PJM Auction a Strong Indicator America Needs More Electricity
1 day ago Guest Blogger
By Raymond Gifford
Among any teen reprobate’s fabled pranks is to take a brown paper bag full of dog poo, light it on fire on the porch of your victim, ring the doorbell, run, and wait for the stinky hilarity to ensue.
And then there are the recent results from the PJM Capacity Auction.
Though not as stinky or juvenilely funny, the capacity auction results promise to trigger a political, regulatory, and consumer conflagration that no ring-and-run joke can match. What’s more, if exogenous forces outside of the PJM regulatory construct—such as permitting delays, policy hostility to dispatchable resources, and financing challenges—intervene, the capacity price increases will leave consumers paying for nothing while still not solving the capacity shortfall.
First, the results: The RTO Zone clearing price rose nearly tenfold from $28.92 to $262.92 per MW-day. Meanwhile, the Baltimore zone cleared at $466.35 per MW-day, up from $73.00 in the prior auction, and the Dominion zone cleared at $444.26 per MW-day. While corks may be popping for some of the generators active in PJM, customers are in for higher electric bills as PJM tries to induce more capacity into its market for 2026 delivery.
While PJM’s top-down engineered price formation bears only a passing resemblance to true bottom-up price emergence from willing sellers to willing buyers, the massive jump in capacity prices sends a blaring signal: PJM is glaringly short of capacity. This shortage means electricity prices will be much higher in the region as consumers are ultimately on the hook for these new capacity payments. Nonetheless, when capacity prices reveal this much volatility, it raises two questions for customers and regulators:
https://wattsupwiththat.com/2024/08/15/pjm-auction-a-strong-indicator-america-needs-more-electricity/
