The recent webinar hosted by Advanced Energy United has thrown a spotlight on the urgent need for bold reforms within PJM Interconnection, the largest and oldest U.S. regional transmission organization (RTO). The call to action comes as PJM grapples with an urgent supply-demand dilemma, exacerbated by surging power demand from electrification, data centers, and onshoring manufacturing. The grid operator has acknowledged that a capacity shortage could affect its system as early as the 2026/2027 delivery year, with summer peaks expected to climb to 220,000 MW over the next 15 years and winter peaks estimated at 210,000 MW by 2039.
The stark reality is that PJM’s current market structures and planning processes are struggling to keep pace with these demands. Asim Haque, PJM’s senior vice president of Governmental and Member Services, highlighted the stark figures: “Last year, we interconnected 4,800 MW into an otherwise 180,000 MW system.” He emphasized that “Supply is coming off of the system and new supply additions are not keeping pace.” This mismatch is not just a statistical anomaly but a pressing issue that threatens the reliability of the grid and the stability of energy prices.
The July 2024 Base Residual Auction (BRA) for the 2025/2026 delivery year underscored this instability. The auction saw a nearly tenfold increase in clearing prices, surging from $28.92/MW-day to $269.92/MW-day. This price spike, as Morgan Pinnell, managing director at Advanced Energy United, noted, “put PJM on the radar in states more than ever before.” The spike, a 900% increase from the previous year, is expected to result in an average 30% increase in consumer costs, placing PJM under intense scrutiny from states and consumer advocates.
Rob Gramlich, president of consulting firm Grid Strategies, explained the dynamics behind the price spike: “There were 6.5 GW less supply in this last auction and 3 GW more demand—so a net change of 10 [GW]. That’s sort of enough to get to that point where you get on the steep part of the supply and demand curves, and prices can change dramatically in one auction for the next.” While high auction prices should theoretically signal developers to build more generation, the abruptness of the spike has raised concerns about consumer impact.
Jon Gordon, director at Advanced Energy United, pointed out that PJM’s frequent rule changes and shifting auction structures introduce significant uncertainty, making it harder for developers to invest with confidence. “With all of the changes PJM has been making, they’re not on a steady auction cycle,” he said. “There’s been lots of changes to major assumptions that go into the auction, and all of those things create risk and uncertainty, which, you know, I think we all understand, are never very good for getting low auction prices.”
The high prices have also prompted scrutiny from several states, including Pennsylvania, Illinois, New Jersey, Maryland, and Delaware, as well as the Organization of PJM States (OPSI) and consumer advocates. Pennsylvania Gov. Josh Shapiro explicitly suggested that if PJM cannot adapt, the state may seek an independent energy strategy. “We are exploring all options here in Pennsylvania, including removing ourselves from PJM, going it alone and determining if that is a better course for both consumer pricing and power generation in our common market,” he said.
Interconnection bottlenecks and delays are another major obstacle. PJM’s interconnection queue is enormous, with 200 GW of capacity, 98% of which are clean energy projects. Pinnell argued that the queue is backed up because “fundamentally, PJM has failed to anticipate the energy transition.” Even when projects clear the queue, permitting and siting delays, along with supply chain issues, remain significant challenges.
To address these issues, PJM is pursuing several market and interconnection reforms. These include Capacity Interconnection Rights (CIR) Transfer Reforms, Surplus Interconnection Service (SIS) Changes, and the Reliability Resource Initiative (RRI) to fast-track “shovel-ready” projects. However, panelists emphasized that PJM must go beyond incremental reforms and take a more proactive approach to market design, interconnection, and planning.
The webinar’s discussions highlight the need for a comprehensive overhaul of PJM’s processes. The sector must challenge norms and spark debate on how to ensure reliability without disproportionately burdening consumers. The urgency is clear: bold reforms are needed to prevent further volatility and ensure that PJM can meet its reliability mandate in the face of rising demand and the clean energy transition. The
