and verifying the underlying data.
- Identifying operations that can be shifted during PJM’s five highest system peaks.
- Participating in demand response programs that provide revenue for load reductions.
- Using interval and utility data to identify avoidable demand and operational waste.
- Evaluating energy efficiency, on-site generation, or storage where financially appropriate.
These strategies require planning before the highest-demand days occur. Changes made during the current peak season generally influence capacity exposure in the delivery year corresponding to the auction.
Looking Ahead
The next capacity auction for the 2029/2030 delivery year is scheduled for December 2026. PJM is also advancing proposals intended to accelerate generation, address reliability shortfalls, and manage the connection of very large new loads.
For businesses, the takeaway is straightforward. Capacity planning should be part of proactive energy budgeting rather than a reaction after higher charges cause alarm.