The 2028/2029 Base Residual Auction cleared at $325/MW-day UCAP, compared with $333.44/MW-day in the prior auction. At first glance, the lower clearing price may suggest that capacity market conditions improved. That was not the case. The difference reflects an annual recalculation of PJM's temporary auction price cap, which is converted from an ICAP value to a UCAP value based on the accredited capability of a reference resource. In other words, the auction once again cleared at the maximum allowable price. Beneath that lower headline price, however, the market remained just as tight, reinforcing that capacity continues to be one of the largest drivers of future electricity costs for PJM customers.
PJM's capacity market is designed to ensure there is enough reliable generation available to meet future peak electricity demand. Through the Base Residual Auction (BRA), generators, demand response providers, and other qualifying resources commit capacity nearly two years in advance in exchange for a fixed payment. Those costs ultimately flow through to customer electricity bills, making capacity one of the largest non-energy cost components for many PJM end users.
What Happened in the 2028/2029 Auction?
Every modeled zone across PJM cleared at the same $325/MW-day price, meaning there were no locational capacity adders for the 2028/2029 delivery year. More importantly, despite additional supply entering the market, PJM again failed to procure enough accredited capacity to satisfy its reliability requirement.
Why the Market Remains Tight
Although supply continued to improve, demand continues to grow faster.
Compared with last year's auction:
In other words, more capacity entered the market than last year, but it still was not enough to keep pace with PJM's growing reliability requirement.
That shortfall is nearly identical to the previous auction and resulted in PJM procuring an estimated 14.7% reserve margin, well below the 20% Installed Reserve Margin (IRM) required to maintain PJM's one-day-in-ten-year reliability standard. PJM noted this was the second consecutive auction to clear materially below its reliability target.
The primary drivers remain familiar:
Simply put, additional capacity is entering the market—but not quickly enough to keep pace with growing demand.
The Price Cap Continues to Mask Market Conditions
One of the most important findings in PJM's report is what the auction would have cleared without the temporary price cap.
PJM estimates the unconstrained RTO clearing price would have been approximately $555/MW-day, while the COMED zone would have cleared near $777/MW-day. In other words, the market remains substantially tighter than the published auction price suggests.
While the price collar provides customers with short-term cost protection, it also suppresses the economic signal intended to encourage new investment in reliable generation. PJM itself notes that clearing below the Value of Reliability curve can reduce future supply additions, prolonging the structural capacity shortage.
What This Means for PJM Customers
Capacity costs remain one of the largest uncertainties affecting future electricity prices in PJM.
Although the temporary price cap has limited near-term increases, the underlying market remains structurally tight. Growing electricity demand, particularly from data centers and broader electrification, continues to outpace additions of dispatchable generation, leaving reserve margins well below PJM's reliability target.
For commercial and industrial customers, this reinforces the importance of understanding how suppliers price future capacity obligations. Even with auction price protections in place today, capacity is likely to remain a significant contributor to electricity costs until new reliable generation, transmission infrastructure, and demand-side resources restore a healthier supply-demand balance.
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