The Base Residual Auction (BRA) is the primary Capacity Auction administered by PJM. The BRA is a part of PJM’s Reliability Pricing Model (RPM) to secure electrical capacity as necessary to satisfy the capacity requirements imposed under the PJM Reliability Assurance Agreement for each delivery year. The BRA is conducted to allow for the procurement of resource commitments to satisfy PJM’s unforced capacity obligation for the Delivery Year and allocates the cost of those commitments to Load Serving Entities (LSEs) through a Locational Reliability Charge.
Source: https://www.pjm.com/-/media/markets-ops/rpm/rpm-auction-info/rpm-base-residual-auction-faqs.ashx
The 2026/27 PJM RPM Base Residual Auction is scheduled for early December. Ethan Howland reports in today’s Utility Dive that according to Morgan Stanley and ESAI Power’s Scott Niemann, PJM capacity auction prices could plausibly clear at the price cap. Whilst clearing at the cap is a “very plausible” outcome, there are scenarios where pricing clears at “substantially” lower prices.
Ethan Howland reports in Utility Dive that after receiving two key Federal Energy Regulatory Commission decisions, the PJM Interconnection plans to hold its next capacity auction in June. Our Scott Niemann, Managing Director & Principal, said the FERC-approved changes will likely put upward pressure on capacity prices in most parts of PJM. Driven by pending power plant retirements, prices in PJM’s Southwest MAAC zone could break higher than the overall regional transmission organization.
Power Generator owners and their investors are placing big bets (often in the hundreds of millions of dollars) in the PJM, MISO, ISO-NE and NYISO Capacity Markets. As Mark Christie, FERC Commissioner, put it in March, 2023: “Capacity Markets are characterized by such hopeless complexity and impenetrable opacity that they represent the example of a game that only insiders can play and win.”
For Energy Investors and Generation Owners investing and trading in PJM, it’s vital to have an in-depth market model with deep analysis of the market fundamentals, the latest regulatory updates, and insight into the rule changes and planning parameters that impact PJM BRA clearing prices moving forward. Surface level analysis is not enough when it comes to making investment decisions in the PJM Capacity Market. The PJM BRA for 2024/25 Delivery year is set to begin December 7th, 2022
ESAI Power’s recent Capacity Watch includes our forecast for the PJM BRA 2023/24. Our PJM analysis this quarter includes ESAI’s forecast for the PJM BRA 2023/24 and reflects upon MOPR, MSOC, ELCC and VRR Curves.
In ESAI’s latest Capacity Watch report, we analyze the three major rule changes that will impact pricing in the upcoming PJM Base Residual Auction (2023/24 BRA) and the subsequent influence on clearing prices out to 2030. These rule changes include FERC’s revised approval of ELCC, a default MSOC based upon Net ACR, and FERC’s failure to reach a majority decision on PJM’s proposed MOPR revisions.
Our Q2 Capacity Watch™ provides clients with an in-depth outlook on PJM, ISO-New England, and NYISO Capacity prices. In this blog, we will highlight a portion of the analysis in the PJM section of the recently published Q2 Capacity Watch™. PJM’s recent release of the 2022/23 Base Residual Auction clearing prices surprised many market participants with prices well below expectations. Prices in each LDA cleared significantly lower than historical auctions, and in particular, the 2021/22 BRA.
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ESAI Power is a market research and consulting firm that delivers focused analysis of the wholesale power markets in the Northeast region of the US: PJM, NYISO, and ISO-NE. Since 2001, ESAI has been providing market-focused research product content and custom consulting services for Northeast power market participants including investors (banks, private equity, & hedge funds) & developers, generation owners & operators, utilities & retail electricity suppliers, regulators & RTOs, traders, and end-users & buyers.