PJM Grid Auction Hits Price Cap Amid Power Shortfall

The regional grid operator PJM Interconnection announced that its capacity auction for the 2028 and 2029 delivery years hit a maximum price cap of $325 per megawatt-day. The auction failed to meet the reliability requirement, resulting in a shortfall of approximately 6,831 megawatts. This marks the second consecutive auction to miss the operator's 20% installed reserve margin target, creating a larger deficit than the previous year.

President and CEO David Mills attributed the imbalance to electricity demand growing faster than supply, fueled by the expansion of data centers, increased electrification, and the retirement of fossil fuel plants. Without the price cap, which was extended at the request of the Trump administration and several governors, PJM estimates costs would have risen from $16.4 billion to $29.7 billion, with prices reaching as high as $777 per megawatt-day in Northern Illinois.

Chief Operating Officer Stu Bresler noted that the system faces increased risk during extreme stress conditions. In response, PJM is preparing proposals for the Federal Energy Regulatory Commission regarding a backstop capacity auction and a connect and manage framework for data centers. While power producers like Constellation Energy expect significant revenue increases, some Pennsylvania utilities have already raised rates for non-shopping consumers by up to 20% to cover the high costs.