$12B of US ratepayers' money wasted on a modeling mistake and PJM wants to do it again
Robert Boswall
· SemiAnalysis
· August 16, 2026 at 22:27
· ⏱ 52 min read
| Read on Substack ↗
Summary
PJM’s capacity market has wasted roughly $12B of ratepayer money from 2025-2027 because its reliability model ignores cold-air uprates and post-Storm Elliott winterization of gas plants, overstating the capacity shortfall by ~4GW. PJM now plans an emergency 6.8GW backstop auction that could lock in another ratepayer-funded transfer to incumbent generators and push datacenter load growth out of PJM.
•PJM underestimates existing reliable capacity by ~4GW; cold-air uplift plus asset winterization would add 3.8GW — equal to eight large gas plants worth ~$10B — and offset 56% of the emergency auction shortfall.
•Using a reverse-engineered Reserve Requirement Study, SemiAnalysis estimates $11.57B of combined savings in the 2025/26 and 2026/27 auctions (sensitivity range $8.0B-$14.5B), with only 14MW and 0.6GW less capacity procured.
•PJM capacity clearing prices rose from $28.92/MW-day to $270-$333/MW-day; the four auctions procured 134-138GW each and totaled $63.6B, yet only 4.8GW of new capacity was procured.
•The model's winter risk is still driven by Polar Vortex 2013 and Storm Elliott 2022, despite 400+ gas units reporting winterization; storms Gerri, MLK, and Fern showed 9-10% forced outage rates versus Elliott's 24%.
•Cold, dense air can raise gas turbine output up to ~25%, with PJM's class table showing 8.4% winter uplift; PJM's own sensitivity found 8.5GW of winter capability above summer ratings, but the reform was voted down.
•PJM's upcoming Reliability Backstop Auction targets 6.8GW, which improved modeling would cut to ~3GW; it signs contracts through 2043 with no committed counterparty and no state cost-allocation laws in place.
•PJM is globally unique in pricing ~93% of its entire fleet through one marginal-price auction, while the market monitor says existing generators bid only $8-14/MW-day — far below the $270+/MW-day clearing prices.
•FERC comments close August 21, the backstop auction runs September 30-October 21, and PJM's Board overrode the stakeholder subscription design, raising the risk of over-procurement and litigation.