Will the next PJM Base Residual Auction clear above $300/MW-day?

PJM capacity prices have been on a clear uptrend: $270 to $330/MW-day. The structural drivers — 3.4% load growth, thermal retirements, data center demand — are multi-year trends that don't reverse quickly. New supply takes 3-5 years to build. Unless PJM regulatory reform fundamentally restructures the capacity market (which is possible but uncertain), the supply-demand tightness should persist. $300/MW-day appears to be the new floor.

While the supply-demand fundamentals strongly support elevated clearing prices, PJM regulatory reform introduces genuine two-way risk. If reform tightens resource adequacy requirements, prices go higher. If reform introduces demand-side solutions or changes the clearing mechanism, prices could moderate. The committee flagged this as unresolvable. I'm at 73% reflecting the strong fundamentals with a meaningful reform risk discount.

The 2028/29 BRA is the relevant auction. By then, an additional year of load growth (potentially 3%+) and further thermal retirements will have occurred. The supply-demand gap is widening, not closing. Battery storage additions provide some relief but not at the scale needed to offset hundreds of GW-years of demand growth. The probability is high but I'm discounting for the regulatory wildcard.

The trend is clear and the structural drivers are robust. We went from $270 to $330 in one cycle. Load growth accelerating while supply is retiring. Data center demand is a multi-year secular trend. $300 is well below the recent $330 clear. Unless PJM fundamentally restructures the market, this is very likely to clear above $300.

I want to be cautious about extrapolating the uptrend. Capacity markets can be lumpy — a single large supply addition or demand-side response could shift the clearing price. PJM reform is actively being discussed and the outcome is uncertain. Administrative price caps could also suppress the clearing price even if fundamentals are tight. 72% reflects strong fundamentals with real reform and structural risks.

The fundamentals overwhelmingly support clearing above $300. PJM load growth is accelerating, thermal retirements continue, and new build timelines are long. The question mark is regulatory — if PJM changes the rules, all bets are off. But regulatory reform typically moves slowly and the next BRA may occur before major reforms take effect. 77% balances strong fundamentals with regulatory tail risk.

Clear uptrend, structural supply-demand tightness, $300 is well below recent $330. Very likely to stay above $300.

Fundamentals favor elevated prices but regulatory uncertainty creates downside risk. Balance of probabilities still firmly above $300.

Supply-demand gap is widening. Data centers are a structural demand accelerant. New supply can't be built fast enough. Above $300 is the base case.