PJM’s capacity auction: a battery’s shortfall charges can exceed its capacity payments

PJM’s report on its base residual auction for 2028/2029 shows every megawatt of battery and hybrid capacity offered as cleared: 478.3 MW of unforced capacity, counting commitments under PJM’s Fixed Resource Requirement alternative, against 205 MW the year before. PJM announced on 14 July 2026 that the auction had cleared at its temporary price cap of $325/MW-day, 6,831 MW short of the reliability requirement. For batteries, clearing was not the hard part; what clearing commits them to is.^{1, 2}

PJM’s capacity market is built on one product, Capacity Performance, and a resource that clears as Capacity Performance is paid a daily auction credit: the megawatts it cleared times its area’s clearing price, for every day of the delivery year. In return, PJM’s tariff obliges it to deliver energy, as PJM schedules or dispatches it, in every Performance Assessment Interval of that year (each five-minute interval for which PJM has declared an Emergency Action), and charges it for a shortfall unless an exemption applies; storage is among the resource types that may offer on these terms. The charge is not built on the clearing price but on the net cost of new entry, Net CONE: the cost of new entry less an offset for net energy and ancillary services revenue, in installed-capacity terms. Only the yearly cap on the charges is tied to the clearing price. For a battery whose committed capacity all cleared in the base auction, that cap is one and a half times its year of capacity payments: in a bad year it can be charged more than the auction paid it.^{3, 4}

As of 19 October 2026, PJM’s schedule gives the next base residual auction, for 2029/2030, an offer window from 9 December 2026 to 15 December 2026, with results to be posted on 22 December 2026. How much a battery can offer into it is settled before the price; what follows is what it takes on once it clears.⁵

Accreditation caps what a battery can commit: no resource rated by effective load carrying capability (ELCC), which sets accredited capacity from 2028/2029, may offer more than its accredited unforced capacity.³ As of October 2026, PJM’s class rating for four-hour storage in the 2029/2030 auction is 57%; its file says the ratings will be applied to that auction, while its schedule lists the item as preliminary.^{5, 6} The capacity it commits is then both what it is paid on and what PJM measures it against.

In each Performance Assessment Interval, PJM expects a battery to deliver its committed unforced capacity times a balancing ratio, never above 1.0: the actual performance of all generation and storage in the interval (with net energy imports and some demand-side bonus performance), divided by all the generation and storage capacity committed. The shortfall is calculated over the resources located in the area of the Emergency Action. What counts as delivered is the energy the battery puts into PJM’s system plus any real-time reserve or regulation assignment it holds; expected minus delivered is the shortfall, and a negative result means there is none. So the battery answers for the megawatts it committed, not its nameplate, and a battery that PJM assigns to reserves is not counted as idle.⁴

Manual 18 sets two conditions that trigger a Performance Assessment Interval, each for the reserve zone or sub-zone concerned. The first is a shortage of primary reserves together with one of four listed procedures: a voltage reduction warning with a reduction of non-critical plant load, or with curtailment of non-essential building load, a manual load dump warning, or a maximum emergency generation action. The second is an order to deploy all resources, reduce voltage, dump load manually or shed load. The condition must hold for the whole interval, and Capacity Performance commitments are exposed to non-performance charges throughout the delivery year.³

The tariff excuses a shortfall only to the extent the resource was unavailable solely because it was on a planned or maintenance outage PJM had approved, was not scheduled by PJM, or was online but scheduled down by PJM for economic dispatch. A shortfall still counts where the resource was needed and would have been scheduled, but was not scheduled or was scheduled down solely because of operating limits in its own offer, or because its market-based offer was higher than its cost-based one.⁴ None of these grounds mentions a battery’s state of charge, and each interval is assessed on its own. Manual 18 counts every Capacity Storage Resource as a limited duration resource: a generation capacity resource, other than a variable or combination resource, that cannot run continuously at full output for 24 hours or longer. For such a resource, how long it can hold its expected output through a long emergency is a pricing question, not only an operating one.³

The charge for an interval is the shortfall in megawatts times the tariff’s Non-Performance Charge Rate. That rate is Net CONE for the area and delivery year, times the days in the delivery year divided by 30, divided by the number of settlement intervals in an hour.⁴ Manual 18 takes the area’s Net CONE only through 2025/2026 and the RTO’s, for PJM’s region as a whole, after that; its revision 63 lists the change as “fixed rate to reflect RTO instead of LDA net CONE from previous tariff change”, while the tariff text as posted names the area’s Net CONE. For a battery in an area whose Net CONE differs from the RTO’s, the two texts give different rates for the same shortfall.^{3, 4}

By our arithmetic, an hour in which a battery is one megawatt short costs a thirtieth of a year’s Net CONE for that megawatt, so thirty such hours in a delivery year cost as much as a full year of Net CONE.

Manual 18 calls the cap the stop-loss: a Capacity Performance resource’s non-performance and non-curtailment charges for a delivery year may not exceed 1.5 times the base residual auction’s clearing price for its area, times its committed unforced capacity (the most committed up to the end of the month of the event), times the days in the delivery year. Because the hourly charge is set by Net CONE and the cap by the clearing price, the lower the clearing price stands against Net CONE, the fewer hours of shortfall it takes to reach the cap.^{3, 4}

The money collected in an interval goes to whoever delivered more than expected in it, capacity resource or not, in proportion to each one’s extra performance, counted only up to the level PJM scheduled it at. A bonus credit is not income to count on: it exists only when others fall short, and its size is what they are charged.^{3, 4}

The obligation does not wait for an emergency: PJM checks every day of the delivery year that a committed resource can still deliver at least the unforced capacity it committed. A resource can fall short because a planned project is cancelled or delayed and has not started interconnection service by the start of the delivery year, because it is derated or retired, or because its final accredited factor gives it fewer unforced megawatts than it cleared. Each day short is charged at a daily deficiency rate: the resource’s weighted average clearing price for the part of the shortage caused by a lower accredited factor, and that price plus the higher of a fifth of it or $20/MW-day for the rest. Revision 63 of Manual 18, effective 24 September 2026, lists the charge for a derate caused by a lower final accredited factor as a new penalty. For a battery still under construction, the start date is part of the bid: one that has not started interconnection service when its delivery year begins can be short from the first day, and each day it is short is charged.³

Where daily shortfalls on a Capacity Performance commitment and non-performance charges fall in the same continuous period, Manual 18 charges the greater of the two totals for that period, and what is billed for it may not exceed that greater total. Outside such an overlap, the daily deficiency charge stands on its own: the stop-loss limits only non-performance and non-curtailment charges.³

Under Manual 18, a planned battery may be offered only after a binding notice of intent, due for 2029/2030 on 12 June 2026 under PJM’s schedule, and must then be offered, even by a different seller, or it may not offer into later auctions for that delivery year.^{3, 5} The tariff requires every existing generation capacity resource in the PJM region that is capable, or can reasonably become capable, of qualifying as Capacity Performance to be offered as such in every auction for every delivery year, less any excepted amount; it exempted Capacity Storage Resources from this only through 2025/2026, and from 2026/2027 only demand resources keep the exemption.⁴ Read with Manual 18’s definition of a storage resource as a generation capacity resource, the end of that exemption brings a built battery that is capable of qualifying as Capacity Performance under the same duty in later auctions. Manual 18 allows exceptions on stated grounds only, among them a resource reasonably expected to be physically unable to meet the Capacity Performance requirements by the start of the delivery year, and a request is due no later than 120 days before the auction’s offer window opens.³

PJM must give its decision on a request to offer as Capacity Performance no later than 65 days before the offer period opens, and rejects one if the seller cannot show the resource can reasonably be expected to meet the obligations by the delivery year. Counted back from 9 December 2026, that point and the 120-day deadline for must-offer exceptions had both passed as of 19 October 2026, as had the notice of intent due on 12 June 2026.⁴

On 9 October 2026, FERC rejected all but two parts of PJM’s large-load proposal of 13 August 2026, its Interim Resource Adequacy Service (IRAS) filing, including the rules that would have taken certain new large loads out of the 2029/2030 demand curve, PJM’s Variable Resource Requirement (VRR) curve. It accepted only the proposed definition of large load and a large-load registry, effective 12 October 2026.⁹ As of 19 October 2026, PJM’s planning parameters still make the curves’ points subject to adjustment pending FERC’s acceptance of the IRAS filing, with updated curves that would be posted 30 days before the auction in accordance with PJM’s IRAS proposal, and PJM’s capacity market page lists no updated curves.^{7, 8, 10}

As of 19 October 2026, the posted price cap for 2029/2030 is $337.83/MW-day in unforced-capacity terms, against the temporary cap of $325/MW-day at which the 2028/2029 auction cleared; PJM attributes the rise to its reference resource’s UCAP factor changing from 79% to 76%.^{2, 7, 8} Because the battery’s payment and its stop-loss are both set by the clearing price, an auction that clears at the higher cap also raises the most a battery can be charged in non-performance charges for the same committed capacity.

ListingMinds, “PJM’s capacity auction: a battery’s shortfall charges can exceed its capacity payments”, 4 November 2026. https://www.listingminds.com/energy/field-notes/pjm-capacity-auction-obligations-and-penalties