As electricity demand continues to rise across the United States, the PJM Interconnection’s latest power auction has once again hit its federally mandated price limit, raising questions about future energy supply and costs. This marks a critical moment for the largest grid operator in the U.S., as it navigates the complexities of balancing supply and demand amid evolving energy needs.
In the 2028/2029 Base Residual Auction, PJM Interconnection reached the maximum price cap of $325 per megawatt-day, a ceiling set by a coalition of 13 state governors and the Federal Energy Regulatory Commission (FERC). The auction, without this price collar, would have seen prices soar to $554.72 per megawatt-day, almost doubling the total auction cost from $16.4 billion to nearly $30 billion. More details can be found in the PJM capacity auction report.
This auction marks the third successive instance where PJM’s auction has reached the price cap. Initially, the collar was approved for two auctions, but FERC accepted PJM’s request to extend it to cover the latest auction and the subsequent one, set to conclude on December 15 for the 2029/2030 Delivery Year. The FERC approval details provide more context.
The clearing price for the 2028/2029 auction represents a 2.5% decrease from the previous year’s cap, the first decline since a dramatic increase in the 2025/2026 auction drew significant industry attention. This shift in pricing is significant as it underscores ongoing challenges in meeting energy demands.
Looming Shortfall
In this auction, PJM secured 13,318 MW of unforced capacity generation and demand response, meeting the needs of over 67 million people. Additional resources from regions under the Fixed Resource Requirement brought the total to 149,182 MW, falling short of PJM’s 20% target reserve margin by 6,831 MW. This shortfall is consistent with the previous auction, where the grid operator also failed to meet the reliability standard.
PJM acknowledges that the shortfall doesn’t necessarily imply an inability to serve demand reliably but does indicate that the grid will operate with a tighter reserve margin of 14.7% for the 2028/2029 Delivery Year. For more information, visit PJM’s official statement.
PJM’s Plan
PJM President and CEO David Mills remarked, “These auction results show that demand for electricity continues to grow faster than electricity supply.” PJM is actively working on multiple strategies to address the supply-demand imbalance, which include:
- Clearing the generation interconnection queue backlog with the help of Google’s Tapestry AI to reduce study timelines.
- Planning a Reliability Backstop Procurement to address near-term reliability needs.
- Developing frameworks to allow new loads, such as data centers, to connect and operate flexibly.
- Creating an Expedited Interconnection Track for state-sponsored projects.
- Maximizing performance and availability of existing resources.
- Collaborating on long-term market reform as outlined in their Powering Reliability Through Market Design report.
PJM plans to seek FERC approval for a special “Backstop Procurement” in September to address the immediate shortfall and intends to submit further filings for its Reliability Backstop and Connect and Manage proposals soon.
Impact on Electricity Prices
Although wholesale capacity from these auctions accounts for only a portion of wholesale electricity costs, PJM customers continue to face rising costs. The Sierra Club criticizes PJM’s planning and the projected energy demand from data centers, citing an independent analysis that reported a significant increase in annual customer costs since June 2025. For further analysis, refer to the independent analysis.
Sierra Club senior advisor Jessi Eidbo stated, “It’s little surprise that this capacity auction also hit the auction ceiling once again.” Eidbo emphasizes the need for a long-term solution rather than temporary protections like the price collar. The Sierra Club also calls for responsible data center development and more clean energy integration to lower customer costs.
The Energy Mix
Critics like the Sierra Club highlight PJM’s reliance on fossil fuels. For the 2028/2029 year, 64% of PJM’s generation will come from gas and coal. The auction results show a mix of 46% natural gas, 20% nuclear, 18% coal, with smaller contributions from demand response, hydro, wind, oil, and solar. The auction also cleared 525 MW of new generation and uprates, increasing total capacity from the previous year. Explore more about the auction results in the auction report.
The energy mix and capacity changes highlight the ongoing challenges PJM faces in balancing reliable supply with environmental and economic considerations.
Original Story at www.renewableenergyworld.com