PJM Capacity Auction Misses Target by 6.8 GW as FERC Chair Warns of Compounding Failures
A third consecutive shortfall in PJM's forward capacity market has prompted FERC's chairman to describe the results as compounding "alarm bells" for US grid reliability.
PJM Interconnection's capacity auction for the 2028-2029 delivery year closed on Tuesday (2026-07-15) with prices hitting the $325/MW-day price cap across the entire region and a 6.8 gigawatt shortfall below the grid operator's reliability target — the third straight year the nation's largest power market has failed to secure adequate future supply commitments.4,3
FERC Chairman Swett described the results as compounding earlier "alarm bells," a characterisation that carries weight given the regulator's role in overseeing organised wholesale markets across the eastern United States. The auction secured 138,318 MW of unforced capacity, with Fixed Resource Requirement regions adding another 10,864 MW, for a combined 149,182 MW — still falling short of what PJM needs to serve 67 million customers across 13 states and Washington, DC through the summer of 2028.6,3
The price cap being reached across the whole footprint, rather than in isolated constrained zones, signals broad inadequacy rather than a localised transmission problem. When every sub-region simultaneously clears at the ceiling, the auction mechanism has effectively stopped functioning as a price signal and is instead confirming scarcity.4
Data center demand is the most visible driver of the supply gap. PJM's load growth projections have climbed sharply as hyperscale computing facilities proliferate across the mid-Atlantic and Midwest. Grid Strategies projects US data center capacity to expand by at least 65 GW and as much as 90 GW by 2029, a pace that organised capacity markets were never designed to accommodate at this speed.1
The infrastructure mismatch runs deeper than a single auction. FERC directed all six major regional transmission organisations outside Texas to establish enhanced transmission planning programmes in late 2021, but regional operators subsequently sought extensions on federal deadlines to upgrade existing infrastructure. Delays in that process compound the supply shortfall by reducing the ability to import capacity from adjacent regions during stress events.1
One proposed response is to lean harder on bilateral contracts — direct agreements between data centers and generation or storage developers that bypass the centralised capacity market entirely. Analysts cited by Canary Media note this channel could expand significantly, potentially allowing large loads to fund the resources they require rather than relying on the socialised auction mechanism.5 But bilateral deals take time to negotiate and build, and do nothing for the 6.8 GW gap already locked in for the 2028-2029 delivery year.4
Some analysts regard the backstop auction that PJM has used to address prior shortfalls as a temporary measure that is now looking permanent. "The backstop auction was intended to be a one-off, but it's hard to see how we can return to normal," one market observer noted, according to Utility Dive. That assessment points to a structural change in how PJM procures future capacity, with implications for merchant generators, developers and load-serving entities that plan around the annual base residual auction as a primary revenue signal.4
Heat stress adds a near-term dimension. The Department of Energy has issued a series of Section 202(c) emergency orders under the Federal Power Act to keep an estimated 4,400 MW of coal and gas capacity online beyond planned retirements, a measure that reflects the gap between the retirement pipeline and new-build timelines. NERC has separately flagged the risk of sudden load loss from large data centers and industrial facilities as a reliability concern during peak demand hours.2
PJM Western Hub day-ahead spot prices stood at $72.38/MWh as of Monday morning (2026-07-20), reflecting current summer demand conditions rather than the 2028 capacity crunch. But forward market participants are now pricing a delivery year where capacity is demonstrably short, transmission upgrades are delayed and demand growth projections continue to rise. The settled $325/MW-day clearing price across the full footprint gives developers a clear revenue signal — the question is whether that signal arrives early enough to bring sufficient capacity online before June 2028.
PJM is expected to revise its planning parameters ahead of the next auction cycle. Whether that involves a higher price cap, redesigned demand curves or structural changes to how load growth from large customers is incorporated into the auction will determine whether the 2029-2030 delivery year produces a different outcome or a fourth consecutive miss.