PJM’s 2027/2028 Capacity Auction: Record Prices and What They Mean for Your Facility
The December 2025 auction results are in. Capacity prices hit the cap for the third straight year. Here’s our analysis of what’s driving prices and how facilities can capitalize.
The Headlines: Cap-Hitting Prices Continue
PJM’s Base Residual Auction for the 2027/2028 delivery year cleared at $121,705/MW-year, the maximum allowed under current market rules. This marks the third consecutive year of cap-hitting prices, signaling a fundamental shift in PJM’s supply-demand dynamics.
For demand response participants, this translates to the strongest earnings environment we’ve seen in two decades of operating in PJM markets.
Why Prices Keep Climbing
Data Centres Are Reshaping Load Forecasts
PJM’s peak load forecast for 2027/2028 is approximately 5,250 MW higher than the previous year, and data centres account for nearly all of that growth. The AI boom is translating directly into grid infrastructure stress.
Supply Can’t Keep Pace
New generation projects take years to develop, permit, and construct. Meanwhile, older coal and gas plants continue retiring. The result: a widening gap between available capacity and growing demand.
Reserve Margins at Historic Lows
PJM’s target reserve margin was 20%. The auction procured just 14.8%, the lowest in PJM history. This isn’t just a pricing signal; it’s a reliability warning.
The Demand Response Opportunity
Here’s where it gets interesting for our clients:
ELCC Ratings Jumped to 92%
The Effective Load Carrying Capability rating for demand response resources rebounded sharply, from 69% to 92%. This means demand response is now valued at nearly its full capacity contribution.
What this means for you: If you can curtail 10 MW, you’re now credited for 9.2 MW of capacity value instead of 6.9 MW. That’s a 33% increase in your earning potential from the same load flexibility.
All DR Cleared
Every megawatt of demand response offered into the auction cleared. PJM needs flexible load resources, and they’re willing to pay for them.
24/7 Resource Status
Starting in 2027/2028, PJM is transitioning demand response to 24/7 resource status. This reflects the grid’s increasing reliance on load flexibility around the clock, not just during summer afternoon peaks.
What This Means for Your Facility
Revenue Potential
A 5 MW curtailment capability in PJM could earn:
| Revenue Component | Annual Value |
|---|---|
| Capacity Payment (5 MW × $121,705 × 92% ELCC) | ~$560,000 |
| Energy Payments (event performance) | $20,000 – $80,000 |
| Total Annual Potential | $580,000 – $640,000 |
These numbers represent a step-change from just three years ago when the same capability might have earned $50,000-100,000.
Event Frequency Will Increase
With reserve margins at historic lows, expect more frequent dispatch events. Summer 2025 already saw record demand response activations. This trend will continue.
The upside: More events mean more energy payment opportunities on top of your capacity revenue.
The consideration: Your facility needs robust curtailment capabilities and a proven ability to perform when called.
Performance Is Non-Negotiable
Here’s the reality check: with prices this high, PJM’s performance requirements are stringent. Underperformance during events can trigger significant penalties that erode your earnings.
This is where experience matters. At Rodan, we’ve managed demand response performance through hundreds of PJM events. Our approach:
- Conservative nominations: We never over-commit your capability
- Real-time monitoring: We track performance throughout every event
- Automated controls: Where possible, we implement direct load control to ensure reliable response
- Backup strategies: Contingency plans for every enrolled load
The Window Is Open
The 2026/2027 and 2027/2028 delivery years represent a historic earning opportunity for PJM demand response participants. But enrollment windows have deadlines, and capacity commitments are made months in advance.
If your facility has:
- Flexible industrial processes
- Large HVAC or refrigeration loads
- Backup generation capability
- Data centre cooling flexibility
…you likely have untapped capacity value sitting on your balance sheet.
Beyond PJM
While PJM’s auction results are making headlines, similar dynamics are playing out across North America:
- IESO (Ontario): Capacity auction prices rising as Pickering nuclear retirement approaches
- NYISO: Growing demand response opportunities in downstate New York
- MISO: Seasonal capacity requirements driving new participant interest
- AESO (Alberta): Market reforms creating new flexibility value streams
Market-wide, flexible load is becoming more valuable, and that trend shows no signs of reversing.
Next Steps
Don’t leave money on the table. Contact our team for a no-obligation assessment of your facility’s demand response potential in PJM or any major North American market.
Current Rodan clients: Reach out to your account manager to discuss optimizing your PJM participation for the 2027/2028 delivery year.
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