Let's take a look at @pjminterconnect's capacity auction, shall we?...
Travis Kavulla@TKavulla
7 views
Jul 24, 2025
~3 min read
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Let's take a look at @pjminterconnect's capacity auction, shall we?
This market is tighter than a pair of skinny jeans. Only 17 MWs of capacity [solar, it would seem] was offered but did not clear (out of 134,205 MWs). 🧵
This market is tighter than a pair of skinny jeans. Only 17 MWs of capacity [solar, it would seem] was offered but did not clear (out of 134,205 MWs). 🧵
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The price that results from such an auction should be high enough to send a signal to retain retiring units, encourage demand response, and bring on new entry.
We can safely ✅ the retirements box. Ain't nothing worth anything leaving if they can help it. But....
We can safely ✅ the retirements box. Ain't nothing worth anything leaving if they can help it. But....
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On new entry, the lead time is longer than the auction's 2026-27 delivery period, & there's a clear signal and people are racing to get generation online. This auction price will add confidence to generation developer ambitions, but if new entry cost > price cap, not great.
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This is an interconnection queue problem to some extent, but PJM has finally kicked things into gear (see below) and... still kaput. A supply chain and vintaging problem of certain generation projects.
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Demand response is still a Commercial & Industrial game in PJM (unlike in ERCOT and the UK, where it is quickly evolving to residential customers).
Volumes held steady, though changes to accreditation meant lower ratings this year, to be followed by higher ones next year.
Volumes held steady, though changes to accreditation meant lower ratings this year, to be followed by higher ones next year.
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Lots of fingers pointed at Supply but state officeholders' first imperative here should be to figure out how to convert advanced metering into a workable platform to ensure this market has two co-equal sides: Supply and Demand.
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So what about consumer impacts? PJM estimates 1-5% impacts on average. Not sure how they came up with that number. Impacts will vary widely.
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Some consumers (e.g., me!) won't feel any impact. I'm supplied under a 5-year fixed price contract which I signed before MD effectively abolished residential retail competition. The capacity market goes up, goes down, and either way it has no impact on my bill.
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How many people even knew that state policy gave them this option? Very few. A lack of bilateral contracting and hedging is a substantial problem in the PJM region. This isn't entirely or even mostly PJM's fault, but PJM's new leadership will need to provide vision & options here
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Meanwhile, if you translate these capacity prices into a $/MWh, based on customer profile, you would generally get between $20-30/MWh. That's real money (it was previously <$10) but still ~10-20% of a total customer bill.
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Finally, the price cap instituted by FERC-approved settlement between PA & PJM meant much lower prices for Maryland and Virginia, and slightly higher (than last auction) and slightly lower (vs a hypothetical counterfactual) for the rest of the RTO.
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You can look at the price cap's function in all sorts of ways to suit your political narrative, so pick your poison of all these half-truths:
1. Load saved money & got the same service for a lower price.
2. It's a subsidy from economies like PA, OH, and IL to MD & VA.
3. It had a negative effect on renewable entry
4. Price caps, once instituted, never go away, and price caps that do not reflect the marginal cost of a product in a scarce market are not the good thing many people think they are.
1. Load saved money & got the same service for a lower price.
2. It's a subsidy from economies like PA, OH, and IL to MD & VA.
3. It had a negative effect on renewable entry
4. Price caps, once instituted, never go away, and price caps that do not reflect the marginal cost of a product in a scarce market are not the good thing many people think they are.
