The regional transmission organization, PJM, forecast “sufficient generation” for typical peak demand this summer but is preparing to call on contracted demand response resources to reduce electricity use under more extreme scenarios featuring record demand.
In its latest Summer Outlook, published on May 9, PJM forecasts summer energy use, or load, to peak at just over 154,000MW. PJM’s record summer peak load was set at 165,563MW in 2006. Last year, PJM’s summer peak was about 152,700MW.
PJM has approximately 179,200MW of generation capacity this summer. But PJM noted that available generation capacity may fall short of required reserves in an extreme scenario that would result in an all-time PJM peak load of more than 166,000MW. In these circumstances PJM would call on its 7,900MW of contracted demand response to meet its required reserve needs.
Historically businesses participating in demand response may have gained revenue by participating in the capacity market. But values that can be achieved are volatile. PJM’s latest capacity auction successfully secured resources to meet the reliability requirement for the 2025-26 Delivery Year. But two zones cleared just short of their reserve requirement, resulting in prices being set at the zonal cap. Auction prices were significantly higher across the RTO due to decreased electricity supply caused primarily by a large number of generator retirements, combined with increased electricity demand and implementation of FERC-approved market reforms, including improved reliability risk modeling for extreme weather and accreditation that more accurately values each resource’s contribution to reliability. The auction produced a price of $269.92/MW-day for much of the PJM footprint, compared to $28.92/MW-day for the 2024-25 auction. This year’s auction procured 135,684MW for the period of June 1, 2025, through May 31, 2026. The total Fixed Resource Requirement (FRR) obligation is an additional 10,886MW for a total of 146,570MW. The total procured capacity in the auction and resource commitments under FRR represents an 18.5% reserve margin, compared to a 20.4% reserve margin for the 2024/2025 Delivery Year.
Added to this, 5 Critical Peaks (5CP) rates continue to rise. Peak Load Contribution (PLC) related costs may account for up to 30% of your total electric bill. Businesses that can accurately anticipate and strategically lower their demand during 5CP events can drastically reduce their capacity charges for the following year. The value could be as much as $98,500/MW-Yr of 5CP savings combined with a further saving of $5,000 – $180,000/MW-Yr. (Zone dependent) on Network Transmission (NITS) charges. The combination of these factors is putting additional pressure on consumers struggling to improve sustainability and green up operations.
In this current landscape, energy management is increasingly important as energy use is rising, and programs like Demand Response and 5CP can help businesses to reduce their costs.
Nick Guay is business development director at GridBeyond, where he is a member of GridBeyond’s North American business development team, where he leads strategic initiatives to strengthen client relationships and support commercial and industrial customers participating in demand response, demand management and real-time price avoidance programs. He is focused on maximizing program performance, delivering outstanding customer service, and helping clients boost bottom-line revenue without sacrificing operational goals. With a decade of experience in the energy sector, Nick previously led the North American demand response account management team at Enel X.
