More Electric Generation Needed in Mid-Atlantic, Grid Operator Says

Regulators have been raising concerns about the future reliability of the electric grid as fossil fuel-fired power plants are being retired faster than new capacity is added and demand is projected to continue to increase.

Now, a new alarm bell sounded when Mid-Atlantic regional grid operator PJM Interconnection held its annual capacity auction for 2025-26, at which it secures from power providers the amount of electricity it forecasts will be needed to meet grid demands for the next year through an auction process that locks in the lowest prices first and then accepts higher offers.

Auction prices were 833% higher than last year, with electricity being purchased at $269.92 per megawatt-day (MW-day), compared to $28.92 per MW-day for 2024-25. That will likely mean a spike in electricity bills for approximately 65 million customers across PJM’s footprint.

“The higher prices send a clear investment signal across PJM’s 13 states (including Pennsylvania) and the District of Columbia,” a PJM release states. The regional transmission organization (RTO) is one of 10 across the U.S. that oversee the nation’s electric grid reliability and interconnection.

“The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening across the RTO,” PJM President and CEO Manu Asthana said. “The market is sending a price signal that should incent investment in resources.”

PJM has been studying the effect of the transition away from fossil fuels to renewable energy sources and issuing warnings that coal-fired power plants are being retired at a faster pace than new energy projects are coming online.

The North American Reliability Corporation, an international regulatory authority that oversees grid reliability, also warned in its 2023 Long-Term Reliability Assessment that a large increase in electricity demand that is forecast to occur over the next decade. This trend is being driven by the rise of electric vehicles, electrification of industrial processes, and the surge of energy-hungry data centers coming online.

While PJM has about 3,300 active electric projects in its queue, the approval process takes time. In addition, there is about 38,000 MW of electricity that has already cleared PJM’s interconnection queue but the projects have not been built due to challenges involving financing, supply chain, and and siting and permitting.

While more capacity is anticipated to come online in coming years, the high wholesale price of electricity may lead some coal-fired power plant operators to reconsider plans to retire plants as the economics may work at a higher price.