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PJM keeps building for a peak it could just move
What happened
Results are in from PJM's latest forward capacity auction, and they’re not pretty.
PJM's auction for the 2028-2029 delivery year hit the cap at $325/MW-day across the whole region, the third straight time it's maxed out. Without that price collar, it would have cleared at $555/MW-day regionwide and $777/MW-day in the ComEd zone (northern Illinois and greater Chicago), turning a $16.4bn auction into a $29.7bn one.
The mechanics, quickly. PJM operates the grid in 13 states from Illinois to Virginia plus Washington DC. Like most organized wholesale markets, it runs capacity auctions to pay generators years ahead of time (plus demand response and storage resources) for the promise they'll be available when demand peaks. That’s essentially a reliability insurance premium, separate from the energy you actually consume, and every customer in the footprint ultimately foots the bill.
This auction, two things happened:
The shortfall grew. The auction left PJM’s reserve margin 6.8GW below its 20% target. That’s the worst-ever, a bigger reliability gap than its first miss last cycle, when it was 6.5GW.
New supply barely showed. Just 525 MW of new generation and uprates cleared, down from 774 MW the cycle before.
Then the market monitor, Monitoring Analytics, drew a line. It said that data centers drove $6.3bn, or 38%, of the auction's cost. Across PJM's last four auctions, data center-linked charges total $29.4bn, 46% of everything collected. President Joseph Bowring called it a "paradigm shift" that PJM is acting like it can ignore, and proposed pulling data centers into a separate auction track so the rest of the grid stops paying for their uncertainty. Especially when the issue continues to get brought up by the White House.
The timing is the pressure. PJM's board has to file its backstop for that reliability gap, and "connect and manage" proposals with FERC this month for a one-time September auction to cover the 6.8GW. And the bill lands on real customers. A 10-MW industrial customer's monthly capacity charge jumps from roughly $6,000 in 2024 to roughly $70,000 in 2028. That's not a rounding error.
Mark’s take
Remember that scene from the Simpsons where Grandpa is trying to help Jasper get his beard out of the pencil sharpener?
I’m getting those vibes here.
PJM keeps looking to generation to fix what’s looking increasingly like a flexibility problem.
The never-ending debate is all around who pays. Is it the data center developer, or the rest of the ratepayers? But tbh, it seems to be the wrong debate. The question we should probably be asking is whether PJM actually needs all that capacity, especially new generation.
In the current market, a new plant can't get financed, permitted, and built by 2028 – at any clearing price. Hence the relatively modest 525MW that showed up. So releasing the cap, or even doing a separate data centers-only capacity auction, wouldn't have brought new supply into this auction. Bowring's separate-auction idea is cool and would be a great way to stop socializing data center costs. And I can really get behind the notion that a pledge isn't a plan.
If we’re looking at 2028, flexibility has to be viewed as the primary or even only supply-side lever that can make the dent needed. If the goal isn’t to incentivize new generation, but shrink the peak – and this sounds obvious – the tools are already there:
Flex new load. I think we all know this by now. But um, data centers are curtailable load. Flexibility could be made a condition of interconnection, not an act of goodwill. We’ve mentioned it before, but calling back to the Duke paper that found the existing grid could absorb 76-100GW of new large load if that load curtails just a bit each year.
Flex existing load. Demand response is cheap and fast – sophisticated turning the lights off. But it shrank 277MW in this auction. In our chat with Voltus CEO Dana Guernsey last week, she told us about how she’s had so many chats with C&I owners that have been asked to shut down during peak hours, then were surprised when she told them they could have been paid to do that! When no one is taking the cheapest resource, sounds like the attribution rules are broken.
Flex the supply. Batteries, LDES, on-site gas, and DERs show up in months, not queue-years. Again from last week's Powerstack, Dana put a number on it – a megawatt online in about five months with no land to buy, no queue to wait in.
For me, the main thing will be whether FERC restructures the auction before the 2029-30 auction. Whether it introduces flexibility requirements, splits the auction into data centers and normies, or whether it’s BAU and the shortfall gets even bigger.
Who this helps
Flexibility providers. Voltus alone runs 8.5GW under management and dispatched across PJM's July emergency.
Incumbent generators. Constellation, Vistra, and Talen cleared more than last cycle and locked in $2.2bn, $1.3bn, and $1.2bn in 2028/29 revenue. A broken market could be a windfall for whoever's already in it.
Monitoring Analytics. Its separate-auction proposal now has four auctions of data behind it.
Who should be nervous
Industrial and residential ratepayers in PJM. A $6,000-to-$70,000 jump for a 10-MW customer is a wild structural shift in what it costs to run a business across 13 states.
Hyperscalers who signed the White House pledge. The market monitor says the pledge is unfulfillable under current PJM rules, so the signatures buy goodwill, not compliance.
New-build developers banking on the price signal. They need $555/MW-day to pencil a project and will keep getting $325.
Meter reading (18 Jul - 23 Jul)
A quick read on the numbers shaping the market. The capex, the contracts, the regs, all anchored in the so-what.
~200 // organizations now signed to Trump's expanded Ratepayer Protection Pledge, covering an estimated 80% of US power delivered. NextEra, Duke, Equinix, and Digital Realty are among the new additions, alongside governors, Wright, and Zeldin. The expansion pulls utilities and data center developers in alongside the original hyperscalers who signed in March. But with current rules in place, as PJM’s capacity auction showed, it’ll be hard to make good on the pledge.
£2bn // cost of Nscale's data center, which can't connect to the grid for its 2027 opening. The Essex, UK-based project, backed by Nvidia and anchored by Microsoft, was announced by former PM Starmer during Trump's UK state visit last year. It had planning permission and a $900m credit facility, but utility National Grid just told it that it can’t get a grid connection, given the 125GW queue. With waits stretching to a decade, Nscale is now in talks with Bloom Energy to bridge with on-site fuel cells to go BTM, one of 100+ UK projects now going the same route.
104 // large-load tariffs approved or proposed across 37 states. Of the total, 12% are data-center-exclusive; most are large-load-neutral. Twenty-nine state PUCs have approved such tariffs already. Even though FERC ordered NERC to propose reliability standards by year-end, rate design is being settled utility by utility in the meantime, and large loads are the main lightning rod amid affordability debates.
1 // DOE emergency dispatch order issued this week as SPP's western territory hit a Level 3 energy emergency during a heat wave in the mid and southwest, marking the first federal emergency dispatch of this Trump administration. No controlled outages needed, and the alert downgraded within hours, but it still revealed the thin reserve margins utilities are dealing with. SPP West only integrated seven western states earlier this year and reserve margins are thin.
Explore more Signals on Currence here.
On the docket
The policies, rulings, and company moves worth watching.
FERC's large-load generation adequacy reports due 20 Jul. Under the Section 206 show-cause orders FERC issued 18 Jun to all six RTOs/ISOs, each grid operator must show the Commission how it intends to keep generation adequate to serve existing and incoming large loads -- the first concrete deliverable in a compliance clock that runs through a 17 Aug deadline for full tariff-reform proposals.
Delaware, Illinois, Maryland, and Ohio said the FERC order doesn’t go far enough. Advocates from these PJM states filed a request asking the agency to expand its Section 206 show-cause order, arguing the current version means regional grid operators would unfairly allocating data center network upgrade costs to ratepayers. It could help delay the quick notice report filings, even if it doesn’t come to fruition.
Holtec Nuclear Corp's S-1 IPO filing. The nuclear equipment and SMR developer is officially listed as of this week, joining the rush of advanced nuclear and fuel startups going public. This was a record H1 for IPOs already, so we’ll be watching to see the actual progress as it aims to accelerate manufacturing capacity and FOAK projects.
New & upcoming at Sightline
The latest research, features, and data drops on the Currence platform.
We have a new H2 202626 Geothermal Developer Leaderboard out now. A follow up to our tracker identifying the companies that have been buying US BLM geothermal leases released last week, this new leaderboard offers a market snapshot of which top 30 developers are furthest along the path to scaled, bankable deployment, ranked out of 100 and considered along four dimensions: tech maturity, portfolio, financing, execution. Clients can see who’s winning and why here.
Take our Powering AI Survey here to get a copy of our upcoming benchmarks report. Currence is collecting data center metrics from developers, utilities, equipment providers, and others. Results will be anonymized and create industry-wide benchmarks.
Interested in diving deeper? Talk to our team and learn how the teams that finance and build the energy system use Currence to stay ahead in the energy and AI buildout, including Southern Company, Tokyo Gas, Jefferies, Galvanize, B Capital, and others.
