PJM’s 2027/28 Capacity Auction: Prices Hold Steady, Reliability Questions Rise
- Tony Zelinski
- 7 minutes ago
- 3 min read
PJM released the results of its Base Residual Auction (BRA) for the 2027/28 delivery year, and while the headline number looks familiar, the underlying dynamics tell a more complicated story. Clearing prices once again settled at the FERC‑approved cap of $333.44/MW‑day, only a modest 1.3% increase from last year’s auction. But beneath that stability lies the first system‑wide capacity shortfall in PJM’s history.
For businesses operating in the PJM footprint, this auction offers both clarity and caution.
A Stable Price Masking a Tightening System
The RTO-wide clearing price hit the cap again, signaling persistent supply constraints and strong demand pressure. Total unforced capacity (UCAP) procured reached 145,777 MW, up slightly from last year but still 6,623 MW short of PJM’s reliability requirement—a notable milestone and a warning sign for future planning.
PJM’s reserve margin now sits at 14.8%, below the 20% Installed Reserve Margin (IRM) needed to maintain the one‑day‑in‑10‑years reliability standard.
Any shortfall greater than one percentage point triggers an investigation, and this auction cleared 5.2 percentage points below that threshold.
What’s Driving the Tightness?
Several structural forces shaped this auction:
1. Surging Data Center Demand
Forecasted peak load for 2027/28 jumped by 5,250 MW, with 5,100 MW of that increase tied directly to data center growth—one of the most aggressive demand expansions PJM has ever modeled.
2. Retirement Risk
Announced generator retirements continue to pressure supply. PJM notes that reliability could improve if some of these units remain online longer than expected.
3. Seasonal Mismatch
Winter‑only resources that couldn’t be paired with summer‑only resources failed to clear an annual commitment. These assets may still support winter reliability, but they don’t count toward BRA capacity.
Supply Growth Isn’t Keeping Pace
Despite the tightness, supply did increase:
BRA supply offered:Â 136,148 MW (up from 135,192 MW)
Total installed capacity in PJM:Â 200,994 MW (up 4,344 MW year over year)
New generation and uprates contributed 774 MW UCAP, but not enough to offset rising demand and retirement pressures.
What This Means for Your Costs
Capacity charges remain a major component of commercial energy costs. Using the 2027/28 clearing price:
Monthly cost for a 1 MW PLC:  (333.44 × 31 = $10,337)
Annual cost:  (333.44 × 365 = $121,706)
That’s a modest increase from the 2026/27 delivery year, but still meaningful for large‑load customers.
This is where load management becomes a strategic lever. While you can’t control the clearing price, you can influence your Peak Load Contribution (PLC)—and that’s where businesses can materially reduce exposure.
Looking Ahead: Auctions Return to Normal Cadence
After several years of regulatory delays and compressed timelines, PJM expects to return to its traditional three‑year‑forward auction schedule in May 2027, when it plans to run the BRA for the 2030/31 delivery year.
Upcoming milestones:
February 2027:Â Incremental Auction for 2027/28
June 2026:Â BRA for the 2028/29 delivery year
One final note: PJM’s simulation of the auction without the price cap suggests the clearing price would have reached $529.80/MW‑day—a powerful indicator of underlying market tightness.
Bottom Line
The 2027/28 BRA delivers a familiar price but a very different message. PJM’s grid is tightening, demand is accelerating, and reliability margins are narrowing. For businesses, this is a moment to double down on:
Peak load management
Long‑term procurement strategy
Understanding how capacity risk flows into total energy cost
#PJM #CapacityMarket #ElectricityMarkets #GridReliability #EnergyMarkets #DataCenters #AIGrowth #CloudComputing #LoadGrowth
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