On July 30, the PJM Interconnection reported its latest electricity auction produced a wholesale price of $269.92/MW-day for much of the PJM footprint for delivery in 2025-26-- 933% more than the  $28.92/MW-day cost for delivery in the 2024/2025 auction.

Auction prices were significantly higher across the RTO, PJM said, due to decreased electricity supply caused primarily by a large number of generator retirements, combined with increased electricity demand and implementation of FERC-approved market reforms.

PJM said the higher prices send a clear investment signal across PJM’s 13 states and the District of Columbia.

“The capacity auction has been a valuable tool over time to help PJM competitively secure resources to meet reliability requirements,” said President and CEO Manu Asthana. “The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening across the RTO. The market is sending a price signal that should incent investment in resources.”

The auction cleared a diverse mix of resources, including 48% of gas, 21% of nuclear, 18% of coal, 1% of solar, 1% of wind, 4% of hydro, 5% of demand response and 2% from other resources.

Click Here for detailed results.

Specifically, PJM said the drivers of higher prices in this auction include--

-- Decreased supply offers into the auction due mainly to generator retirements;

-- Increase in projected peak load and

-- FERC-approved market reforms, including improved reliability risk modeling for extreme weather and accreditation that more accurately values each resource’s contribution to reliability

The amount of supply resources in the auction decreased again this year, continuing the trend from recent auctions and underlining PJM’s stated concerns (PDF) about generation resources facing pressure to retire without replacement capacity being built quickly enough to replace them.

Approximately 6,600 MW of generation have retired across the PJM footprint or have must-offer exceptions (signaling intent to retire) compared with the generators that offered in the 2024/2025  Base Residual Auction (BRA).

Meanwhile, the peak load forecast for the 2025/2026 Delivery Year has increased from 150,640 MW for the 2024/2025 BRA to 153,883 MW for the 2025/2026 Delivery Year.

Additionally, FERC-approved market reforms contributed to tightening the supply and demand balance by better estimating the impact of extreme weather on load and more accurately determining resource reliability value.

These reliability concerns associated with reducing supply and increasing demand are not limited to PJM; the North American Electric Reliability Corporation has identified elevated risk to the reliability of the electrical grid for much of the country outside of PJM.

[The reliability of natural gas was a significant part of these reliability concerns. Pennsylvania is dependent on natural gas for 59% of our electric generation.  See Resource Links below.]

The total procured capacity in the auction and resource commitments under FRR represents an 18.5% reserve margin, compared to a 20.4% reserve margin for the 2024/2025 Delivery Year.

Slow Pace Of New Generation

PJM remains concerned with the slow pace of new generation construction.

Approximately 38,000 MW of resources currently have already cleared PJM’s interconnection queue but have not been built due to external challenges, including financing, supply chain and siting/permitting issues.

“Interconnection process reform is proceeding, but hurdles remain for many projects outside of our process,” said Stu Bresler, Executive Vice President – Market Services and Strategy. “We are considering ways to accelerate those who can successfully overcome those challenges and build.”

While the price level across the RTO signals the need for investment in generation throughout the footprint, prices are higher, at the zonal cap, in the BGE zone in Maryland and the Dominion zone in Virginia and North Carolina.

This is due to insufficient resources inside those regions and constraints on the transmission system that limit the ability to import capacity.

These prices indicate that those regions would benefit from either additional resources, additional transmission to allow increased imports into those regions, or a combination of the two.

Click Here for the complete announcement.

Impact On Consumers

Electric utilities that supply customers with power buy electricity ahead of their need in different contract time periods so the impact of future price changes is not felt all at once. 

Depending on how your electric utility staggers these purchases will ultimately determine what impact these prices will have on the utility bill you receive.

It is clear, as many have warned, the price for electricity will be going up because new, cheaper generation-- renewables-- are not coming online fast enough

PJM Interconnection, founded in 1927, ensures the reliability of the high-voltage electric power system serving 65 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

Resource Links:

-- Pennsylvania’s Electric Grid Is Dependent On One Fuel To Generate 59% Of Our Electricity; Market Moving To Renewables + Storage  [PaEN]

-- PJM Makes Multiple Reliability-Focused Improvements To Prepare For Winter To Deal With 70% Natural Gas, Other Generator Nonperformance In 2022   [PaEN]

-- PJM Reports Natural Gas Power Plants Were Over Half The Forced Outages During Winter Storm Gerri In January; Special Procedures Used For Gas Generators Raised Questions About Market Impacts   [PaEN]

-- New NERC Winter Reliability Assessment Finds Elevated Risk Of Blackouts In Extreme Weather Conditions; Natural Gas Supplies Still Vulnerable To These Conditions With 'Devastating Consequences'   [PaEN]

-- US EIA Report Shows How Winter Storms Have Reduced US Natural Gas Production, But Disruptions Can Happen Any Time Of The Year   [PaEN]

Related Articles This Week:

-- PJM Electricity Auction Price 9 Times Higher Than Previous Auction-- $269.92/MW-Day For 2025/26 Delivery Compared To $28.92/MW-Day In 2024-25; Extreme Weather Risk Big Factor    [PaEN]

-- PennFuture: Dramatic PJM Electricity Price Increases Due To Forced Outages Of Gas Power Plants; Huge Backlog Of New Generation Projects; Demand Growth Driven By Data Centers, Cryptocurrency Mining  [PaEN]

-- Natural Resources Defense Council: The Cost Of Slow-Walking Clean Energy Can Be Seen In Latest PJM Electricity Prices  [PaEN]

-- Kleinman Center For Energy Policy: The High Price Of Failing To Transition To Clean Energy In PJM Footprint; Next PJM Auction Is In December - By John Quigley, Senior Fellow, Kleinman Center  [PaEN]

-- DEP Awards $15+ Million In PA Electric Grid Resilience Grants To Prevent, Shorten Power Outages In Rural Electric Systems; Fall Grant Round Planned  [PaEN]

-- DEP Awards $2.3 Million To Schools, Businesses, Local Governments Switching To Zero- Or Low-Emission Vehicles; Now Accepting Applications  [PaEN]

-- PA Solar Center, Philadelphia Solar Energy Assn., Partners Host Aug. 14 Webinar To Get Eligible Schools Ready To Apply For The New PA Solar For Schools Grants  [PaEN]

-- Allegheny County Health Dept. Accepting Applications For $5 Million In Local Climate Resiliency And Adaptation Project Grants [PaEN]

NewsClips This Week:

-- Utility Dive: PJM Capacity Auction To Lead To Double-Digit Rate Hikes For Exelon Utilities: CFO  [PECO]

-- Utility Dive: FirstEnergy Seeks Alternatives To PJM Capacity Market’s Dramatically Higher Prices To Bolster Power Supply

-- Meadville Tribune: National Fuel Natural Gas Rates Rising More Than 11% Aug. 1

-- Utility Dive: PJM Electric Capacity Prices Hit Record Highs, Sending Build Signal To Generators-- $14.7 Billion Up From $2.2 Billion In Last Auction

-- Bloomberg: PJM Interconnection Auction Results In Record Wholesale Electric Price Increases

-- Renewable Energy World: Energy Prices At PJM Capacity Auction Skyrocket 9x: Oh, That’s Not Good

-- Reuters: PJM Power Auction Results Yield Sharply Higher Prices

-- S&P Global: PJM Power Capacity Auction Clears At Record High Price Of $269.92/MW-Day For Most Of Footprint

-- Power Magazine: PJM Capacity Auction Prices Surge Over Nine-Fold, Signal Urgent Need For New Power Generation

-- RTO Insider: PJM Capacity Prices Spike 10-Fold In 2025/26 Auction

-- Bloomberg: Almost 20% Of Americans Face Prospect Of Higher Energy Bills

[Posted: July 30, 2024]

8/5/2024