Sunday, May 31, 2026 · 02:44 PM
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PJM Interconnection's December capacity auction cleared at $333.44 per megawatt-day — the federally mandated price cap — across every zone in the grid. The grid operator procured 145,777 MW, falling 6,625 MW below its 20% reserve margin target, the cushion designed to prevent blackouts more than once a decade. Capacity prices hit a record $16.4 billion, yet for the first time in PJM history, the auction for the June 2027 through May 2028 delivery year dropped 5.2 percent below what's needed to guarantee reliability.
The market sent a price signal that nobody can answer. Without the temporary price cap agreed with Pennsylvania Governor Josh Shapiro, the auction would have cleared near $530 per megawatt-day — 60% higher. Ratepayers are paying maximum price for a grid that openly admits it cannot meet summer 2027 peak demand, and the generating capacity to fix it won't arrive for years. Nearly 5,100 MW of the demand increase is attributable to data centers, and PJM projects peak demand will grow by 32 gigawatts from 2024 to 2030, with all but 2 gigawatts coming from data centers.
Only 2.7 gigawatts of new generation came online in the 12 months preceding the July auction, and a fast-track procurement secured mostly gas plants that won't be operational until 2030 or later. PJM faces a backlog of more than 100 gigawatts of power capacity — the vast majority solar, wind, and batteries — stuck in interconnection limbo. The region faces permitting challenges, turbine shortages, and a difficult financing environment that have added years to gas plant construction timelines. The December auction cleared just 774 MW of new generation and uprates.
This isn't a supply shock; it's a market failure by design. The 1970s and 1980s saw utilities build baseload generation three to five years ahead of projected demand because regulation forced them to. Investment preceded need. Restructured markets do the opposite: prices rise only after shortages begin to form, leaving developers little time to respond, and by the time new capacity comes online, consumers have already paid through higher bills and reliability risks. PJM is now auctioning capacity 15 months before delivery instead of the designed 36 months, compressing response time to nothing.
What matters now:
- June 2026 auction: The next capacity auction for 2028-2029 is scheduled for June 2026 and could trigger emergency backstop measures if supply again falls short.
- Rate shock incoming: Utility supply rates across PJM have increased between 5% and 44% since June 2025, and further increases of 1.5% to 5% are expected for the period starting June 2026.
- Reliability gap widens: PJM's rules require an investigation when it misses the reserve target by more than one percentage point; it missed by 5.2 percentage points, potentially triggering backstop procurement.