Vienna, VA, August 21, 2024 — Energy Ventures Analysis (EVA) has released a comprehensive report (access the full report here) on behalf of America’s Power on the recent PJM 2025/26 Base Residual Auction (BRA) results, revealing a dramatic shift in the electricity market that could have far-reaching implications for energy consumers and providers alike.
The auction, conducted in July 2024, saw capacity prices soar to an unprecedented $269.92 per megawatt-day (MW-d) for the Regional Transmission Organization (RTO) footprint, marking a nearly tenfold increase from the previous year’s auction. This spike in prices is attributed to significant changes in PJM’s market structure, including a higher forecasted peak load, an increased Installed Reserve Margin (IRM), and modifications to the Effective Load Carrying Capability (ELCC) for various resource types.
Key Findings from the Report:
- Increased Forecasted Peak Load:
- PJM raised its forecasted peak load by 2.2%, driven by the growing electrification of the transportation sector and substantial demand growth from data centers, particularly in Northern Virginia and Chicago.
- Higher Installed Reserve Margin (IRM) Target:
- In response to reliability concerns following extreme weather events like Winter Storm Elliott in December 2022, PJM increased its IRM target by 3.1 percentage points to 17.8%, leading to a significant rise in capacity requirements.
- Changes in Capacity Accreditation:
- PJM extended ELCC accreditation to all generating resources, resulting in a substantial reduction in accredited unforced capacity (UCAP) for natural gas-fired and solar resources, effectively reducing available capacity by nearly 25,000 MW.
The report underscores the profound implications these auction results may have on the PJM market and its stakeholders. The total cost of capacity for the 2025/26 delivery year skyrocketed to $14.7 billion, a cost that will ultimately be borne by ratepayers across the PJM footprint. The impact on electricity rates will vary, with deregulated markets likely to see the most significant increases, while vertically integrated utilities may experience minimal or no impact.
Challenges Ahead:
The report also highlights the ongoing challenges facing the PJM market, including the scheduled retirement of nearly 12,000 MW of primarily coal-fired power plants by 2028, with insufficient replacement capacity currently under development. Without significant investments in new power plants and transmission infrastructure, PJM could face continued capacity constraints and rising costs in future auctions.
Energy Ventures Analysis calls for strategic interventions to ensure the future reliability and affordability of electricity in the PJM region, emphasizing the need to maintain existing generating resources and encourage investment in new capacity.
For more information regarding the report, please visit EVA’s website or contact us at 703-276-8900.
About Energy Ventures Analysis: Energy Ventures Analysis (EVA) is a leading provider of consulting and analytical services for the energy industry. With decades of experience, EVA delivers in-depth market analysis, strategic insights, and expert advice to support decision-making in the energy sector.