PJM Starts Task Force Effort on Sub-Annual Capacity Procurement

PJM Interconnection LLC and its stakeholders on Aug. 26 launched discussions under the Sub-Annual Capacity Market Senior Task Force, focusing on potential seasonal changes to its capacity market design. The group, created earlier this year by the PJM Markets and Reliability Committee, is tasked with evaluating sub-annual structures as the grid operator shifts away from its long-standing annual procurement framework designed to preserve reliability during peak summer demand. PJM acknowledged that risks during winter have increased, making a seasonal approach more relevant.

The task force will examine a broad range of seasonal elements, including reliability procurement targets, accreditation of resource classes, cost allocation, and capacity obligations. PJM noted that winter reliability risks are heightened because natural gas supplies for power plants compete with residential heating demand, creating potential fuel shortages for electricity generation. Generation performance and outage rates also differ across seasons depending on weather conditions and unit characteristics. The move comes amid a growing consensus that seasonal auctions could better capture resource performance and risk profiles.

PJM’s exploration aligns with approaches in other U.S. regions. The New York Independent System Operator already operates seasonal capacity markets, while the Midcontinent Independent System Operator does the same. The New England grid operator is also examining reforms to integrate seasonal availability of resources in order to optimize both reliability and procurement efficiency. PJM said these models highlight the potential benefits of aligning auctions with seasonal differences.

The task force is now beginning its review of seasonal constructs. Its initial meetings will focus on a consultant study evaluating sub-annual market designs for PJM, alongside ongoing reforms under consideration at ISO New England. Market analysts view the effort as a pivotal step that could reshape PJM’s auction framework, with broad implications for reliability planning, consumer costs, and market participants.

The initiative underscores how regional grid operators are adapting to evolving system risks and changing resource mixes. As winter reliability challenges grow, PJM’s focus on seasonal capacity constructs signals that flexibility in market design may be critical for ensuring a balanced and resilient power system.