PJM’s Capacity Price Eases to $325 per Megawatt-Day, But the Reliability Gap Just Got Worse
The auction CRE owners were told to watch broke a three-year streak of record prices. The shortfall behind it did not.
By Keith Reynolds | Publisher & Editor, ChargedUp!
PJM Interconnection’s capacity price fell for the first time in three years, and that is not the reassuring signal it sounds like. PJM’s 2028/2029 Base Residual Auction cleared July 14 at $325 per megawatt-day, a 2.5 percent decrease from the record $333.44 set eight months earlier. At the same time, the grid operator secured 6,831 megawatts less capacity than its reliability standard requires, a wider gap than the prior auction left. For owners, the price dip is not relief. The scarcity driving it is still building, and PJM used the same month to move from pricing the problem to governing it, with new rules that put electrical capacity directly into site underwriting.
Key Facts at a Glance
PJM’s 2028/2029 Base Residual Auction cleared at $325 per megawatt-day, down 2.5 percent from the 2027/2028 auction’s record $333.44 and ending three consecutive record-setting auctions.
The auction secured 138,318 megawatts of capacity, more than the prior year, yet still landed 6,831 megawatts short of PJM’s reliability requirement, up from a 6,623-megawatt shortfall the year before.
PJM’s negotiated price cap, originally approved for two auctions, has been extended through the next auction, scheduled for December 2026 for the 2029/2030 delivery year.
PJM operates the grid for 13 states and Washington, D.C., serving more than 67 million people.
In August, PJM proposed a Large Load Registry and new curtailment priority rules for data centers, and opened a one-time Reliability Backstop Procurement running Sept. 30 through Oct. 21, with results due in early December.
The Price Streak Breaks, but the Pressure Behind It Does Not
PJM’s capacity price has climbed sharply since 2025: $269.92 per megawatt-day for the 2025/2026 delivery year, then $329.17, then a record $333.44 for 2027/2028. Pennsylvania Gov. Josh Shapiro’s complaint to the Federal Energy Regulatory Commission (FERC) produced a negotiated price collar covering that run, and PJM has since extended it through the newest auction and the next. Without the collar, PJM estimates this auction would have cleared at $554.72 per megawatt-day, nearly 71 percent higher. The collar is doing exactly what it was designed to do. It is also the reason a falling headline price does not mean falling underlying risk.
The Reliability Gap Widens Even as Price Eases
The number that should hold an owner’s attention is not $325. It is 6,831. PJM’s cleared capacity fell further behind its own reliability requirement than in the prior auction, even as total procurement rose from 134,479 to 138,318 megawatts. Demand is still outrunning new supply, and data center load remains the primary driver, continuing the pattern PJM’s independent market monitor identified in the December 2025 auction, when data centers accounted for roughly 40 percent of the $16.4 billion in cleared costs. A cooler price with a wider gap is not a signal to stand down. It is a signal that the collar, not the market, is currently setting the price.
PJM Shifts From Pricing the Problem to Governing It
The more consequential change for property owners arrived a month later and had nothing to do with price. In August, PJM proposed a Large Load Registry to track large electricity users by location, scale and timing, alongside curtailment priority rules that would cut power to certain large loads before calling on Load Management customers, who are paid in advance to reduce use. PJM’s board also opened a one-time Reliability Backstop Procurement, running Sept. 30 through Oct. 21 with results expected in early December, aimed at closing the shortfall before it becomes an outage.
That turns power availability into a negotiated term, not a given. A site with firm, documented service now carries a different risk profile than one exposed to curtailment under the new priority rules, and that distinction belongs in lease language and tenant improvement schedules as much as in interconnection agreements.
How Owners Can Blunt the Exposure
A building’s capacity obligation is set by its demand during the grid’s peak hours, so cutting demand at those moments cuts the charge. Battery storage discharged during peak windows, demand response that curtails noncritical load, and onsite solar that offsets grid draw all reduce a property’s measured contribution to peak. In New York, CBRE reports that distributed battery project revenues could rise up to 80 percent under proposed reforms, and 57 percent of buildings covered by Local Law 97 are off track for their 2030 emissions limits, giving owners a second reason to pair storage with compliance strategy. The mechanics vary by market. The principle does not: control your peak, control the charge.
What to Watch Before December
Two dates now matter more than the auction price itself. The Reliability Backstop Procurement results land in early December, and PJM’s next Base Residual Auction, for the 2029/2030 delivery year, is scheduled for the same month. Both will show whether the widening reliability gap is closing or compounding, a better forward indicator than the collar-suppressed clearing price. In the meantime, the move for owners is to quantify peak demand and evaluate storage, demand response and onsite solar against the specific charge in the local tariff. Every $1,000 in durable annual savings adds roughly $12,500 to asset value at an 8 percent capitalization rate.
Read all ChargedUp! coverage of PJM Interconnection here.
Sources
PJM Inside Lines: PJM Kicks Off Initiative to Balance Reliability with Large Load Growth
PJM Inside Lines: PJM Board Directs Action on Resource Adequacy, Affordability and Large Loads
Utility Dive: PJM capacity prices hit record high as grid operator falls short of reliability target
CBRE: Q2 2026 Distributed Generation Opportunities
