PJM Capacity Auction Reveals Shrinking Power Supply Amid Rising Demand
PJM's latest capacity auction for 2028-29 shows a shrinking power supply and rising electricity demand, driven in part by data center growth, leading to higher prices and reliability concerns across 13 states and Washington, D.C. The grid operator is proposing new frameworks to manage demand and secure federal approval for a reliability backstop. Environmental groups are calling for data centers to bear more of the grid costs and for faster integration of clean energy.
PJM, the grid operator for 67 million people across 13 states and Washington, D.C., recently held its 2028-2029 Base Residual Auction, revealing that demand for electricity continues to outpace supply. David Mills, PJM president and CEO, stated that the supply-and-demand imbalance impacts system reliability and consumer costs, emphasizing the need for new generation and load management, particularly in light of the data center boom.
The auction results showed the price reaching the federally approved cap of $325 per MW-day across the PJM region, a slight decrease from the previous auction, but still indicating high costs. Katie Blume, coalition chair of Clean Power PA, attributed these high prices to surging data center demand and a less reliable grid, crediting Gov. Josh Shapiro's negotiated price cap with preventing steeper increases. However, Blume, along with Claire Lang-Ree of the Natural Resources Defense Council, called for data centers to pay their fair share of grid costs and for accelerated integration of renewable energy sources.
For the second consecutive auction, PJM secured less capacity than required to meet its reliability target, falling short by 6,831 MW for the 2028-2029 operating year. Despite this shortfall, PJM maintains a reserve margin and is working to address the issue by clearing its project queue, prioritizing new generation, and developing "Connect and Manage" frameworks for large users like data centers. PJM also plans to seek Federal Energy Regulatory Commission approval for a Reliability Backstop Procurement in the coming weeks to address near-term supply needs.