Intelligent Generation
PJM’s recent Base Residual Auction (BRA) results have sent shockwaves through the energy industry. Capacity prices for the 2025/26 plan year are set to skyrocket, increasing by over 800% compared to current rates. This dramatic surge in capacity prices will have a profound impact on commercial and industrial (C&I) customers, with average electricity costs increasing by approximately 1.5 cents per kilowatt-hour for the average facility.
The PJM Interconnection is the wholesale power grid operator covering 13 states plus the District of Columbia – an area covering from Virginia to New Jersey on the Atlantic Coast and west through Northern Illinois. If you are an electricity user in that area, this substantial cost increase will impact you starting in June 2025.
Understanding the Capacity Market and Its Impact
Before we delve into the implications of this price hike, let’s briefly explain the capacity market. Essentially, it ensures that there’s enough electricity generation to meet demand, even during peak periods. Capacity auctions determine the price generators are paid to be available to supply electricity when needed and what customers have to pay for this critical service. Having adequate generating capacity available to supply power on peak days is critical to maintaining the reliable electric service we all count on.
The recent BRA outcome reflects a perfect storm of factors:
- Increasing electricity demand: As the economy grows and electrification accelerates, the demand for electricity continues to rise.
- Grid reliability concerns: The need for a resilient and secure grid has become paramount, driving up capacity prices.
- Retirement of traditional power plants: The phase-out of older power plants is reducing the overall capacity available.
The Financial Burden on C&I Customers
Capacity prices are set by PJM annually via auctions with new prices taking effect each June. The current price for most of the PJM’s network is about $1.07/kW per month. Starting in June 2025, the price jumps to around $8.20/kW per month! For a 1 MW business customer, that equates to an increase of $88,000 per year.
This astronomical increase in capacity prices will directly translate to higher electricity expenses for C&I customers. The Peak Load Contribution (PLC) – a measure of a customer’s electricity usage during peak demand periods (5CP events) – will be multiplied by a significantly higher capacity price. This means that even if your energy consumption remains constant, your electricity costs will soar.
Typical C&I customers will see their monthly electricity bill increase by thousands of dollars or more. These additional costs can severely impact a business’s bottom line and profitability.
The Strategic Importance of Battery Storage
In light of this unprecedented rise in capacity prices, battery storage has become an indispensable tool for managing energy costs. By strategically discharging your battery during peak demand periods, you can reduce your PLC and significantly reduce your capacity charges.
Intelligent Generation’s advanced energy management platform is designed to optimize battery performance and maximize savings. Our software predicts when to discharge your battery to coincide with 5CP events, ensuring you get the most out of your investment.
With a battery at your facility, you effectively provide your own generation capacity. Having a battery thus reduces or eliminates your exposure to future increases in capacity charges for years to come plus other added benefits.
How Intelligent Generation Can Help
- Predictive analytics: Our platform leverages advanced algorithms to forecast peak demand periods and optimize battery discharge timing.
- Real-time monitoring: We continuously monitor grid conditions and adjust battery operations accordingly to maximize savings.
- Customized solutions: Our experts work closely with you to develop a tailored energy management strategy that meets your specific needs.
By partnering with Intelligent Generation, you can mitigate the impact of rising capacity prices, enhance your energy resilience, and achieve long-term cost savings.
Don’t let soaring capacity prices erode your bottom line. Contact us today to learn how Intelligent Generation can help you harness the power of battery storage and achieve energy independence.
Learn more about PJM capacity on this this fact sheet: https://www.pjm.com/-/media/about-pjm/newsroom/fact-sheets/pjm-capacity-market-promoting-future-reliability-fact-sheet.ashx