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PJM capacity auction RTO clearing price surges 83% on year to $140/MW-day

The clearing price in PJM Interconnection's 2021/2022 Base Residual Auction surged about 83% on the year to $140/MW-day at the RTO zone and most other zones.

The 2021/2022 delivery year clearing price for capacity performance resources, which include generation, demand response and energy efficiency, broke out at higher levels from the RTO in five zones due to transmission limits, PJM officials said in a May 23 news release announcing the results.

Prices cleared at $165.73/MW-day in Eastern MAAC, $171.33/MW-day in ATSI, $195.55/MW-day in ComEd, $200.30/MW-day at BGE and $204.29/MW-day at PSEG.

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Contributing to the overall increase in clearing prices on the year were the ongoing decline in energy prices, which causes generators to seek revenues in the capacity market through higher offers; an increase in the cost of new energy; and a decrease in total cleared capacity, including a reduction in the number of new generators.

"Those factors driving higher prices were partially offset by a lower reliability requirement because of lower forecasts of future electricity demand," PJM said.

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According to PJM, a total of 11,126 MW of demand response cleared in the latest auction, an increase of 3,305 MW compared to last year.

A total of 2,832 MW of energy efficiency resources also cleared, an increase of about 1,100 MW on the year. A total of 1,417 MW of wind generation cleared while a total of 570 MW of solar power cleared in the latest auction.

The auction cleared 500 MW more coal generation than last year's auction. The auction also cleared 1,000 MW more gas-fired generation than last year's auction, including one new combined cycle plant. The auction cleared 19,900 MW of nuclear generation, about 7,400 MW less than last year's auction.

Ahead of the auction, the wide range of analyst estimates for the RTO zone price spanned about $80.00/MW-day to $155.00/MW-day. Price outlooks for EMAAC ran from $135.00/MW-day to $157.00/MW-day, with prices at the ComEd and PSEG zones pegged near $157.50/MW-day and $200.00/MW-day, respectively.

In May 2017, the 2020/2021 delivery year clearing price for capacity performance resources cleared at $76.53/MW-day for all of PJM except four regions. Ongoing transmission limits and retiring generation led to a breakout at four zones: $86.04/MW-day in MAAC, $187.87/MW-day in Eastern MAAC, $188.12/MW-day in ComEd, and $130/MW-day in Duke Energy's Ohio and Kentucky region.

The annual Base Residual Auction is a key component to PJM's forward capacity market, known as the Reliability Pricing Model. Due to the poor power plant performances during the polar vortex cold snap in 2014, the capacity performance product was designed to reward top-performing generating units and punish underperforming resources.

Capacity performance requires generation, demand response and energy efficiency to perform when called upon regardless of weather conditions or extreme system conditions. Committed capacity performance resources that do not perform when called upon face significant nonperformance charges.

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For more detailed capacity market data, visit our Capacity Market Pages.