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Blog
What’s Next for PJM’s Capacity Crunch
What’s Next for PJM’s Capacity Crunch
Kevin Diau, Market Revenue Manager
PJM has a capacity shortage problem, and it's getting harder to ignore. Data center load is arriving faster than new generation can be built, and PJM forecasts about 30 GW of new data center demand by 2030.
The region's own capacity market is flashing warning signs: the PJM's last two capacity auctions cleared roughly 6.5 GW and 6.8 GW short of its reliability requirement for 2027/28 and 2028/29.
FERC recently weighed in on PJM's plans to close that gap, and its rulings reshape the timeline for new capacity pathways. Here's what changed and how we recommend partners approach PJM in 2027.
PJM's two proposals to close the gap
In the span of a few months, PJM put forward two complementary mechanisms to address its capacity shortfall:
Reliability Backstop Procurement (RBP). A one-time procurement designed to secure new capacity outside PJM’s regular capacity auctions. The proposal offered longer contracts and higher potential prices to encourage investment in new supply.
Interim Resource Adequacy Service (IRAS). A framework for connecting new large loads, such as data centers, when there isn’t enough existing capacity to serve them. Under IRAS, new large loads that don’t bring matching new capacity could face curtailment during grid stress, before PJM called on its emergency demand response resources.
Under this proposal, PJM would establish a Bring Your Own New Capacity (BYONC) framework that would enable data centers to avoid that curtailment risk by sourcing their own qualifying new capacity to cover their demand. For Leap and our partners, BYONC opened a new pathway for distributed capacity to support specific large loads through direct contracts at a premium rate.
What FERC decided
FERC acknowledged the urgency of the shortfall, but rejected key aspects of the proposed mechanisms to address the capacity gap.
RBP is postponed. Although PJM originally intended to hold the emergency auction this fall, FERC has delayed the RBP and asked PJM to refile and address concerns with certain elements, including cost allocation. We expect an update from FERC by the end of December. An RBP auction could run as early as January or February 2027, but revenues and new capacity from RBP wouldn't start until the 2028/2029 Delivery Year.
IRAS and the associated BYONC framework were rejected. FERC ruled that PJM can't set terms for retail customers; that authority belongs to the states. FERC also flagged two design issues PJM will need to address in any new proposal:
Geographic deliverability. IRAS would have allowed capacity in one utility zone to offset a shortfall in another. FERC wants resources that offset a large load to sit in the same utility zone as that load.
ELCC accreditation. Effective Load Carrying Capability works like a reliability contribution factor for each technology type, and PJM updates it every year. IRAS would have locked in a BYONC resource's ELCC for the full 10–15 year contract. FERC objected to freezing a value that's designed to change.
Some pieces survived. FERC accepted PJM's definition of a large load and its proposal to establish a large load registry. The BYONC concept also remains open for refinement.
States now have a bigger role. FERC wants states to set curtailment priorities, compensation, and large-load tariffs. Many PJM states are already moving: legislation has been passed, adopted, or debated across the region. Timing and the parties responsible for implementation may shift as a result, but the pressure on PJM's capacity keeps building.
Leap’s recommendation for 2027
For 2027, the strongest move is enrolling eligible resources in PJM's existing capacity program while new pathways take shape. The revenue opportunity is already substantial, with prices for annual participation rising by roughly 28% from last year.
Enrolling now also puts Leap partners in position for what comes next. Resources that are already registered, metered, and performing in PJM may be ready to move into BYONC or other new capacity pathways as soon as they open.
We're planning to offer a new program for partners, and will continue to track PJM's refiled proposals, follow state-level large-load tariffs as they take shape, and position our partner resources to meet any same-zone deliverability requirements.
Distributed resources remain the fastest path to new PJM capacity
PJM needs capacity solutions that can come online faster than new power plants can be built.
Batteries in homes and businesses, smart thermostats, HVAC, EVs, and other distributed energy resources are already connected to the grid. When coordinated through virtual power plants, eligible resources can reduce demand during critical hours and help make better use of the infrastructure already serving customers.
Leap helps our partners turn flexible loads into dependable capacity. Our platform automates key enrollment, dispatch, and reporting workflows, while our market experts help partners identify best-fit programs and prepare their portfolios to participate.
The rules for PJM’s next capacity pathways are still taking shape. The work of bringing more distributed flexibility into the market must start now.
PJM has a capacity shortage problem, and it's getting harder to ignore. Data center load is arriving faster than new generation can be built, and PJM forecasts about 30 GW of new data center demand by 2030.
The region's own capacity market is flashing warning signs: the PJM's last two capacity auctions cleared roughly 6.5 GW and 6.8 GW short of its reliability requirement for 2027/28 and 2028/29.
FERC recently weighed in on PJM's plans to close that gap, and its rulings reshape the timeline for new capacity pathways. Here's what changed and how we recommend partners approach PJM in 2027.
PJM's two proposals to close the gap
In the span of a few months, PJM put forward two complementary mechanisms to address its capacity shortfall:
Reliability Backstop Procurement (RBP). A one-time procurement designed to secure new capacity outside PJM’s regular capacity auctions. The proposal offered longer contracts and higher potential prices to encourage investment in new supply.
Interim Resource Adequacy Service (IRAS). A framework for connecting new large loads, such as data centers, when there isn’t enough existing capacity to serve them. Under IRAS, new large loads that don’t bring matching new capacity could face curtailment during grid stress, before PJM called on its emergency demand response resources.
Under this proposal, PJM would establish a Bring Your Own New Capacity (BYONC) framework that would enable data centers to avoid that curtailment risk by sourcing their own qualifying new capacity to cover their demand. For Leap and our partners, BYONC opened a new pathway for distributed capacity to support specific large loads through direct contracts at a premium rate.
What FERC decided
FERC acknowledged the urgency of the shortfall, but rejected key aspects of the proposed mechanisms to address the capacity gap.
RBP is postponed. Although PJM originally intended to hold the emergency auction this fall, FERC has delayed the RBP and asked PJM to refile and address concerns with certain elements, including cost allocation. We expect an update from FERC by the end of December. An RBP auction could run as early as January or February 2027, but revenues and new capacity from RBP wouldn't start until the 2028/2029 Delivery Year.
IRAS and the associated BYONC framework were rejected. FERC ruled that PJM can't set terms for retail customers; that authority belongs to the states. FERC also flagged two design issues PJM will need to address in any new proposal:
Geographic deliverability. IRAS would have allowed capacity in one utility zone to offset a shortfall in another. FERC wants resources that offset a large load to sit in the same utility zone as that load.
ELCC accreditation. Effective Load Carrying Capability works like a reliability contribution factor for each technology type, and PJM updates it every year. IRAS would have locked in a BYONC resource's ELCC for the full 10–15 year contract. FERC objected to freezing a value that's designed to change.
Some pieces survived. FERC accepted PJM's definition of a large load and its proposal to establish a large load registry. The BYONC concept also remains open for refinement.
States now have a bigger role. FERC wants states to set curtailment priorities, compensation, and large-load tariffs. Many PJM states are already moving: legislation has been passed, adopted, or debated across the region. Timing and the parties responsible for implementation may shift as a result, but the pressure on PJM's capacity keeps building.
Leap’s recommendation for 2027
For 2027, the strongest move is enrolling eligible resources in PJM's existing capacity program while new pathways take shape. The revenue opportunity is already substantial, with prices for annual participation rising by roughly 28% from last year.
Enrolling now also puts Leap partners in position for what comes next. Resources that are already registered, metered, and performing in PJM may be ready to move into BYONC or other new capacity pathways as soon as they open.
We're planning to offer a new program for partners, and will continue to track PJM's refiled proposals, follow state-level large-load tariffs as they take shape, and position our partner resources to meet any same-zone deliverability requirements.
Distributed resources remain the fastest path to new PJM capacity
PJM needs capacity solutions that can come online faster than new power plants can be built.
Batteries in homes and businesses, smart thermostats, HVAC, EVs, and other distributed energy resources are already connected to the grid. When coordinated through virtual power plants, eligible resources can reduce demand during critical hours and help make better use of the infrastructure already serving customers.
Leap helps our partners turn flexible loads into dependable capacity. Our platform automates key enrollment, dispatch, and reporting workflows, while our market experts help partners identify best-fit programs and prepare their portfolios to participate.
The rules for PJM’s next capacity pathways are still taking shape. The work of bringing more distributed flexibility into the market must start now.
