PennFuture: Dramatic PJM Electricity Price Increases Due To Forced Outages Of Gas Power Plants; Huge Backlog Of New Generation Projects; Demand Growth Driven By Data Centers, Cryptocurrency Mining

On August 1, PennFuture released this statement related to the latest PJM Interconnection electricity auction that resulted in a dramatic increase in electricity prices in the PJM footprint for delivery in 2025-26.  Read more here.

"At the most recent auction, the clearing prices for the 2025/26 delivery year, soared to $269.92 per megawatt-day, a staggering increase of over 9 times compared to the 2024/25 clearing price of $28.92. 

"This will result in a substantial cost increase of about $12.5 billion."

"There are several key factors that likely contributed to this significant price increase, each playing a crucial role in shaping the current market dynamics:

-- "The largest single factor is the fallout of Winter Storm Elliot and other events where forced outages at [natural] gas plants demonstrated gas is not as reliable as PJM previously assumed.  

-- "The huge backlog in the PJM interconnection queue has slowed new generation from coming online.  PJM has frozen new applications and created a new process to clear the backlog, but thousands of projects—mostly solar, storage, and wind—are facing significant delays.

-- "The glut in gas generation driving unprofitable coal plants and other legacy generators into retirement.

-- "Demand growth which has been driven by data centers and, very likely, the enormous energy demands of wasteful cryptomining."

"All together, this costly failure is the unfortunate consequence of over-reliance on fossil fuels and a failure to adapt to the changes in the generation industry."

"The capacity market is one of PJM’s tools to ensure grid reliability. Facilities submit bids where they commit to be available in the future in return for guaranteed payments.  

"Our grid operator, PJM, decides the reserve margin it needs and accepts bids, until they have sufficient commitments. 

"Facilities that clear the auction get payments whether or not they actually deliver energy to the grid in that year, but if they are not available when needed, they may face substantial penalties."

Resource Links:

-- Pennsylvania’s Electric Grid Is Dependent On One Fuel To Generate 59% Of Our Electricity; Market Moving To Renewables + Storage  [PaEN]

-- PJM Makes Multiple Reliability-Focused Improvements To Prepare For Winter To Deal With 70% Natural Gas, Other Generator Nonperformance In 2022   [PaEN]

-- PJM Reports Natural Gas Power Plants Were Over Half The Forced Outages During Winter Storm Gerri In January; Special Procedures Used For Gas Generators Raised Questions About Market Impacts   [PaEN]

-- New NERC Winter Reliability Assessment Finds Elevated Risk Of Blackouts In Extreme Weather Conditions; Natural Gas Supplies Still Vulnerable To These Conditions With 'Devastating Consequences'   [PaEN]

-- US EIA Report Shows How Winter Storms Have Reduced US Natural Gas Production, But Disruptions Can Happen Any Time Of The Year   [PaEN]

Related Articles This Week:

-- PJM Electricity Auction Price 9 Times Higher Than Previous Auction-- $269.92/MW-Day For 2025/26 Delivery Compared To $28.92/MW-Day In 2024-25; Extreme Weather Risk Big Factor    [PaEN] 

-- PennFuture: Dramatic PJM Electricity Price Increases Due To Forced Outages Of Gas Power Plants; Huge Backlog Of New Generation Projects; Demand Growth Driven By Data Centers, Cryptocurrency Mining  [PaEN] 

-- Natural Resources Defense Council: The Cost Of Slow-Walking Clean Energy Can Be Seen In Latest PJM Electricity Prices  [PaEN]

-- Kleinman Center For Energy Policy: The High Price Of Failing To Transition To Clean Energy In PJM Footprint; Next PJM Auction Is In December - By John Quigley, Senior Fellow, Kleinman Center  [PaEN] 

-- House Committee Held 2nd Hearing On Governor’s Energy Plan To Diversify Energy Generation, Improve Grid Reliability, Lower Consumer Energy Costs  [PaEN]

-- DEP Awards $15+ Million In PA Electric Grid Resilience Grants To Prevent, Shorten Power Outages In Rural Electric Systems; Fall Grant Round Planned  [PaEN]

-- DEP Awards $2.3 Million To Schools, Businesses, Local Governments Switching To Zero- Or Low-Emission Vehicles; Now Accepting Applications  [PaEN]

-- PA Solar Center, Philadelphia Solar Energy Assn., Partners Host Aug. 14 Webinar To Get Eligible Schools Ready To Apply For The New PA Solar For Schools Grants  [PaEN]

-- Allegheny County Health Dept. Accepting Applications For $5 Million In Local Climate Resiliency And Adaptation Project Grants [PaEN] 

NewsClips This Week:

-- Utility Dive: PJM Capacity Auction To Lead To Double-Digit Rate Hikes For Exelon Utilities: CFO  [PECO]

-- Utility Dive: FirstEnergy Seeks Alternatives To PJM Capacity Market’s Dramatically Higher Prices To Bolster Power Supply

-- Meadville Tribune: National Fuel Natural Gas Rates Rising More Than 11% Aug. 1

-- Utility Dive: PJM Electric Capacity Prices Hit Record Highs, Sending Build Signal To Generators-- $14.7 Billion Up From $2.2 Billion In Last Auction 

-- Bloomberg: PJM Interconnection Auction Results In Record Wholesale Electric Price Increases

-- Renewable Energy World: Energy Prices At PJM Capacity Auction Skyrocket 9x: Oh, That’s Not Good

-- Reuters: PJM Power Auction Results Yield Sharply Higher Prices

-- S&P Global: PJM Power Capacity Auction Clears At Record High Price Of $269.92/MW-Day For Most Of Footprint

-- Power Magazine: PJM Capacity Auction Prices Surge Over Nine-Fold, Signal Urgent Need For New Power Generation

-- RTO Insider: PJM Capacity Prices Spike 10-Fold In 2025/26 Auction

-- Bloomberg: Almost 20% Of Americans Face Prospect Of Higher Energy Bills

[Posted: August 1, 2024]  PA Environment Digest