The nation's largest grid operator is facing a growing resource shortfall after its latest capacity auction hit the price ceiling while attracting minimal new power generation. PJM Interconnection's capacity auction for the 2028-2029 delivery year reached a $325/MW-day price cap across its 13-state Mid-Atlantic and Midwestern region, leaving the grid operator with a 6.8 GW shortfall below its 20% installed reserve margin target, the company said Tuesday. The results mark the second consecutive auction with a reserve shortfall and signal continuing strain on the grid that serves 65 million people.

The auction drew only about 525 MW in new resources, including 208 MW of uprates to existing generation, down from 774 MW of new resources in the previous auction held in December. The amount of demand response offered into and cleared the auction fell by 277 MW to 7,365 MW of "unforced capacity." Meanwhile, forecast demand increased by roughly 2 GW, largely driven by data center development, according to PJM Chief Operating Officer Stu Bresler. Without the price collar, the auction would have cleared at nearly $555/MW-day across PJM's footprint and $777/MW-day in the Commonwealth Edison zone in northern Illinois, bringing total costs to $29.7 billion instead of the actual $16.4 billion.

"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 at Aurora Energy Research, told Utility Dive. New generation needs "significantly more" than the $325/MW-day price cap to be financially viable, according to Hoos. The Edison Electric Institute said PJM's markets are incapable of addressing the resource adequacy challenges the grid operator faces, with EEI President Drew Maloney stating that "the status quo benefits generation owners and fails to attract sufficient new supply." The Electric Power Supply Association countered that competitive power suppliers have responded with "tens of gigawatts of generation projects" since capacity prices jumped in a mid-2024 auction, but they face barriers including permitting, siting, and interconnection delays.

PJM's board is preparing to file proposals with the Federal Energy Regulatory Commission for a backstop capacity auction and a "connect and manage" framework for data centers, with a filing needed this month for the auction to be held in September as planned, Bresler said. While ratepayers should see little change in electric bills starting June 2028 compared to the last auction, the monthly capacity charge for a 10-MW industrial customer will likely jump from around $6,000 in 2024 to roughly $70,000 in 2028. Analysts don't expect relief anytime soon, with the planned backstop auction raising concerns about what Aurora's Hoos called an "intervention doom loop" where price caps prevent market signals from working while requiring repeated regulatory fixes to keep the lights on.