On July 22, 2025, PJM Interconnection, the largest U.S. grid operator serving 67 million people across 13 states and Washington, D.C., released the results of its 2026/2027 Base Residual Auction (BRA). The outcome was a stark warning: capacity prices hit the Federal Energy Regulatory Commission (FERC) cap of $329.17 per megawatt-day (MW-day) across all zones, a 22% increase from the previous year’s $269.92/MW-day. This unprecedented price spike, totaling $16.1 billion in capacity payments, underscores a growing crisis in America’s power grid, driven by surging demand, retiring baseload generation, and delays in new capacity. The auction results highlight the critical role of coal and other dispatchable energy sources in maintaining grid reliability.
A Distress Signal from the Grid
The 2026/2027 BRA secured 134,311 MW of unforced capacity (UCAP), with an additional 11,933 MW through Fixed Resource Requirement utilities, ensuring enough power to meet peak demand plus a reserve margin. However, the auction clearing at the FERC price cap signals a market in distress, unable to balance supply and demand without extreme costs. PJM’s forecasted peak load for 2026/2027 is 5,400 MW higher than the previous year, driven by data center expansion, electrification of vehicles and buildings, and industrial growth. Meanwhile, the rapid retirement of coal and gas plants—nearly 100,000 MW of coal capacity lost over the past 15 years—has outpaced new generation, leaving only 139 MW of excess capacity above reliability requirements.
The Dominance of Dispatchable Power
Despite mandates requiring renewable and battery projects to participate, the auction’s cleared capacity relied heavily on dispatchable sources: natural gas (45%), coal (22%), nuclear (21%), hydro (4%), with wind and solar contributing just 3% and 1%, respectively. This mix reflects the reality that intermittent renewables struggle to provide reliable power during peak demand, such as during heatwaves or winter storms. Coal’s role was bolstered by an 867 MW UCAP increase, partly due to Reliability Must-Run (RMR) units like Maryland’s Herbert Wagner and Brandon Shores plants, which were kept online through 2029 after PJM flagged their retirement as a reliability risk.
The auction also saw 17 generating units, totaling 1,100 MW, withdraw retirement plans since the 2025/2026 BRA, responding to market signals. Investors are taking note: shares of Talen Energy, a major coal and gas operator, surged 9%, while Constellation Energy, with nuclear and fossil assets, rose 5%. These trends underscore the enduring value of baseload generation in a grid under strain.
Policy Missteps and Rising Demand
The crisis stems from a confluence of factors: premature retirements of coal and nuclear plants, driven by state policies and economic pressures, and a failure to replace them quickly enough. For example, New York’s closure of the Indian Point nuclear plant has strained its grid, prompting consideration of new nuclear facilities. PJM’s interconnection queue, with 286 GW of mostly renewable projects, is plagued by delays, with 46,000 MW of approved projects stalled by permitting, supply chain issues, and financing challenges. Only 2,669 MW of new generation and uprates cleared in the 2026/2027 auction, far short of what’s needed to offset retirements.
Meanwhile, demand is skyrocketing. The International Energy Agency projects that data centers could double global electricity demand by 2026, with PJM’s “Data Center Alley” in Northern Virginia driving much of this growth. Electrification mandates and industrial expansion further exacerbate the strain, pushing PJM’s 2025/2026 peak load forecast to 153,883 MW, up 3,243 MW from the prior year.
The Case for Coal and Baseload Power
The auction’s results challenge the narrative that renewables alone can meet America’s energy needs. Coal plants, with their 40–60-year lifespans and on-site fuel storage, offer unmatched reliability compared to gas pipelines vulnerable to disruptions or intermittent renewables dependent on weather. Globally, countries like China, which initiated 94.5 GW of coal capacity in 2024, and India recognize this, building coal plants to support economic growth. In contrast, U.S. policies have sidelined coal, leading to a supply-demand imbalance that threatens blackouts and energy poverty.
PJM’s Reliability Resource Initiative (RRI) is a step toward addressing this, attracting 11,000 MW of planned projects, including gas, nuclear, and battery storage. Reforms like the Surplus Interconnection Service (SIS) aim to utilize existing grid capacity for new generators, such as pairing renewables with battery storage. However, these measures face hurdles, including a three-year closure of PJM’s interconnection queue, which prevents new projects from entering until 2026.
Economic and Social Impacts
The auction’s high prices will likely increase electricity bills by 1.5% to 5% starting June 2026, with some Pennsylvania businesses facing up to 29% hikes. These costs, while a small fraction of total bills, reflect the growing risk of grid failure. Pennsylvania Governor Josh Shapiro, frustrated by the 833% price surge in the 2025/2026 auction, negotiated a FERC-approved price cap reduction from $500/MW-day to $325/MW-day, saving consumers an estimated $21 billion. Yet, Shapiro’s threat to exit PJM highlights a broader “crisis of confidence” among state leaders, as noted by ClearView Energy Partners.
Without action, the U.S. risks California- or Texas-style blackouts, with outages costing millions per hour and disproportionately affecting vulnerable communities. The North American Electric Reliability Corporation warns of elevated blackout risks across much of the country, driven by similar supply-demand imbalances.
A Path Forward: Pragmatism Over Ideology
To avert a reliability crisis, the U.S. must prioritize dispatchable generation. This means extending the life of existing coal and nuclear plants through upgrades, such as improved emissions controls and turbines, and building new baseload capacity. Coal’s resilience—immune to pipeline disruptions and geopolitical volatility—makes it a strategic asset, as evidenced by its 22% share in the 2026/2027 auction. Streamlining interconnection processes, as PJM is attempting through its FERC-approved reforms, is also critical to bring new capacity online faster.
The auction’s $16.1 billion price tag is a wake-up call: energy policy must balance environmental goals with reliability and affordability. By investing in coal, nuclear, and natural gas alongside renewables, the U.S. can ensure a stable grid capable of meeting the demands of the AI era, electrification, and economic growth.