PJM Capacity Auction Highlights Growing Shortfall and Data-Center-Driven Cost Surge

On Tuesday, PJM Interconnection LLC announced the results of its 2028-2029 capacity auction. The market cleared at the $325 /MW-day price cap, generating $16.4 billion in capacity charges. The auction left the grid 6.8 GW below PJM’s 20 % reserve-margin target—a slight increase from the 6.5 GW shortfall in the previous auction. Only about 525 MW of new resources were secured, including 208 MW of uprates, far less than the 774 MW added in the December auction. Demand-response offers fell by 277 MW to 7,365 MW of “unforced capacity,” while a roughly 2 GW rise in forecast demand was attributed largely to data-center development.

UtilityDive

PJM conducts capacity auctions three years ahead of delivery to ensure sufficient generation. After a series of delays, the schedule has been accelerated, giving developers limited time to respond to rising prices. A price-cap, first negotiated in 2024, limits the market clearing price; without it, PJM estimates the auction would have cleared near $555 /MW-day, pushing total costs toward $30 billion. The surge in AI-driven workloads and the expansion of “Data Center Alley” in Virginia have amplified electricity demand across the 13-state footprint and Washington, D.C.

UtilityDive

• Shortfall: 6.8 GW (? seven nuclear reactors)

Bloomberg

• New resources secured: 525 MW (208 MW uprates)

UtilityDive

• Demand-response cleared: 7,365 MW (down 277 MW)

UtilityDive

• Forecast demand increase from data centers: ? 2 GW

The Hill

• Total auction cost: $16.4 billion (? $6.3 billion attributable to data-center load)

Bloomberg

• Cumulative data-center cost over four auctions: $29.4 billion

The Hill

• Projected capacity charge for a 10-MW industrial customer: $6,000 -> $70,000 in 2028

UtilityDive

• Without the cap, estimated clearing price: $554.72 /MW-day, total cost ? $30 billion.

UtilityDive

The shortfall forces PJM to operate with slimmer reserves, raising reliability risk during peak-demand events. Ratepayers face sharply higher capacity charges, and the price cap suppresses market signals needed to spur new generation. The situation has prompted calls for a dedicated data-center auction, a backstop procurement mechanism, and broader market reforms to lower long-term capacity prices.

UtilityDive

PJM’s chief operating officer Stu Bresler said the board will file a backstop-auction proposal with FERC this month to meet the September schedule. PJM president and CEO David Mills noted that the grid “recognizes how this supply-and-demand imbalance impacts the reliability of the system and costs for consumers” and is working with government and industry to “bring on new generation as fast as possible.” EEI President Drew Maloney warned that “the status quo benefits generation owners and fails to attract sufficient new supply.” EPSA president Todd Snitchler called for “accelerating permitting, interconnection, load forecasting, and market reforms” to speed resource deployment. NRDC advocate Claire Lang-Ree urged PJM to “remove large loads—like data centers—that have not brought their own new supply” and to implement a strong “Connect and Manage” construct.

The Hill

Julia Hoos of Aurora Energy Research argued the system “doesn’t work to bring online new capacity or stimulate demand response.” Clara Summers of the Citizens Utility Board’s Consumers for a Better Grid highlighted the lack of demand-response participation and stressed the need for better transmission planning. Monitoring Analytics president Joseph Bowring advocated a separate capacity market for data centers, saying “data-center load should be removed from the capacity market and procured through a dedicated auction.” Consumer-advocate Julia Kortrey warned that “prices are pretty baked in” and relief may not arrive until the 2030s.

The Hill

• “We knew that the shortfall was coming, but the outcome demonstrates that the current system doesn’t work to bring online new capacity or stimulate demand response, the two things we need the most,” — Julia Hoos, head of USA East, Aurora Energy Research

UtilityDive

• “Do not expect this to materially change in 2029/30,” — Peter Cavan, head of strategy, Unison Energy

UtilityDive

• “data center load should be removed from the capacity market and procured through a dedicated auction.” — Joseph Bowring, president, Monitoring Analytics

The Hill

• “This year’s auction confirms an unacceptable trend: data center load growth is outpacing new electricity supply, degrading reliability, and keeping prices at the cap,” — Claire Lang-Ree, NRDC climate and energy advocate

Bloomberg

• “The status quo benefits generation owners and fails to attract sufficient new supply,” — Drew Maloney, President and CEO, Edison Electric Institute

UtilityDive

PJM estimates the uncapped clearing price at $555 /MW-day, while Bloomberg reports $554.72 /MW-day; the difference is minor but reflects separate calculations. PJM states the shortfall “does not necessarily mean the system will be unable to serve load reliably,” whereas industry critics emphasize heightened risk, indicating a gap in consensus on reliability outlook.

UtilityDive

PJM must submit its backstop-auction filing to FERC by the end of the month, with the auction slated for September. A FERC-hosted conference on July 23 will address grid governance and the emerging data-center burden. An emergency procurement mechanism is expected later this year to bridge the supply gap and shift cost responsibility to hyperscale data-center operators.

Bloomberg