While the overall outlook for the PJM Interconnection's 2021/2022 base residual auction is stronger than the prior year, an S&P Global Market Intelligence analysis using proprietary Power Forecast data shows that 32,190 MW of capacity is at risk not to clear the auction.

Results of the auction are due to be released May 23.

According to Power Forecast's PJM zone assignments, the ComEd region in northern Illinois has the most capacity at risk, with 11,883 MW. This is followed by the RTO region, with 8,102 MW of at-risk capacity, and the EMAAC region, with 6,314 MW of at-risk capacity. While this capacity is at risk not to clear in the wider PJM auction, a substantial portion still could clear in their respective load delivery areas given forecast prices and the historical precedence for higher clearing prices within specific areas.

Analysts have mixed outlooks on the upcoming auction, but have raised estimated clearing prices since FirstEnergy Solutions Corp. announced plans to retire more than 4,000 MW of nuclear capacity in northern Ohio and western Pennsylvania by 2021 due to market challenges. The market challenges cited by FirstEnergy make capacity payments even more important for struggling baseload facilities. While some argue that coal and nuclear facilities are necessary for grid reliability, others say the market should be able to force uneconomic plants offline.

Power Forecast data shows 16,107 MW of nuclear capacity and 14,849 MW of coal capacity at risk to not clear the capacity auction for PJM. Combined, coal and nuclear resources supplied 67% of PJM's net generation in 2017. However, PJM continues to lead all ISOs in planned new capacity, with more than 16,000 MW slated to come online in 2018 alone. As supply continues to outpace demand, failure to clear in the upcoming auction could put added pressure on aging baseload facilities.

About the data

This Data Dispatch features proprietary S&P Global Market Intelligence Power Forecast data, which was used to aggregate at-risk capacity by fuel type and by zonal location within PJM. If you are interested in getting access to our Power Forecast product, please contact Jeremy Stander at Jeremy.Stander@spglobal.com.

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