PJM’s First Capacity Auction in Three Years Yields Low Electricity Prices

PJM — the grid operator whose service area includes Ohio — has completed its first Base Residual Auction (BRA) for capacity in three years for the 2022/23 delivery year. The BRA had been delayed while the Federal Energy Regulatory Commission (FERC) created new rules to discourage state subsidies from influencing competitive market pricing.

This spring’s auction was the first to implement FERC’s Minimum Offer Price Rule (MOPR) — and may be the only auction to do so. Natural gas-fueled generation, nuclear, solar, wind, and energy efficiency all cleared more megawatts in this auction, while coal plants experienced a significant reduction. The resulting BRA capacity price was $50/MW-day — the lowest capacity price in nine years. The BRA procured a 19.9% reserve margin, far exceeding PJM’s reliability target of 14.5%. Duke Energy’s Ohio customers will pay a slightly higher — but still low — capacity price of $71.69/MW-day.

Missing out on the low market prices and marked increase in low and no-carbon generation was Dominion Energy, which pulled out of the market, apparently to increase its renewable energy supply. 6/3/2021