PJM Capacity Market

With PJM capacity prices elevated and load growth outpacing new supply, the capacity value of a PPA in PJM has become more significant than ever. Pexapark's capacity market model helps users benchmark this value by forecasting UCAP (Unforced Capacity) clearing prices over the duration of a PPA. This allows users to estimate how much capacity value a project may earn if they choose to bundle capacity with energy in ther offtake agreement.

Our model simulates Base Residual Auction (BRA) outcomes where capacity is priced in $/MW-day. The clearing price is driven primarily by the ratio between supply to demand, or UCAP to peak load.

Supply-Demand Ratio = UCAP / Peak Load

• UCAP (Unforced Capacity) is calculated as Installed Capacity (ICAP) × ELCC, with ICAP based on PJM’s interconnection queue and known retirements (State of the Market Report, 2025) and ELCC drawn from PJM’s latest accreditation forecast (PJM ELCC Ratings, 2026–2035).

• Peak Load assumptions are sourced from PJM’s long-term demand forecast (PJM Load Forecast Report, 2025), which incorporates strong growth from data centers, electrification, and winter-peaking behavior.

In the last 10 years, the relationship between this supply-demand ratio and resource clearing prices has been consistent. As the ratio decreases, clearing prices increase. Last year, the supply-demand ratio was below 0.95 for the first time, leading to a dramatic spike in the clearing price.

Capacity Prices Forecast

As load rises faster than supply in the future, the supply-demand ratio will continue to deteriorate. As a result, capacity prices are expected to remain elevated or capped at $325/MW-day through at least 2030.

Impact to PPA Value

To help users incorporate capacity value into PPA pricing, we convert the modeled BRA clearing price ($/MW-day) into an effective $/MWh value. This reflects how much additional revenue a project can expect from capacity payments, based on its accredited contribution to system reliability.

Capacity Value ($/MWh) = (Clearing Price × 365 × ELCC × Project Capacity) ÷ (Net Annual MWh)

Where:

• ELCC is the Effective Load-Carrying Capability of the resource (e.g., 38% for wind or 11% for solar).

• Project Capacity is the nameplate capacity in MW.

• Net Annual MWh is the expected actual energy generation per year.

This formulation ensures that only the ELCC accredited portion of a project’s capacity earns capacity revenue. The resulting $/MWh value can then be directly added to the energy and REC components of a PPA valuation.