PJM’s 2028/2029 Capacity Auction: What Large Energy Users Should Know

Understanding the PJM Base Residual Auction

PJM runs a forward-looking capacity market through its Reliability Pricing Model (RPM). Its job is simple: help make sure enough generation resources will be available in future planning years to meet expected demand across 13 states and the District of Columbia.

The Base Residual Auction (BRA) is the main tool PJM uses to buy that future capacity. Through the auction, generation resources are paid for committing capacity to the grid for a specific delivery year. Load-serving entities and, ultimately, commercial and industrial customers pay for that capacity through supply costs.

Put simply, the capacity market is designed to help ensure energy is available when the grid is under the most stress.

Exploring the 2028/2029 PJM Capacity Auction Results

PJM recently released the capacity auction results for the 2028/2029 planning year. The auction cleared at $325.00/MW-day across the Regional Transmission Organization (RTO), the Mid-Atlantic Area Council (MAAC) and the Eastern Mid-Atlantic Area Council (EMAAC). That price hit the ceiling for the auction collar for this planning year. It also continues a broader trend of elevated capacity prices across PJM.

For context, historical clearing prices for the RTO zone include:

While the 2028/2029 result came in slightly below the prior year, it is still well above many earlier planning years.

PJM’s no-collar simulation offers another important signal. Without the price cap, the 2028/2029 clearing price would have reached $554.72/MW-day. That gap suggests the market is still signaling a shortage of generation relative to rising demand.

How Capacity Impacts Total Delivered Cost

Forward energy prices matter, but they are only one piece of your total delivered cost. For many large commercial and industrial users, capacity can represent a sizable share of overall spend. In the example below, a heavy manufacturing facility operating at a 70% load factor had a cost stack where capacity represented 27% of total cost.

Heavy Manufacturing Facility in Ohio:

When capacity takes up that much of the cost stack, it becomes something worth managing, not just absorbing.

Managing Costs Through Peak Load Planning

Capacity is a demand-based cost. For qualifying customers, PJM capacity charges are based on a facility’s Peak Load Contribution (PLC). That value is tied to your average usage during the five highest peak hours across the five highest peak days in summer. These are known as the 5 Coincident Peak (5CP) intervals.

If your business can reduce demand during those hours, you may be able to lower your PLC and reduce capacity charges for the following 12-month market year.

Forecasting support can make that process easier. Through our 5CP Service, on non-holiday weekdays, customers can receive 9 a.m. Eastern Time emails that show the probability of a coincident peak event as High, Medium or Low, along with a weekly outlook and updates if a likely peak develops later in the day.

Recent summer heat waves show why that kind of planning matters.

During the June 30 to July 5 heat wave, PJM preliminarily set an unrestricted system peak load of 168,158 MW on July 2. That surpassed the previous record of 165,563 MW set on August 2, 2006. On that day, the Regional Transmission Organization average temperature reached 97°F and forced generation outages ranged from 18,100 MW to 19,400 MW. Conditions like these can put real strain on the grid, which is why peak notifications, operational readiness and load flexibility can make a difference for your budget.

Creating Revenue Opportunities with Demand Response

Higher capacity costs are challenging, but they can also create opportunities for businesses with flexibility. Demand response programs let you earn revenue by reducing or shifting energy use when the grid is under stress or when market prices spike.

During the July 2 heat wave, demand response participants contributed an estimated 6,100 MW of load reduction. They followed that with an estimated 5,000 MW on July 3. For large users in PJM, the value can be meaningful. Through our partnership with Voltus, customers can earn up to $400K/MW-yr in PJM for being available to curtail load when dispatched.

Strategic Procurement Steps for Your Organization

If you are reviewing your options, these are a few helpful questions to ask:

• What is our current Peak Load Contribution and how is it affecting our bills?
• Do we have interval meter data available to analyze usage during extreme summer conditions?
• Can our facility reduce load or shift processes during possible 5 Coincident Peak events?
• What would happen to our capacity spend if we miss one or two peak events?
• Would demand response be a fit for our operations and revenue goals?
• Are we reviewing both energy price trends and capacity exposure when we evaluate contract renewals?

When you understand your load profile, monitor likely peak conditions and evaluate demand response options, you put your business in a better position to manage rising capacity costs.