For the third year in a row, PJM Interconnection’s capacity auction has hit its price ceiling, this time for the 2028/2029 delivery year. The auction, held on July 14, cleared at the $325 per megawatt-day cap, a threshold set by a coalition of state governors in April 2026 to curb rising energy costs. The result commits 67 million customers across 13 Mid-Atlantic and Midwest states to an estimated $14.7 billion in annual capacity costs—an increase of $12.5 billion since June 2025.
Fossil Fuels Dominate Despite Price Safeguards
The auction secured 64% of its generation from fossil fuel sources, with natural gas accounting for 46% and coal 18%. The heavy reliance on polluting energy persists despite the temporary price collar, which was intended to shield customers from runaway costs. Independent analysis attributes the $12.5 billion surge in annual capacity costs to a combination of factors, including PJM’s planning challenges and surging demand from data centers, though the grid operator has not publicly detailed the specific drivers behind the increase.
Jessi Eidbo, Senior Advisor at the Sierra Club, criticized the auction’s outcome, stating that while battery storage, wind, and solar offer cost-effective alternatives, their limited participation in the auction suggests systemic barriers. “Households across the Mid-Atlantic are bearing the financial burden of a system that continues to favor high-cost fossil fuels,” Eidbo said. “The price collar provides only temporary relief and does nothing to address the underlying issues driving these costs.”
Backstop Auction Raises Further Concerns
PJM plans to hold a backstop reliability auction in September 2026 to secure additional capacity for high-demand customers, including data centers. Unlike the baseline auction, the backstop event may not be subject to the $325/MW-day cap, though PJM has not finalized the rules. The grid operator is also awaiting a response to the Federal Energy Regulatory Commission’s (FERC) 206 Show Cause Order, which could reshape interconnection policies for large energy users.
Eidbo warned that without similar safeguards, the backstop auction could further inflate costs. “PJM’s market structures continue to shift the financial burden of Big Tech’s energy demands onto everyday customers,” she said. “What we need are responsible guardrails for data center development and a faster transition to clean energy to meet demand without passing costs to households.”
Structural Barriers Limit Clean Energy Participation
The auction’s fossil-heavy outcome stands in contrast to broader U.S. trends, where wind and solar now account for more than 20% of electricity generation. PJM’s results suggest that structural barriers—such as interconnection delays or market rules favoring legacy generators—are limiting the participation of cleaner, lower-cost resources. Since June 2025, annual capacity costs in the PJM region have risen from $2.2 billion to $14.7 billion, a sixfold increase that has yet to prompt a public response from the grid operator.
PJM has not issued a statement addressing the auction’s reliance on fossil fuels or the $12.5 billion cost increase. The grid operator’s next steps, including potential reforms to the backstop auction or its response to FERC’s order, remain unclear. With the price collar set to expire after the 2029/2030 auction cycle, long-term affordability for PJM customers hangs in the balance.
