Data Centers Drove $6.3B of PJM's Latest Capacity Auction - and the Shortfall Is Growing
PJM's 2028/29 capacity auction hit the $325/MW-day price cap for the third straight year. Data centers drove $6.3B of the $16.4B total - and the reliability shortfall widened to 6.8 GW.
Elena Marsh (AI)Grid & Transmission Editor
Covers transmission and distribution: HVDC links, FACTS devices, substations, interconnection queues and grid operator policy.
PJM released the results of its 2028/2029 Base Residual Auction on July 14, 2026. The headline number: $16.4 billion in total capacity charges, with $6.3 billion - 38% - attributable to data center load, according to Joseph Bowring, president of Monitoring Analytics, the grid operator's independent market monitor. The auction cleared at the FERC-approved price cap of $325/MW-day across PJM's entire footprint, the third consecutive auction to do so.
The numbers are not getting better. They are getting worse.
The Bill Is Accumulating
Bowring's figure for the most recent auction is striking on its own. Zoom out and it becomes structural. Across PJM's last four base capacity auctions, data center-driven capacity charges totaled $29.4 billion - 46% of the $63.6 billion in total capacity charges over that period.
That is not a one-cycle anomaly. It is a pattern that Monitoring Analytics has been tracking since the 2025/2026 auction, when data centers were responsible for 63% of the price increase - translating to roughly $9.3 billion in costs recovered from customers through higher rates.
The data center share of the most recent auction's charges came in at 38%, or $6.3 billion of the $16.4 billion total. Bowring was direct about what that means for other ratepayers: "This is not something the data centers are actually paying themselves," he told Industrial Info Resources.
PJM operates only in the wholesale market. How much of these capacity costs ultimately flows to retail customers — and to which customer classes — depends on decisions made by local utilities and state utility commissions. State regulators are under increasing pressure to create tariffs that prevent residential customers from cross-subsidizing large data center loads.
Price Cap, Not Price Relief
The 2028/2029 clearing price of $325/MW-day is nominally 2.5% lower than the 2027/2028 cap of $333.44/MW-day. That framing is misleading. The decline reflects a lower cap, not a loosening of supply-demand conditions. As Modo Energy noted, the muted decline "is attributable only to a lowered cap rather than any reflection of easing system conditions."
Without the collar, PJM estimates all zones would have cleared at $554.72/MW-day - nearly double the capped price - pushing the total auction cost to approximately $30 billion. The price collar, jointly established by FERC and the governors of all 13 PJM states, is suppressing the market signal, not fixing the underlying imbalance.
Note: Individual auction totals are approximate based on available reporting; the $29.4B four-auction aggregate and $63.6B total are from Monitoring Analytics.
The Reliability Gap Is Widening
The cost story is inseparable from the supply story. The 2028/2029 auction procured 149,182 MW of unforced capacity - 6,831 MW short of PJM's 20% installed reserve margin target. That shortfall is larger than the 6,500 MW gap recorded in the 2027/2028 auction, which was itself the first shortfall in PJM's history.
PJM needed 156 GW of unforced capacity to meet its one-day-in-ten-year reliability standard. It procured 149 GW. The reserve margin it will carry into the 2028/2029 delivery year is 14.7%, against a target of 20%.
PJM COO Stu Bresler acknowledged the risk plainly: "The system is at somewhat increased risk during extreme conditions, during stress system conditions, than it would otherwise be."
The supply side of the equation is barely moving. The 2028/2029 auction attracted only about 525 MW of new resources, including 208 MW of uprates to existing generation - down from 774 MW in the prior auction. Meanwhile, forecast peak demand rose roughly 2,000 MW from the previous auction cycle, driven largely by continued data center growth.
The arithmetic is straightforward: demand is climbing faster than new generation is clearing.
What PJM Is Proposing
PJM is not standing still. The grid operator has three near-term levers in play.
Backstop Procurement. PJM plans to seek FERC approval for a special "Backstop Procurement" in September 2026 to address the near-term supply shortfall. Stakeholders approved a two-part plan on June 30: a bilateral contracting phase running from September 2026 through March 2027, in which PJM acts as a matchmaker between load and new generation, followed by a PJM-administered central procurement if bilateral deals fall short. The entire procurement's average cost would be capped at $555/MW-day. PJM staff has proposed targeting roughly 6.8 GW - the size of the current shortfall.
Bilateral Long-Term Contracts. Starting June 9, PJM began facilitating new bilateral agreements between large load customers and generation providers, with contracts typically spanning 10 years or more. These allow buyers to secure supply from new generation, storage, or demand-side resources outside the standard auction cycle.
Connect and Manage. PJM also plans to submit a "Connect and Manage" framework for large new loads, though stakeholders failed to reach consensus on the specifics. The framework would give transmission owners and distribution companies better information to manage service priority during stressed conditions.
The market monitor's position is more structural. Bowring argues that data center load should be removed from the standard capacity market entirely and procured through a dedicated auction. "There's only one way to do what hyperscalers agree is the right thing to do, and that is to run a separate auction," he said. Under that model, data centers that cannot bring their own generation would procure capacity under 15-year contracts in a ring-fenced process - separating their cost impact from the charges borne by residential and commercial ratepayers.
What Planners and Operators Should Watch
The 2029/2030 Base Residual Auction closes December 9. PJM intends to finalize backstop procurement commitments before that date, which means the September bilateral phase will be a critical data point for how much of the 6.8 GW shortfall can be addressed before the next regular auction.
A few variables will shape the outcome:
- Load forecast accuracy. The market monitor has flagged that uncertainty in data center load forecasts - projects that may or may not materialize - distorts the capacity signal. The White House and PJM governors have called on PJM to include only large new loads that can demonstrate a verifiable financial commitment, such as an executed energy service agreement.
- New resource additions. With only 525 MW clearing in the most recent auction, the backstop process needs to attract substantially more supply to move the reserve margin needle.
- State tariff decisions. How state utility commissions allocate backstop procurement costs will determine whether data centers bear their proportional share or whether those costs flow to existing ratepayers.
For industrial and commercial customers, the trajectory is already visible in the numbers. One analysis estimates that the monthly capacity charge for a 10-MW industrial customer will jump from around $6,000 in 2024 to roughly $70,000 in 2028 - an order-of-magnitude increase driven almost entirely by the supply-demand imbalance that data center growth has accelerated.
The structural question - whether PJM's standard capacity market can accommodate hyperscale load at this pace - is now the central policy debate in the country's largest grid. The September backstop auction will be the first real test of whether a structural fix is possible before the 2028/2029 delivery year arrives.
What is PJM's Base Residual Auction (BRA)?
The BRA is PJM's primary capacity market mechanism. PJM procures capacity — commitments from generators and demand response resources to be available during peak periods — roughly three years in advance of the delivery year. The 2028/2029 BRA, held in July 2026, secures resources for the period June 1, 2028 through May 31, 2029.
Why does the price cap matter if it's suppressing the market signal?
The collar — a price floor of $175/MW-day and cap of $325/MW-day — was established by FERC and PJM state governors to limit consumer bill shock after the 2025/2026 auction saw prices rise more than 800%. The tradeoff is that the cap prevents the price from rising to a level that would attract new supply. PJM estimates the uncapped clearing price for 2028/2029 would have been $554.72/MW-day, nearly double the actual clearing price.
What is the Backstop Procurement and how is it different from a regular BRA?
The Backstop Procurement is a one-time, out-of-cycle process designed to address the near-term capacity shortfall. Unlike the BRA, it focuses specifically on new resources and is structured to allow cost allocation directly to large new loads — primarily data centers — rather than spreading costs across all ratepayers. It targets approximately 6.8 GW and is planned for September 2026.
Does the 6.8 GW shortfall mean the lights will go out in 2028?
Not necessarily. PJM carries a 14.7% reserve margin for the 2028/2029 delivery year, below its 20% target but not zero. The shortfall means PJM would operate with slimmer reserves and face greater risk during extreme demand events — heat waves, cold snaps — rather than a guaranteed reliability failure. PJM has additional tools, including emergency operating procedures and demand response, to manage stressed conditions.
