PJM Capacity Prices, Explained
Capacity prices are what ratepayers pay for having electricity be available all the time, especially when the grid is stressed with high demand like during a heatwave.
To keep electricity available even during these high-demand days, PJM, the grid operator for 13 states in the Mid-Atlantic and Midwest and the District of Columbia, holds an auction for large-scale energy generators and consumers to offer energy-generating or energy-saving measures. PJM pays them, with the price reflected on PJM ratepayers’ electricity bills as the capacity price.
PJM Capacity Prices are at an All-Time High
In the third week of July, 2025, capacity prices in PJM reached an all-time high. The most recent figure of $329.17/MW‑day is the highest ever recorded by PJM, and it cleared at PJM’s FERC-approved price cap. It surpasses prior records in consecutive years by wide margins and is based on PJM’s published the results of their 2026/2027 Base Residual Auction Report.
Again, this is the highest price in PJM history and reflects a 22% increase over the record set in the previous year.
In this blog, we’ll address where PJM capacity prices are now, where they’ve been, and how an on-site battery energy storage system can protect your organization against rising capacity costs by storing energy when it is cheap and abundant and dispatching energy when it is expensive and scarce.
PJM Capacity Prices – Where They Are NOW
What does it mean for large energy users?
It means that for the second year in a row, PJM's capacity auction sent a strong signal to the market:
1. The grid is tight. 😬
2. Reliability is expensive. 💰
3. Large power users will feel it. 😰
All zones in PJM cleared at the cap: $329.17/MW-day. That's a 22% jump from last year, and nearly 10x higher than prices just two years ago.
For a manufacturing facility with a 5 MW peak load contribution (PLC), that means over $600,000/year in capacity charges — up ~$100k from last year.
PJM Capacity Prices – Where They’ve Been Historically
Here’s how PJM capacity prices have trended over the last decade:
What’s Driving These Historic Highs?
1. 📈 Skyrocketing demand, notably from the rapid expansion of data centers (especially AI‑driven facilities) in PJM service territory.
2. ⏳ Supply constraints and delays from slow interconnection of new generators (especially renewables) due to a backlog, regulatory hurdles, and limited new capacity entering the market.
In other words, PJM customers are demanding more energy but PJM does not have the supply to match it.
Quick Review: Energy Storage 101 (skip if you know this already!)
Energy storage systems allow electricity to be stored—and then discharged—at the most strategic times. Today, Lithium-ion batteries, the same batteries that are used in cell phones and electric vehicles, are the most commonly used type of energy storage. Like the batteries in your cell phone, industrial-scale and utility-scale battery energy storage systems can be charged with electricity from the grid, stored, and discharged when there is a deficit in supply or when energy is most expensive.
Ok, now that we got that covered, let’s get into how battery storage can dramatically lower your costs.
How Battery Storage Can Protect Your Business or Utility Against Rising Costs
If you're in PJM and not managing your capacity charges, you're leaving money on the table.
Now more than ever, peak shaving with on-site generation or battery storage isn’t just a nice-to-have — it’s essential. In fact, every MW shaved during system peak can save ~$120k/year under the new rates.
Smart energy users are:
• Tracking peak days to reduce PLC
• Dispatching batteries during grid peaks
• Considering demand response to turn cost into revenue
Don’t Pay More Than You Have to For Electricity – Contact Us Today
This heat wave didn’t just raise temperatures—it raised the stakes for managing energy costs and reliability. For PJM customers, the risks of inaction are real: higher bills, reduced reliability, and growing complexity. But with the right battery storage solution, those risks can become opportunities.
At Convergent, we’re helping our partners turn volatility into value—optimizing when and how they use energy to save money, reduce risk, and support a more reliable grid.
For nearly 15 years, Convergent has gained deep expertise by working closely with businesses, communities, and utilities to take the hassle out of on-site renewables by financing, building, owning, and operating these systems on our customers’ behalf.
Schedule a free, no-obligation introductory call with our team today to explore how we can support your energy goals.
