What to Expect From the December 2025 PJM Capacity Auction

The next PJM capacity auction is coming up quickly on December 4, 2025. We’ll break down what’s likely to happen, how it connects to recent trends in energy and how you should be planning your energy strategy.

What is a Capacity Auction?:

Capacity market auctions exist to make sure there’s enough electricity on the grid without overpaying for it. They balance reliability and cost by forcing suppliers to compete, driving the market toward the lowest achievable price for consumers. Capacity auctions operate similarly to energy auctions.

There are two types of auctions that shape the supply landscape. Forward Capacity Auctions are held years in advance, giving the system time to build or upgrade generation before demand hits. Incremental Auctions run closer to delivery, adjusting for real-world shifts like spikes in demand or outages.

Auctions operate with participants submitting sealed bids offering capacity at certain prices. Once the total supply meets the region’s requirement, the auction stops. Everyone who clears receives the same clearing price, regardless of their individual bid. The structure is designed to encourage competition and fairness while pushing inefficiencies and high-cost operators out of the market.

Why is This Auction So Important?:

The next PJM capacity auction is slated to occur on December 4, 2025 and goes until December 10, 2025 with results delivered on December 17, 2025. This auction will be for the 2027/2028 delivery year.

PJM’s last capacity auction for the 2026/2027 delivery year cleared at $329.17 per megawatt-day (MW-day) which was about a 22% increase from the previous year.

This upcoming auction is expected to clear at or above the approved cap due to predicted limited supply and reduced eligible capacity. Analysts expect high prices because new generation has had difficulty connecting to the grid, and there’s a continued decrease in eligible capacity. Keep in mind that auction rates are also passed down to the end user on their monthly bill for a capacity charge.

Key Takeaway 

The PJM auction is a reminder that when and how you buy energy matters. Waiting too long risks paying peak prices, while acting too early can lock in above-market rates.