Illustration: Brendan Lynch / Axios
The country's largest grid operator hit the cap for power capacity prices in the Mid-Atlantic region in a move likely to spur more congressional grumbling about rate hikes.
Why it matters: Lawmakers from both parties have been clamoring for PJM Interconnection to avoid hitting their constituents with higher electric bills.
- But the results of PJM's recent capacity auction could drive up costs and show that significantly more electricity is needed to supply the regional grid.
Capacity markets aim to ensure the long-term ability of electricity supply to meet demand by creating price signals indicating where and how much capacity is needed in future years.
- Buyers in those markets are utilities, such as Dominion Energy and Pepco, that seek electricity for customers.
Driving the news: PJM, which serves 13 states, reported that bids in the capacity auction hit a cap of $329.17 megawatts per day. That translates to a year-over-year increase of 1.5% to 5% in some customers' bills, PJM said.
- The high prices come after FERC approved PJM's plan to fast-track up to 50 power plant projects to be studied to connect to the grid to address near-term grid reliability concerns.
Friction point: Renewable energy advocates and environmental groups have bashed PJM for not moving fast enough to lower barriers for wind, solar and batteries to connect to the grid.
- The higher prices are a "direct result of PJM's failure to clear its clogged interconnection queue and adequately plan the grid for the future," said Julia Kortrey, deputy state policy director at Evergreen Action.
What they're saying: Todd Snitchler, head of the Electric Power Supply Association, said that "higher prices are a signal to build more generation resources, and reflect increasing stress on the system."
- TD Cowen said the auction results show "signs of life" as PJM attracted a net increase in generation supply offers for the first time in five years while simultaneously slowing retirements.
