PJM Capacity Auctions Clear at Capped Prices as Shortfalls Grow Under AI Power Demand
The capacity market for PJM Interconnection—the nation’s largest grid operator serving 67 million people across 13 Mid-Atlantic and Midwestern states—continues to experience severe, systemic supply-demand imbalances. On July 14, 2026, PJM released the results of its 2028/2029 Base Residual Auction (BRA), revealing that the grid has failed to secure enough generation capacity to meet its reliability requirements for the third consecutive year.
The auction cleared 138,318 MW of unforced capacity (UCAP) and demand response, leaving PJM 6,831 MW short of its standard one-event-in-10-year reliability requirement. This shortfall has widened from the ~6,500 MW deficit recorded in the previous 2027/2028 auction cycle, driven by rapid AI data center load growth outpacing new generation interconnections and fossil-fuel plant retirements.
Price Cap Prevents a 70% Ratepayer Bill Explosion
To insulate consumers from runaway market volatility, PJM utilized its FERC-approved capacity price collar. The clearing price hit the administrative price ceiling of $325 per MW-day (UCAP) across the entire PJM footprint, representing a minor 2.5% decrease from the 2027/2028 auction cap of $333.44/MW-day. The total cleared supply cost reached $16.4 billion.
However, PJM's official results show that without the regulatory price cap, market clearing prices would have exploded:
- The system-wide price would have cleared at $554.72 per MW-day—a 70.7% increase over the capped price.
- In the constrained ComEd zone (serving northern Illinois and the Chicago data center hub), prices would have cleared at a staggering $776.69 per MW-day (a 139% increase over the cap).
While the price cap protected ratepayers from an immediate multi-billion dollar bill surge, it does not resolve the physical supply gap. PJM is continuing to hold a tight reserve margin of 14.7% for the 2028/2029 delivery year.
Grid Operator Response and Future Auctions
To address the persistent capacity deficit, PJM has accelerated its planning timeline. The next Base Residual Auction, covering the 2029/2030 Delivery Year, is scheduled for December 2026 as PJM works to return to its standard three-year-forward planning cycle.
Additionally, PJM has proposed an emergency, one-time Reliability Backstop Procurement (RBP) auction targeting roughly 9 GW of new resources, which is slated to carry a higher price cap of $555/MW-day to incentivize fast-tracked generation development.