President and CEO Manu Asthana and Vice President of Market Design & Economics Adam Keech joined industry leaders this week to discuss the challenges that grid operators face in maintaining enough reliable, affordable electricity supply to meet rapidly growing demand.
The Federal Energy Regulatory Commission’s two-day technical conference, “Meeting the Challenge of Resource Adequacy in RTOs/ISOs,” addressed issues related to a supply/demand imbalance driven by growing electricity demand and diminishing power supply, and how the capacity markets in various regions are working or not working to rebalance the system. PJM President and CEO Manu Asthana participated on the first panel, “The Resource Adequacy Challenge in RTOs/ISOs.”
For more than two years now, PJM has expressed growing resource adequacy concerns based on three trends, Asthana said in his pre-filed statement:
- Premature, primarily policy-driven resource retirements are outpacing the development of new generation.
- The proliferation of data centers and other factors is pushing forecasts for electricity demand to unprecedented levels.
- Rising costs and supply chain challenges have spiked the cost and slowed the construction of new generation.
PJM has embarked on a number of initiatives with its stakeholders to address this risk, including successful interconnection process reform, investment in interconnection tools and automation, and capacity market reforms to produce market prices that accurately reflect supply/demand conditions.
“These actions are having an impact and will help improve projected supply-demand conditions in our region,” Asthana said.
However, PJM has ongoing concerns that will require stakeholder input to solve.
Prime among them is the widening gap between the sustained high market prices that will be needed to incent needed new generation and the affordability issues being experienced by customers. In addition, the unprecedented rate and uncertain nature of data center growth has made forecasting electricity load increasingly difficult, while the risk of political intervention, litigation and changing rules in the capacity market is creating barriers to investment.
There are no simple or correct answers, Asthana said in his written statement:
“They involve trade-offs that will only be durable if they have a significant consensus around them,” he said.
“We need to stabilize market rules and find that intersection between reliability and affordability that works for both consumers and suppliers,” Asthana added during the June 4 session at FERC. “That intersection is getting harder and harder to find.”
Should supply chain, siting and other challenges to rapidly building dispatchable replacement generation remain stubborn to solve, PJM is exploring expanded roles for demand response in the interim, Asthana added during the technical conference. Demand response programs pay customers in advance for permission to curtail their electricity in emergencies.
“We are going to have to find some other creative ways through this transitional period and we are working on that too, including through demand flexibility,” Asthana said.
Adam Keech, Vice President – Market Design & Economics, participated on the panel titled “PJM’s Resource Adequacy Challenge.”
While the capacity market largely has met its designed purpose of generating competitive pricing and supporting investment to secure resource adequacy, PJM faces a complex challenge, Keech said in his pre-filed statement.
PJM needs investment in capacity to meet anticipated load growth. But for the capacity market to adequately support new entry past the 2028/2029 Delivery Year, prices need to be significantly higher than what was produced by the 2025/2026 capacity auction.
“For the market to have an opportunity to incentivize new entry, prices need to move in a direction that will be viewed as even less acceptable to consumers and policymakers,” Keech said.
In the question and answer period, panelists fielded the direct query of what should be changed in the capacity market to meet reliability objectives while maintaining investor confidence amid expected continuing high auction prices and factors inhibiting generation construction.
At this time, Keech responded, compromise on pricing rules to provide greater stability for both consumers and suppliers may be worth exploring with stakeholders. Following the initial panel on that included CEOs from almost every grid operator in the country, the June 4 session focused on PJM’s capacity market. The June 5 session featured panels involving other regional transmission organizations and independent system operators.