Reforms and Market Outlook for PJM Capacity Market

ual Auction (BRA) cleared at near-historically high levels in July 2024, sparking concerns over electricity bills and FERC complaints. To address this, PJM has proposed reforms to adjust the capacity price cap and increase capacity supply.

One of the key changes approved by FERC is the alteration of the parameters of the VRR demand curve, effectively lowering the price cap. Additionally, another pending reform, negotiated with PA governor Josh Shapiro, aims to establish a price cap and floor for the 2026/27 and 2027/28 auctions. These adjustments are intended to create a more balanced and predictable market environment.

Another significant shift is the consideration of Reliability Must-Run (RMR) units as capacity suppliers in the upcoming 2026/27 BRA. Moreover, the capacity market’s “must-offer” obligation will now apply to intermittent and storage resource classes, previously exempt from this requirement. These changes aim to ensure a reliable and resilient capacity market moving forward.

Looking ahead, projections indicate that continued peak load growth will outpace net new capacity, potentially leading to shortfalls as early as the 2027/28 BRA without additional interventions. Consequently, further reforms are anticipated, with stakeholder discussions focusing on modifying the capacity market demand curve and ELCC accreditation already in progress. These measures are crucial to maintaining a balance between capacity supply and demand in the PJM market.

The ongoing reforms in the PJM Capacity Market reflect a broader effort to address challenges and ensure stability and efficiency in the electricity sector. By adjusting pricing mechanisms and expanding the pool of capacity suppliers, PJM aims to create fair and transparent market conditions conducive to long-term sustainability and reliability.

For more in-depth analysis and insights on the PJM Capacity Market and its future outlook, interested parties are encouraged to reach out for additional information. The evolving landscape of the energy market requires proactive measures to adapt to changing dynamics and ensure a robust and resilient energy system. Through collaborative efforts and strategic reforms, PJM continues to pave the way for a more secure and efficient electricity market.