(The Center Square) – Shrinking power supply remains a challenge according to the grid operator’s most recent capacity auction, signaling that regional utility bills could still climb, albeit more slowly, as demand for electricity grows faster than can be provided.

PJM, the organization tasked with managing the flow of power for 67 million people across 13 states and Washington, D.C., collects annual bids from generators that commit them to providing energy supply over the following 12 months. In this case, it’s for the 2028-29 operating year.

By doing so, the organization can better hedge against blackouts and soaring prices that could happen if there’s not enough power to turn on furnaces in the dead of winter or air conditioning at the height of summer.

“These auction results show that demand for electricity continues to grow faster than electricity supply,” said David Mills, PJM president and CEO. “At the same time, PJM recognizes how this supply-and-demand imbalance impacts the reliability of the system and costs for consumers. We are working with government and industry leaders on multiple fronts to restore that balance by bringing on new generation as fast as possible and managing the growth of new load on the grid.”

But a better solution, according to energy producers, state officials, and PJM alike, would be to plug more supply into the grid, which can help limit the stress fractures anticipated from the data center boom.

Auction Price

Results of PJM’s 2028-2029 Base Residual Auction show the price reached the federally approved cap of $325 per MW-day throughout the PJM region – 2.5% below the $333.44 price in the previous auction.

The auction’s cleared capacity totaled $16.4 billion. PJM notes that figure does not represent the total cost to customers because some utilities and other load-serving entities secure capacity through self-supply arrangements or bilateral contracts and are not subject to the auction clearing price.

Katie Blume, coalition chair of Clean Power PA, said the results amounted to “more of the same: high prices driven by surging data center demand, and a grid that’s getting less reliable, not more.”

Blume credited the price cap negotiated by Gov. Josh Shapiro with preventing steeper increases, saying it has saved consumers nearly $13 billion over two auctions. However, she said a cap does not add new power supplies or resolve PJM’s underlying problems.

She called for making data centers pay their “fair share” of grid costs and accelerating the connection of wind, solar, and battery-storage projects.

Reliability Shortfall

For the second consecutive auction, PJM secured less capacity than required to meet its reliability target. The 2028-2029 auction fell short by 6,831 MW, leaving the grid below the reserve cushion required to meet a one-in-10-year reliability standard.

A rough estimate puts the total number of homes powered by that many megawatts around 5.5 million. This figure assumes PJM’s standard of 1 MW is equal to supplying an average of 800 homes.

The organization, however, said that the shortfall does not necessarily mean the system will be unable to meet demand. It means the grid will operate with slimmer reserves and greater risk during extreme conditions. It continues to hold a reserve margin of 14.7%.

The shortfall was not unexpected given the trend. The previous auction fell approximately 6,500 MW short, and large load projects continue to be added to the demand forecast.

Forecast peak demand for 2028-2029 is approximately 2,000 MW higher than in the previous delivery year.

Supply and Proposed Solutions

The auction secured 138,318 MW of capacity, an increase of 3,733 MW from the previous auction. That included 525 MW from new generation and upgrades to existing plants.

That’s enough supply to power 69 million and 138 million homes, dependent upon the season.

The committed resources include: 46% natural gas, 20% nuclear, 18% coal, 5% demand response, 4% hydro, 2% wind, 2% oil, and 1% solar.

PJM said it is working to increase supply and manage demand by clearing its project queue, creating a faster pathway for certain high-priority generation proposals, improving the performance of existing plants, and developing “Connect and Manage” frameworks that would allow data centers and other large users to connect under flexible operating conditions.

The grid operator also plans to seek federal approval for a Reliability Backstop Procurement intended to address near-term supply needs.

“All of these initiatives are critical to keeping the lights on while allowing states to protect their everyday electricity customers,” Mills said.

Electric Power Supply Association President and CEO Todd Snitchler said historically low capacity prices had discouraged investment in generation, while the higher prices that began with PJM’s July 2024 auction prompted companies to announce, restart, expand, or advance tens of gigawatts of projects.

Snitchler said the immediate challenge is turning that investment into additional electricity supply by accelerating permitting, siting, and grid interconnection. He also cautioned against allowing utilities to finance new generation through mandatory customer charges, arguing that competitive suppliers and investors should continue to bear construction risks.

Claire Lang-Ree, advocate for climate and energy for the Natural Resources Defense Council said, the results confirm that data center growth is outpacing new electricity supply, weakening reliability, and keeping prices at the cap.

She called on PJM and state officials to ensure data centers pay for generation and transmission built to serve them and to accelerate the interconnection of lower-cost clean energy projects.

“The 67 million PJM residents literally can’t afford to suffer any more record-breaking auctions or near-blackout events,” Lang-Ree said.

PJM expects to submit its Reliability Backstop and Connect and Manage proposals to the Federal Energy Regulatory Commission in the coming weeks.

The next Base Residual Auction, for the 2029-2030 delivery year, is scheduled for December as PJM works to restore its three-year-ahead auction cycle.

This post was originally published on The Center Square.