At a Glance
- Competitive generators are responding to market signals: Independent Power Producers are developing new generation of all kinds, increasing the output of existing generators through uprates, and keeping essential baseload power online. The timeline to bring new generation online is lengthy, however, due to non-market challenges and occurs as PJM continues to work through a compressed auction timeline.
- Reliability requirement not met: For the second consecutive auction, the capacity resources cleared fell short of PJM’s reliability standard, which provides a 20% cushion. Notably, the 14.7 percent reserve margin secured for the 2028/2029 Delivery Year remains at a robust level and is similar to the level planned for in other regions. Further, the auction is just step one in a multi-stage procurement framework and does not mean that this is a reliability emergency. This auction provides power two years from now for the 2028/2029 Delivery Year (starting June 1, 2028), not tomorrow.
- What policymakers can do: Lawmakers and policymakers should focus on preserving and strengthening competitive markets at this critical time to bring new generation online. Efforts should build on progress to accelerate permitting and siting processes, streamline the interconnection process, enhance load forecasting accuracy, and ensure market rules support the investment needed to meet unprecedented demand at all levels of government – federal, state, and local.
The results of PJM Interconnection’s most recent Base Residual Auction (BRA) send a clear signal that more power generation is needed as demand rises amid surging data center development. This is the fourth consecutive capacity auction that has shown an upward demand trend, reflecting the region’s increased power needs – a departure from where the market was just a few years ago when every signal indicated flat to decreasing demand and retirement signals were sent to asset owners.
Independent Power Producers (IPPs) remain committed to delivering reliable and affordable power to millions of Americans, and this auction does not fully reflect the wave of recent project announcements that will take time to come online.
Key Takeaways: Market Signals Continued Need for More Generation
- Prices Cleared at the Cap
The 2028/2029 BRA cleared at the FERC-approved cap of $325/MW-day across the entire PJM Regional Transmission Organization (RTO), down 2.5% from the 2027/2028 BRA. This is a direct result of sustained supply/demand tightness and rising load forecasts.
This is the third auction with a price cap and floor – or price collar – in effect. The price collar will remain in place for the 2029/2030 auction scheduled for December.
- Market Signals Are Driving a Response
PJM’s 2028/2029 BRA saw 525 MW of new generation and generation uprates, with the total amount of cleared capacity increasing by 3,733 MW, from 134,585 MW in the 2027/2028 BRA to 138,318 MW in the 2028/2029 BRA.
Notably, following the July 2024 capacity auction results – which cleared near the Cost of New Entry (CONE) for the first time in two decades – the generation market has seen a surge in momentum with substantial capital investment rapidly mobilizing. Over 43,000 MW of new generation is expected to enter the PJM regional grid, evidencing a definitive and robust market response. A full list of those projects is detailed in this factsheet.
Signs of a significant market response that is already underway to serve growing electricity demand includes:
- EPSA member companies are optimizing and expanding existing resources through uprates, fuel conversions, hybridizations, and reactivations that can expedite getting new generation online in a shorter time frame and at a lower cost than building a new power plant.
- Since 2020, PJM has processed more than 300 gigawatts of generation projects, resulting in 103 gigawatts securing signed interconnection agreements.
- 811 projects representing approximately 220 gigawatts of potential new generation entered PJM’s latest interconnection cycle, underscoring continued private-sector investment in the resources needed to meet future demand.*
- More than 130 GW of power expressed interest in contracting directly with large load consumers such as data centers to build new generation in response to PJM’s April Request for Information.
- Resource Adequacy Wasn’t Met
The capacity resources procured through the action, plus Fixed Resource Requirement resources (FRRs are procured outside of the auction), is short of PJM’s reliability requirement by 6,830 MW. This shortfall was not unexpected in light of the tightening supply/demand balance in PJM and follows a shortfall of approximately 6,500 MW in the prior capacity auction held last December (for the 2027/2028 Delivery Year).
While the BRA failed to acquire enough generation capacity to meet its target 20 percent reserve margin (meaning the committed supply is less than what would be required to meet the one-event-in-10 years reliability standard), this is not a reliability emergency. PJM continues to hold a reserve margin of 14.7 percent for the 2028/2029 Delivery Year, and the capacity auction is just the first step in the process to acquire capacity.
PJM’s market design includes safeguards to address evolving system needs, including Incremental Auctions (IAs) that allow additional resources to participate closer to the delivery year.
Investments and building new generation takes time, especially when considering that reliable resources often take more than five years to permit, finance, and build. Adding further to the challenge, the PJM capacity market is designed to secure sufficient electricity resources three years in advance to maintain grid reliability. PJM’s auctions have seen significant delays in recent years, with compressed BRA auctions currently scheduled on a six-month cadence through May 2027. This compressed auction cycle can give the false illusion that capacity progress is not keeping pace.
In announcing the BRA results, PJM outlined actions it is taking to address the current supply/demand imbalance and maintain reliability as reflected below. Several of these measures are responsive to the mid-January PJM Board decisional letter on large load integration and the White House/PJM Governors principles regarding PJM.
- In the next three months, holding a one-time Reliability Backstop Auction to procure new generation resources and address near-term reliability needs.
- Developing Connect and Manage frameworks that allow new large loads, such as data centers, to connect to the system but operate flexibly when needed to limit disruptions to other consumers.
- Creating a FERC-approved, temporary Expedited Interconnection Track for up to 10 state-sponsored, shovel ready, high-capacity generation projects that could come online quickly to address short- and long-term supply needs.
- Clearing the generation interconnection queue backlog and implementing a new streamlined cycle process, including a collaboration with Google’s Tapestry to leverage AI to reduce study timelines.
- Maximizing the performance and availability of existing generation resources.
- Moving forward with stakeholders on long-term market reforms as detailed in PJM’s Powering Reliability Through Market Design report.
IPPs Are Best Equipped to Meet the Rising Demand
- Independent Power Producers Bear the Risk of Investments
Unlike monopoly utilities, which pass the risk of investments onto ratepayers, IPPs bear the risk if projects get delayed, canceled, or if demand from AI data centers does not materialize.
Monopoly utilities are incentivized to build as much as they can to get more of a return on those funds – consumers’ funds that is, not their own. If monopoly utilities wanted to build generation, they could start tomorrow through their own competitive arms, but they are interested in building generation only if it’s risk-free, using ratepayers’ money instead of their own.
- Monopoly Utilities Face the Same Barriers
PJM has already reviewed over 170,000 MW of new generation requests since 2023 as it transitions to a reformed process. It is important to note, however, that 53,000 MW of interconnection projects currently have signed agreements to connect to the grid, but many are being stymied by issues beyond PJM’s control, like federal, state and local permitting, siting, and supply chain challenges.
Monopoly utilities would face the exact same challenges that IPPs face, but they have less experience building and operating generation.
- Competitive Markets Keep Costs Affordable
A recent study from FTI Consulting and the Alliance for Competitive Power found that competitive markets kept costs lower than states with monopoly utilities that build, own, and operate generation. Not only did states with competitive markets experience 5 percent fewer power outages, but they also reduced emissions more and saw rates for customers rise more slowly.
What Policymakers Should Be Focused On
There are clear steps that policymakers across PJM’s footprint can take to ensure the power remains affordable and reliable.
- Avoid political interference and regulatory uncertainty
For more than two decades, competitive electricity markets have proven that they lower emissions, provide more reliable power, and are more affordable than monopoly utilities and vertically integrated models. Regulatory and market certainty is essential to developers’ ability to secure capital and make the long-term investments needed to bring more reliable power online.
States in PJM already have clear, effective channels to shape the decisions PJM makes through the Organization of PJM States and PJM’s transparent stakeholder process. Governors should focus on ensuring that their appointed representatives are prioritizing the long-term economic and reliability interests of the states’ customers instead of counterproductive actions like injecting political uncertainty into how the grid is operated.
There may be process enhancements that could be beneficial, which is under consideration at the upcoming July 23 FERC technical conference on PJM Governance and Stakeholder Processes.
- Focus on smarter planning and reducing barriers to development
At both the federal and state levels, policymakers are increasingly focused on ensuring infrastructure decisions are based on realistic demand projections and efficient market signals. As forecasts for large electricity users continue to evolve, regulators are taking steps to improve transparency, reduce speculative forecasting, and better protect consumers from unnecessary infrastructure costs. EPSA supports and urges continued work on these issues, including efforts to streamline permitting and siting so new generation can reach the grid more quickly.
There are already clear indications that the worst-case scenario for data center power demand is not materializing, and more accurate load forecasting will ensure that customers across PJM are not overpaying for power.
Bottom Line:
Policymakers must resist short-term interventions that distort markets, focusing instead on maintaining long-term reliability and consumer affordability through competition. Preserving and improving competitive wholesale markets – and keeping the risks of new generation construction with shareholders and investors – remains the best way to attract private investment, strengthen reliability, protect ratepayers, and power America’s growing economy.
See EPSA’s Statement on the BRA for the 2028/2029 Delivery Year and pre-results explainer for additional details.
*Update August 3, 2026: PJM announced that 715 new generation projects, capable of generating more than 200 GW of electricity, have qualified to be studied in the first Cycle of PJM’s reformed interconnection process (Source: PJM).
