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August 24, 2021

PJM Capacity Market Update: PJM’s First Capacity Auction in Over a Year Misses Expectations

This post was originally featured in our recently published Q2 Renewables Market Report – a comprehensive assessment of current power purchase agreement (PPA) pricing developments, policy updates, insights on PPA evaluation, and trends shaping the global renewable energy market. Download a copy of the full report.


PJM capacity auction results indicate muted impact from minimum offer price rule as stakeholders seek to reform capacity auction rules for the next auction.

PJM, which covers the Mid-Atlantic region, is the largest wholesale power market in the U.S. and the second most active market for renewable energy PPAs, with almost 6 GW of solar and wind projects available for offtake in Q2 2021. Though PJM is a popular market for corporate offtake, buyers must be aware of the challenges present in the market, such as a slow interconnection queue and ongoing capacity market uncertainty.

Regarding capacity market uncertainty, PJM held its first capacity auction in May 2021 after over a year of delays. The capacity market is exceedingly volatile, but the 2022/2023 auction results were lower than industry expectations. As seen in the figure below, the 2021/2022 delivery year clearing price for “Rest of RTO” was $140/MW-Day. This is approximately a 65% reduction in average clearing prices from the 2021/2022 auction held in 2018.

2022/2023 PJM Capacity Market Auction Results

The expanded Minimum Offer Price Rule (MOPR) that applies to state-subsidized resources was in effect for the 2022/2023 auction. Per the auction results, renewable and nuclear plants increased their cleared capacity, indicating the MOPR had a muted impact overall. Anecdotally, Edison Energy heard from some developers who pursued the resource-specific exception that they were given a unit-specific price from PJM above the clearing prices, which may have prevented the projects from clearing this auction. The price discovery from the capacity auction will be useful to developers in bidding projects going forward.

Looking ahead to the next auction in December, PJM and its stakeholders proposed removing the expanded MOPR for renewable projects that receive state subsidies as long as the state subsidies are not conditioned upon clearing the capacity auction. Removing the need for PJM renewable projects to comply with the MOPR would give buyers greater flexibility to pursue renewable projects offering REC swaps in return for a lower PPA price. PJM intends to file its proposal with the Federal Energy Regulatory Commission (FERC) in late July. Edison Energy anticipates a FERC order in Fall 2021, at the latest, to accommodate these changes in the upcoming 2023/2024 auction in December. Capacity market reform discussions will continue throughout the summer.

Please contact Edison Energy if you’d like to learn more about how these regulatory changes will impact contracting and pricing of renewable PPAs in PJM.


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