PJM’s 2028/2029 capacity auction cleared at the FERC approved cap of $325.00 per MW day while again failing to procure enough capacity to meet its reliability requirement. PJM secured 6,831 MW less than required, leaving the reserve margin at 14.7% compared with its 20.0% target.

Without the cap, PJM estimates the auction would have cleared at $554.72 per MW day. That uncapped result illustrates the depth of the supply shortage and the price the market would have required to balance available capacity against projected demand.

The cap limited the immediate cost increase, but it did not create new generation, accelerate interconnection timelines, or improve the reserve margin. PJM remains increasingly dependent on a narrow supply cushion as load growth outpaces additions of firm capacity. The auction therefore represents more than a high capacity price. It is a clear warning that reliability risk is increasing and that structural support beneath forward power prices is becoming more firm.

PJM Demand Has Already Surpassed Its 2028 Forecast

The reliability concern becomes more significant when the auction assumptions are compared with actual system demand. PJM’s peak load this summer has already reached approximately 168.2 GW, more than 2 GW above the 165.95 GW peak forecast used to establish the 2028/2029 auction requirement.

In practical terms, PJM has already experienced the level of demand this summer it expected to reach two years from now. The capacity shortage identified in the auction is therefore not based only on a distant forecast. The system is already operating at demand levels that were used to plan for a future delivery year.

Data center development remains the primary source of projected growth, but the timing and scale of that demand are difficult to forecast precisely. Even so, the current peak demonstrates that load is arriving faster than expected and that PJM has less room for error during periods of extreme weather, elevated generator outages, or transmission constraints. The gap between actual demand and available firm supply has become a present reliability issue rather than a future planning concern.

PJM Power Prices Have Separated From Natural Gas

PJM forward power prices have moved sharply higher even as local natural gas prices have declined. That divergence reflects several factors, including incremental regulatory developments, growing reliability concerns, heavy hedge fund buying, and increased commercial hedging by buyers seeking protection from further price increases. 

We agree with much of the longer term bullish case for PJM power, but we do not see sufficient near term catalysts to move prices materially higher from current levels. In our view, the market already reflects an aggressive outlook for load growth and tightening supply. We therefore expect a correction over the remainder of the year and recommend avoiding major term purchases until the fall rather than chasing the current move. During periods of uncertainty, the most effective approach is a disciplined layered hedge strategy that preserves flexibility, spreads execution across multiple periods, and reduces the risk of committing too heavily at a temporary high. 

Longer term, we expect increased battery storage adoption, improving chip efficiency, and reductions in planned data center development due to capital and political constraints to moderate current load forecasts, particularly in 2030 and 2031. While we remain cautious on PJM power at current levels, we view natural gas as offering compelling value and a more attractive purchasing opportunity today. 

At EnerNova, our goal is to put clear facts and data in front of our clients so they can make properly informed decisions, unlike others who try to sell fear. We are energy risk management experts. We help buyers understand what is happening in the market, what it means for their specific contract structure, and how to stay disciplined with strategies that reduce exposure to price volatility. Contact us today to discover the EnerNova Difference.‍

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