VALLEY FORGE, PA — PJM Interconnection’s latest capacity auction delivered a stark signal about the tightening balance between electricity supply and demand across much of the eastern United States, as prices hit a federally approved ceiling and total resources fell short of long-term reliability targets.
PJM said its 2027/2028 Base Residual Auction secured 134,479 megawatts of unforced capacity from generation and demand response resources to serve more than 67 million people across 13 states and the District of Columbia. When combined with 11,299 megawatts procured by utilities operating under the Fixed Resource Requirement model, total available capacity reached 145,777 megawatts.
The auction cleared at the Federal Energy Regulatory Commission-approved cap of $333.44 per megawatt-day, a 1.3% increase from the prior year. At that price, the cleared supply represents approximately $16.4 billion in commitments, though PJM noted that not all load pays the clearing price due to self-supply and bilateral contracts.
Despite the high price, the auction did not meet PJM’s one-event-in-10-years reliability standard. Committed supply fell short of the required level by 6,623 megawatts, leaving the system with a reserve margin of 14.8%, below the targeted 20%. PJM stressed that the shortfall does not automatically translate into reliability problems for the delivery year, citing several mitigating factors that could narrow the gap.
Those factors include the potential for lower-than-forecast peak demand, generators delaying planned retirements, and winter-only resources expected to be available during periods of highest system risk. PJM also plans to hold an incremental auction in February 2027 to further bolster capacity for the delivery year.
Executives pointed to surging data center demand as the dominant driver behind the tightening market. PJM said the forecast peak load for 2027/2028 is about 5,250 megawatts higher than the prior year’s outlook, with roughly 5,100 megawatts tied directly to data centers.
Stu Bresler, PJM’s executive vice president for market services and strategy, said the results make clear that electricity demand from data centers is growing faster than new supply. He said addressing the imbalance will require coordinated action involving PJM, market participants, regulators, and the data center industry.
The auction marked the first time the entire PJM regional transmission organization, including Fixed Resource Requirement areas, failed to meet the reliability requirement. By contrast, the 2026/2027 auction exceeded the target by a narrow margin.
The cleared resource mix remained heavily weighted toward traditional generation, with natural gas accounting for 43% of capacity, followed by nuclear at 21% and coal at 20%. Demand response represented 5%, while renewable resources, including hydro, wind, and solar, made up a smaller share. Changes in Effective Load Carrying Capability ratings boosted the accredited value of demand response, lifting its cleared capacity to 7,299 megawatts.
PJM said supply offered into the auction rose modestly, and 774 megawatts of new generation and uprates cleared. Installed capacity across the PJM footprint increased by more than 4,300 megawatts year over year.
Beyond the auction, PJM highlighted ongoing efforts to accelerate new generation through interconnection reforms. Since 2023, the grid operator has processed more than 170,000 megawatts of new generation requests, with additional projects moving through revised study processes. PJM is also working with technology partners to apply artificial intelligence to shorten review timelines.
With electricity demand accelerating and capacity additions facing permitting, financing, and local opposition hurdles, PJM said maintaining reliability will depend on faster generation entry, preserving existing resources, and increasing flexibility on the demand side as the region moves toward future delivery years.
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