​On December 17, 2025, PJM released the results of its capacity auction for the June 1, 2027–May 31, 2028 delivery period.

Prices cleared at the Federal Energy Regulatory Commission–permitted maximum ($333/MW-day), indicating that future reliability requirements are outpacing available generation. This outcome signals that PJM is willing to pay a premium for new resources that can support system reliability.

This was the second consecutive auction to expose a growing imbalance between generation and load, following the 2026/2027 delivery auction, which also cleared at a price cap. Batteries could capture higher revenue in this auction though, as updated capacity accreditation and a higher price cap drove potential returns for 4-hour systems up 17.5%.

Without the cap, the 2027/2028 auction would have cleared at $530/MW-day

PJM sets its capacity clearing price at the intersection of offered supply and a predetermined demand curve, which reflects the marginal value of each additional unit of capacity. When supply falls short of the reliability target, the clearing price moves up the curve and can hit a regulated cap.

In the two most recent capacity auctions, prices reached this cap. Both auctions also cleared at a uniform price across PJM’s entire footprint, unlike earlier auctions that produced differentiated prices by load zone.

Without the price cap, the 2026/27 auction would have cleared 18% higher, at $389/MW-day. More strikingly, the 2027/28 auction would have cleared 59% higher without the cap, at $530/MW-day.

Capacity prices are now being administratively suppressed rather than fully reflecting PJM’s reliability needs.

Total awarded capacity is 6.6 GW short of meeting the reliability requirement

PJM’s capacity auction ensures enough resources are available to meet reliability needs during peak demand. The auction targets a reliability standard based on the forecasted peak load plus an installed reserve margin (IRM), typically 15–20%.

This year, PJM raised the target IRM to 20%. They attribute the most recent increase to “more system risk due to higher winter loads.” The higher IRM also coincides with rising load from data centers.

The 2027/2028 auction set a total reliability requirement of 152 GW (127 GW of forecasted peak load plus a 25 GW IRM.) Cleared capacity fell 6.6 GW short of this requirement, resulting in an IRM only 15% above peak load.

Although the cleared IRM reaches only 74% of the targeted IRM, several factors could still support system reliability in the 2027/2028 delivery year. These factors include delayed generator retirements, incremental auctions, and lower-than-forecast load.

On the supply side, only 774 MW of new unforced capacity (UCAP) cleared between the 2026/2027 and 2027/2028 auctions. The resource mix remained broadly consistent with prior years, with modest increases in demand response driven by updated Effective Load Carrying Capability (ELCC) values.

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Updated ELCCs increased capacity awards to demand response

To ensure resources can reliably serve peak load, PJM assigns each technology an ELCC, which discounts installed capacity to the UCAP offered into the auction.

For example, a combined-cycle gas plant with 100 MW of nameplate capacity can offer only 74 MW of UCAP if its ELCC is 74%.

Changes in ELCC values signal which technologies PJM views as more reliable contributors to system capacity needs and, by extension, its preferred resource mix.

Most notably, the demand response ELCC increased from 69% to 92% between the last auction and this one. This was largely driven by allowing demand response resources to participate at any hour of the day and updates to winter performance accounting.