PJM capacity market in 2026: what the next auction is telling us

The RPM construct and the 2024 price shock #

PJM's Reliability Pricing Model is a forward capacity market that procures resource commitments three years ahead of the delivery year through a Base Residual Auction, supplemented by three Incremental Auctions that adjust quantities closer to delivery. Resources offer megawatts of unforced capacity (UCAP) into a sloped Variable Resource Requirement curve calibrated to the installed reserve margin, which currently sits near 17.8 percent for the RTO. Cleared resources receive the locational clearing price for the full delivery year and assume a Capacity Performance obligation to deliver during emergency operating conditions, with non-performance charges that can exceed $3,000 per megawatt-hour during defined performance assessment intervals.

The auction held in July 2024 for the 2025-26 delivery year cleared at $269.92 per megawatt-day across most of the RTO, compared with $28.92 the previous year. Constrained zones cleared even higher, with the Dominion and BGE zones reaching the same $269.92 cap defined by the Capacity Emergency Transfer Limit and the Locational Deliverability Area structure. The total auction revenue rose to roughly $14.7 billion, up from approximately $2.2 billion. State consumer advocates filed protests at FERC arguing that the price signal reflected administrative artifacts as much as genuine scarcity, while generators countered that the result simply revealed the true cost of maintaining accredited capacity in a tightening market.

Three structural drivers behind the squeeze #

The first driver is demand. PJM's January 2026 load forecast lifted summer peak expectations for 2030 to roughly 184 gigawatts, more than 20 gigawatts above the 2024 forecast, with data center growth in Virginia and Ohio responsible for the bulk of the revision. Hyperscaler campuses ranging from 250 megawatts to over 1 gigawatt of contracted capacity have moved from speculative pipeline to construction, and large load interconnection requests in the Dominion zone alone now exceed the entire installed capacity of several smaller PJM utilities.

The second driver is supply attrition. Roughly 5.8 gigawatts of dispatchable generation, mostly coal and older gas steam units, retired or deactivated between 2022 and 2025, with another 11 gigawatts of announced retirements through 2030. State decarbonization mandates, EPA Section 111 rules, and aging plant economics have all pushed in the same direction. Capacity accreditation reforms approved in 2024 also reduced the megawatts that thermal and renewable resources can offer, effectively shrinking the supply curve at every price point.

The third driver is slow replacement. New resource additions cleared by the auction in 2025-26 totaled less than 5 gigawatts of nameplate, with effective UCAP contributions far smaller after accreditation. The interconnection queue is large in absolute terms, but the conversion rate from study agreement to commercial operation remains stubbornly low, and the projects that do progress are weighted toward solar, storage, and hybrid configurations whose accredited capacity values are a fraction of nameplate.

Reading the queue: what LBNL data reveals #

Lawrence Berkeley National Laboratory's annual queued up report tracks interconnection requests across the U.S. ISO and RTO footprints. The most recent edition shows PJM with the largest active queue of any system in the country, dominated by solar and storage but with a notable inflection in gas turbine requests starting in 2024. The headline numbers, though, mask three operationally important facts: the historical withdrawal rate, the slippage between requested commercial operation date (COD) and actual energization, and the share of capacity stuck in cluster restudies under the new transition framework.

Withdrawal rates in PJM have averaged near 70 percent over the past decade, meaning that for every 10 megawatts that enter the queue, only about 3 ultimately reach commercial operation. COD slippage averages 18 to 24 months for projects that do complete, with permitting, supply chain, and network upgrade cost reopener disputes accounting for most of the delay. Under PJM's Order 2023-compliant cluster process, projects that entered before the 2022 transition continue to be processed in legacy serial fashion, while newer requests sit in cluster cohorts whose first results are not expected until 2026 and 2027.

Three zones, three different stories #

Capacity prices in PJM are locational, set by the Locational Deliverability Area binding constraints. The Dominion zone, anchored by Loudoun and Prince William counties in Northern Virginia, has emerged as the most consequential LDA in the country. Existing data center load there exceeds 4 gigawatts, with another 8 to 12 gigawatts of contracted growth through 2030 depending on utility filings. The zone hit the auction price cap in 2025-26 and is structurally short of in-zone generation, with most large unit retirements in eastern PJM exacerbating import dependence.

The Mid-Atlantic Area Council, comprising the BGE, PEPCO, PSEG, JCPL, and AECO zones, faces a different mix of pressures. Coastal load growth is moderate, but offshore wind delays in New Jersey and Maryland have removed several gigawatts of expected accredited capacity from the planning view. Transmission upgrades, including the State Agreement Approach projects to deliver Virginia and Maryland generation to load centers, will not relieve the constraint until late in the decade.

Western PJM, including the AEP, ComEd, AP, Dayton, and DEOK zones, has historically been a long zone exporting capacity east. That posture is eroding. Ohio and Indiana are now attracting their own data center clusters, AEP-Ohio has filed sizable large load tariffs, and ComEd is dealing with electrification load on top of legacy industrial demand. The capacity that once flowed east at low prices is increasingly bid at the system clearing level.

Market design responses and the FERC docket #

PJM and FERC have responded along several tracks. The Capacity Performance construct, in place since 2015, was tightened through 2024 and 2025 filings that refined performance assessment hour definitions and increased non-performance charges, sharpening the incentive for resources to actually deliver during winter and summer stress events. Fast-start pricing reforms accepted by FERC have improved energy market price formation during shortage conditions, indirectly supporting the missing money that the capacity market is designed to provide.

Capacity accreditation reforms moved PJM from an installed capacity convention toward a marginal effective load carrying capability framework, which more accurately discounts thermal availability during correlated outages and renewable output during peak hours. PJM also filed a package of changes in late 2024 and early 2025, partially accepted by FERC, that adjusted the reference resource, modified the demand curve shape, expanded the must-offer exemption review, and recalibrated the price collar for the 2026-27 and 2027-28 auctions. State governors and consumer advocates have continued to press FERC for additional mitigation, while generators argue that further intervention will undermine the price signal needed to attract new entry.

Three scenarios for 2026-2028 capacity prices #

Scenario one, Sustained Scarcity, assumes that data center load materializes near the high end of utility filings, that announced retirements proceed on schedule, and that interconnection cluster results in 2026 deliver only modest incremental supply. In this world, the 2026-27 and 2027-28 base residual auctions clear at or near the administrative cap across most LDAs, total auction revenue exceeds $20 billion in at least one year, and several states accelerate co-located generation procurement to insulate ratepayers from market exposure.

Scenario two, Managed Reentry, assumes that PJM market design adjustments combine with state policy to bring two to four gigawatts of new gas turbines and uprates online by 2028, that demand response and behind the meter resources expand by another two to three gigawatts of accredited capacity, and that data center timelines partially slip. Clearing prices fall back into a $150 to $220 per megawatt-day band, still elevated by historical standards but materially below the cap.

Scenario three, Policy Reset, assumes that FERC accepts more aggressive mitigation, that one or more states pursue capacity market exit or significant carve outs, and that vertically integrated utility self-supply expands. Headline auction prices moderate further into a $90 to $150 range, but the volume of capacity actually procured through the centralized auction shrinks, leaving the long term resource adequacy picture less transparent and shifting risk onto state procurement vehicles.

How Promethean helps clients navigate the next auction cycle #

Promethean's Energy and Transition Economics practice supports developers, hyperscalers, utilities, and investors in translating PJM market signals into specific commercial decisions. Recent engagements have included capacity revenue forecasting under stochastic load and retirement assumptions, interconnection portfolio prioritization for queue holders deciding which projects to advance through cluster restudies, and structured power purchase agreement design for data center customers seeking to hedge multi-year capacity exposure.

We bring a combined view of regulatory trajectory at FERC, PJM stakeholder process dynamics, and the underlying engineering economics of new and existing resources. Whether your priority is a binding offer strategy for the next base residual auction, a load forecast defensible to state regulators, or a long term hedging program for compute infrastructure, our team builds the analytics and the narrative together. To start a conversation about your exposure to the 2026-27 and 2027-28 auctions, visit promethean.com/engage and request a scoping session with our power markets team.

Sources #

• PJM capacity market reports
• FERC PJM orders
• Lawrence Berkeley National Lab interconnect queue annual report
• EIA hourly electric grid monitor
• Monitoring Analytics State of the Market for PJM