Dems’ Crushing Regs Cause PJM Electric Prices to Soar 933% in 2025
“The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening across the RTO,” Manu Asthana, PJM’s president and CEO, said in a statement.
PJM Interconnection, the largest U.S. power grid operator, published the results of its latest electricity auction yesterday. PJM serves 65 million people in 13 states plus the District of Columbia (including PA, OH, and WV). The latest auction for delivery of electricity in PJM in 2025/26 produced a wholesale price of $269.92/MW-day. That is a massive 933% increase from the $28.92/MW per day cost for delivery in 2024/2025. Of great interest to us is the overall mix of how PJM’s electricity gets generated. The auction (for 2025/26) shows a diverse mix of resources, including 48% produced by gas, 21% by nuclear, 18% by coal, 1% by solar, 1% by wind, 4% by hydro, 5% by demand response and 2% from other resources. We hear the constant drumbeat by mainstream media pushing renewable energy, yet solar and wind are producing a minuscule 2% of PJM’s electricity. How does that square? We are fed whoppers every day from mainstream news about the so-called ascendance of renewable energy.
From S&P Global Commodity Insights:
PJM Interconnection’s capacity market auction for the 2025/2026 delivery year cleared at record high prices of $269.92/MW-day for much of the PJM footprint, compared to $28.92/MW-day for the 2024/2025 auction, due to tighter supply, higher demand and market rule changes, the grid operator said July 30.
“The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening across the RTO,” Manu Asthana, PJM’s president and CEO, said in a statement.
“The market is sending a price signal that should incent investment in resources,” he said.
The highest base residual auction clearing price was previously $$174.29/MW-day for the 2010/2011 delivery year, according to PJM data.
“We saw a reduction of about 6,600 MW of generation that either offered into the BRA … from resources that had already retired or were granted must offer exceptions signaling their intent to retire, so supply was down in the auction,” Stu Bresler, PJM’s executive vice president of market services and strategy, said during a conference call with reporters.
Additionally, peakload increased from 150,640 MW in the last auction to 153,883 MW in this auction, he said.
Finally, PJM said Federal Energy Regulatory Commission-approved market reforms, “including improved reliability risk modeling for extreme weather and [capacity] accreditation that more accurately values each resource’s contribution to reliability,” played a role in the higher capacity prices.
Additionally, the BGE and Dominion Zones, which are transmission capacity constrained, limiting the ability to import power, cleared at even higher prices of $466.35/MW-day and $444.26/MW-day, respectively.
Regarding the prospect of increasing power supplies, PJM said it “remains concerned with the slow pace of new generation construction,” as roughly 38,000 MW of resources have “already cleared PJM’s interconnection queue but have not been built due to external challenges, including financing, supply chain and siting/permitting issues.”
Steve Piper, director of energy research at S&P Global Commodity Insights said his team had forecast clearing prices at nearly $200/MW-day, largely due to the factors cited by PJM.
The next base residual capacity auction, for the 2026/2027 delivery year, is currently scheduled for December 2024, PJM said in the statement. (1)
From Bloomberg:
Power prices on the biggest US power grid are about to hit a record-high amid a wave of plant retirements and surging demand, thanks in part to new data centers being built.
Generators that provide electricity to the 13-state grid that stretches from New Jersey to Illinois will get a record $269.92 per megawatt-day from utilities to provide capacity over a 12-month period starting in June, according to results of an auction by grid operator PJM Interconnection LLC disclosed Tuesday. That’s more than a ninefold increase from $28.92 in last year’s auction.
“The market has spoken and it is saying you are going to have to pay a lot more for reliable power,” Paul Patterson, a power market analyst for Glenrock Associates, said in an interview.
The results of the auction underscore the challenges of the energy transition: cheap solar and wind power are making older plants, including coal-fired generators, less competitive, but a sudden burst of electric demand to meet the needs of factories and data centers to enable artificial intelligence along with broader electrification risks straining grids.
“We do believe those higher prices will send a clear investment signal” to maintaining existing resources and building new ones, Stu Bresler, PJM’s executive vice president of market services and strategy, said in a media briefing.
The PJM auction provides a critical revenue source for power plants in the region, shaping the electricity mix for a vast swath of the US. Those payments aim to ensure that generators are ready to serve the grid whenever PJM needs them. Electricity users — households and businesses alike — ultimately end up bearing the costs of such protections.
The auction results drove up share prices of power producers in the region, with both Vistra Corp. and Constellation Energy Corp. soaring more than 11% in after-market trading.
These so-called capacity prices are one component of wholesale electricity costs; the biggest piece being the actual cost for producing megawatts. These charges are passed on to consumers’ utility bills, but how quickly that happens on depends on each utility’s policies.
The latest PJM auction factors in extreme weather and reduced payouts to gas generators for the first time based on unplanned outages in winter storms. The amount of megawatts from some of the most efficient gas generators was reduced by about 20%, though some likely saw greater reductions depending on actual performance. This helped lift prices across the board.
Prices were driven up by a 6.6 gigawatts of generation shutting down or signaling the intention to retire.
Prices hit the price cap in two zones because of insufficient resources in those regions and grid bottlenecks: Exelon Corp.’s Baltimore Gas & Electric utility rose to $466.35 per megawatt-day and $444.26 for Dominion Energy Inc.’s Virginia utility, which is the data center capital of the nation.
“Capacity prices that rise this fast are a sign that the supply/demand balance is out of whack,” Lorig Charkoudian, a Maryland lawmaker who has been warning PJM of a coming supply crunch in Baltimore for years, said in an email. (2)
The announcement from PJM:
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What’s not mentioned in any of the talk about the soaring costs for PJM electricity is the root cause for why prices are increasing so much. It’s because coal plants are shuttering at an alarming rate, and new gas-fired plants are not coming online fast enough. The reason is regulations, mainly from the federal government (from the Bidenistas), that are holding back new gas-fired power plants. Onerous regulations have an effect. High prices are one of those effects.
