PJM Capacity Auction: Record Pricing and Delays

The PJM capacity market remains in a delicate state after last July’s auction. If market participants were hoping for more clarity on how retiring coal plants and extreme weather events affect future auction prices, they’ll have to wait longer. The 2026/2027 auction, originally set for December, has been delayed by six months due to concerns over the sharp price increases from the summer’s auction.

So what happened last July and why was the next auction postponed?  

At the end of July, PJM’s capacity prices for the 2025/26 delivery year skyrocketed to $269.92/MW-day, a staggering increase from the previous $28.92/MW-day. This almost 900% price surge comes down to supply and demand imbalances. Peak demand rose from 150,640 MW in the 2024/2025 auction to 153,883 MW. However, supply offered in the auction dropped by 13,252.1 MW – from 148,945.7 MW to 135,692.3 MW – due to plant retirements and a slow-moving interconnection queue. New PJM regulations focused around resource adequacy that were approved by FERC, also played a role. In short, supply is shrinking while demand is growing, putting upward pressure on prices.  

For generators, this means the market has shifted dramatically in their favor. The new rules aim to improve resource adequacy by better recognizing and compensating resources for their reliability contributions. Previously, generators were being paid $28.92/MW-day, regardless of whether they were called upon to produce power. Now, they’re earning almost $200 more at $269.92/MW-day, translating to significantly higher daily earnings for the same capacity.

The market is already feeling the ripple effects. In certain areas of Maryland, energy bills could rise by as much as 24% due to the steep increase in capacity prices, according to the Bill and Rate Impacts of PJM’s 2025/2026 Capacity Market Results & Reliability Must-Run Units in Maryland Report. Additionally, Middle River Powerplant, which had planned to retire in June 2025, withdrew its deactivation following the price surge, viewing the increased prices as an opportunity for profitability. In the coming years, we may see more generators reconsider retirement for similar reasons.

Prior to this most recent 2026/2027 delay, sources were already expecting these auction prices to remain elevated. For one thing, the interconnection queue is not getting any shorter due to the slow pace of generation construction. Projects totaling about 38,000 MW have cleared PJM’s interconnection queue but have not been built due to challenges such as financing, supply chain, and siting and permitting issues, according to the grid operator. For a second thing, expected demand continues to increase. According to PJM’s 2026/2027 RPM Base Residual Auction Planning Period Parameters, “The forecast peak load for the PJM RTO for the 2026/2027 Delivery Year is 157,197 MW which increased by 3,314 MW, or 2.2% compared to the forecast peak load of 153,883 MW for the 2025/2026 BRA.”  

This most recent delay for the 2026/2027 auction could allow more generation to progress in the interconnection process before the next auction, potentially softening prices. Before the delay, the auction would have resulted in a similar situation with continued elevated auction prices. There would have been no change in the generation stack to help alleviate these prices, leading to expensive power for yet another year for the ratepayers. This time around, some market rules, such as the exclusion of reliability-must-run (RMR) plants from auctions, may be reconsidered to bring more supply into the market and help lower prices. Fast-tracking interconnection requests may also be on the table.

The PJM capacity market faces substantial uncertainty as demand grows, particularly with the rapid expansion of data centers, and the need for new supply to replace retiring coal and natural gas plants becomes more pressing. With peak load forecasted to reach 178,895 MW by 2034, will the 2026-2027 auction get delayed again? Only time will tell. But as long as PJM’s interconnection queues move slowly and coal and gas plants continue to go offline, elevated capacity market prices are likely here to stay.