PJM Interconnection, the regional grid operator spanning 13 states and Washington, D.C., recently announced the results of its latest capacity auction, revealing record-high prices for the second consecutive year. This unprecedented surge is poised to impact the electricity bills of over 60 million consumers across PJM’s vast territory, signaling a critical juncture for grid stability and the clean energy transition.

The escalating prices are primarily driven by a confluence of factors: a sudden spike in electricity demand, largely fueled by the proliferation of data centers and broader electrification trends like electric vehicles and heat pumps, coinciding with the accelerated retirement of aging power plants. As Jon Gordon, a policy director at Advanced Energy United, explained, the capacity market exists to ensure sufficient generation is available during peak demand periods, compensating plants that might only run a few hours a year. However, with less supply and increased demand, the auction dynamics inevitably push prices upward.

A central impediment to introducing new supply is PJM’s severely backlogged interconnection queue. Historically, PJM processed a handful of requests annually from large, centralized power stations. The clean energy transition, however, has introduced hundreds of smaller, distributed solar and wind projects, overwhelming PJM’s engineering and economic analysis capabilities. These complex interconnection studies, which can take several years, have led to a critical bottleneck. The situation became so dire that PJM closed its queue in 2022, with hopes of reopening it in late 2026. This systemic failure to adapt to the high-volume nature of modern energy development is, in Gordon’s view, a primary driver of higher prices.

An Advanced Energy United scorecard rated PJM with a “D minus” on its ability to interconnect new resources, ranking it the lowest among all U.S. Regional Transmission Organizations (RTOs). While PJM has attempted to address the issue by hiring more transmission engineers and abbreviating studies, the depth of the backlog means these efforts have yielded minimal immediate impact. Furthermore, the projects currently in the queue, 95% of which are clean energy, are often years old, with their original economic assumptions potentially invalidated by recent supply chain disruptions, inflation, and tariffs. This raises concerns that many approved projects may no longer be economically viable when they finally receive permission to connect.

Industry stakeholders are urging PJM to reopen and “refresh” the queue, allowing new projects that reflect current economic realities to enter the process. The Federal Energy Regulatory Commission (FERC), which oversees PJM, is increasingly under pressure from states to address these market inefficiencies. The inability to seamlessly integrate new, cleaner power sources not only drives up costs but also poses a significant challenge to meeting renewable energy targets and maintaining grid resilience in a rapidly evolving energy landscape.