Power Markets

On 30 July 2024 PJM Interconnection, the grid operator for thirteen states and Washington, D.C., from New Jersey to Illinois and including the data-centre corridor of northern Virginia, published the results of its capacity auction for the delivery year starting in June 2025. The capacity price across most of its territory cleared at about $269.92 per megawatt-day. The previous auction, for 2024/25, had cleared at about $28.92. The price of being available to generate had risen roughly ninefold in a single auction, and every electricity customer in a market serving about 65 million people would pay for it through their bills.

Three causes overlapped. PJM's load forecasts had risen sharply on data-centre demand. Coal and older gas plants were retiring faster than new ones could enter, because new plants waited years in interconnection queues and gas turbines were sold out. And reforms to how PJM accredited capacity, crediting each resource only for its expected contribution at times of stress, had cut the megawatts many plants could offer. The following auctions confirmed that the result was not a fluke: about $329.17/MW-day for 2026/27, about $333.44 for 2027/28 and about $325 for 2028/29, each at the cap of a price collar negotiated in 2025 after Pennsylvania's governor challenged the market design (reported). The 2027/28 auction was the first to fall short of PJM's reliability requirement, by about 6.6 GW according to Maryland's consumer advocate; its uncapped price would have been about $529.80, and its total cost was about $16.4 billion (PJM, reported).

Investors had already begun to reprice the owners of existing plants. In March 2024 Talen Energy, which had emerged from Chapter 11 only in May 2023, sold Amazon a data-centre campus beside its Susquehanna nuclear plant for about $650 million. In September 2024 Constellation agreed to restart a closed reactor for Microsoft (Chapter 11). Vistra, which had lost about $1.6 billion in Winter Storm Uri three years earlier, became one of the best-performing stocks in the S&P 500 in 2024 (reported). A fleet that investors had valued as a declining merchant business, exposed to cheap gas and falling demand, was re-rated as the owner of the scarcest product in American infrastructure: firm power that already had a grid connection.