PJM capacity market clearing prices for the 2024/2025 delivery year auction declined to $28.92/MW-day, a 15% decrease from the 2023/2024 delivery year. These results continue the year-over-year downward price shift trend since the 2021/2022 Base Residual Auction. At the same time, the amount of capacity being offered by generators into the Capacity Market continues to decline.
About 2,200 fewer MW were offered in the 2024/2025 auction compared to the previous delivery period. This marks the third year in a row where total offered capacity has decreased, a worrying trend for PJM. “If this trend continues, it represents a potential concern for long-term resource adequacy, depending on the rate of replacement of these resources,” PJM said.
Despite the overall decline in system-wide prices, prices for some Locational Delivery Areas (LDAs) increased, offsetting the RTO-wide capacity cost reduction, resulting in an expected $2.2 billion capacity cost for 2023 flat to 2022. Five constrained areas had significantly higher prices compared to last year’s auction period, including Baltimore Gas & Electric and Delmarva Power & Light Co., with clearing prices of $73.00/MW-day and $96.24/MW-day, respectively.
Held three years in advance when power supplies are needed, PJM’s capacity auctions are designed to ensure there is enough future generation for PJM’s 65 million customers while also providing price signals for generators that guide decisions for market entry and exit. PJM delayed the release of its results for the 2024/2025 delivery year after an error in supply-demand forecasting was discovered.
The biggest increase in capacity offers came from natural gas assets, an incremental increase of 1,615 MW, followed by a 1,290 MWs increase in solar. These gains were more than offset by a cumulative 1,060 MW decrease in demand response, nuclear and coal-fired resources. Natural gas continues to make up nearly half of the capacity, with ~72,000 MWs of the 142,000 MWs of cleared capacity coming from natural gas resources.