PJM recently released its new Effective Load Carrying Capacity or ELCC Asset Ratings for the 2026-2027 delivery year. These ratings will be applied to its upcoming Base Residual Auction (BRA), a competitive capacity auction designed to secure resources for the entire PJM region. The ELCC ratings play a key role in evaluating and comparing generation sources.
In this blog, we explore the concept of ELCC and examine how PJM’s valuation approach influences renewable energy resources. While many policymakers might not be fully versed in these technical details, understanding them is essential for grasping how generation sources are valued and where renewable energy fits within that framework.
What is ELCC?
ELCC is a modeling system used to evaluate the contribution of different energy resources to grid reliability. It estimates how much capacity each resource provides during peak demand periods while considering the impact of other resources on the grid. Because the availability and effectiveness of capacity vary depending on existing resources, ELCC adjusts the value of additional capacity. There is no single standardized ELCC model—each region develops its own version based on specific needs and assumptions. PJM has created its own ELCC framework, which it uses to determine the capacity each resource can contribute to its market auctions.
ELCC-based Accreditation and PJM’s Reliability Pricing Model
PJM’s capacity market operates annually. A few years ago, PJM introduced Capacity Performance (CP), which requires that all capacity resources remain available 24/7/365 under the assumption that continuous availability is essential. In contrast, PJM’s ELCC model evaluates only the performance during critical peak periods by examining past peak load days and accrediting capacity. This means that while CP emphasizes year-round availability, the ELCC approach focuses solely on performance during peak demand periods. As a result, solar resources that perform well on sweltering summer days and help mitigate peak loads may not receive credit under the ELCC-based accreditation.
Reliance on Winter Storms
PJM’s ELCC model evaluates resource performance during historical peak events, which over the past decade have occurred during a few winter storms. The model focuses heavily on how resources performed during these peaks, without considering why they may have underperformed. For example, solar resources naturally do not operate on winter nights, regardless of weather conditions. During Winter Storm Elliot, low load forecasts meant some resources were not scheduled in advance, and certain operational choices, such as dispatching energy storage before the peak period, left these resources unavailable when needed. In the ELCC framework, these scenarios are simply recorded as “resource not available,” leading to reduced accreditation.
Penalty for Renewable Energy
Renewable resources are particularly disadvantaged by PJM’s ELCC approach. Wind and solar are evaluated using an annual model that assigns zero capacity value during periods when they are not expected to operate—for example, solar power at night. However, when penalties for non-performance are applied, this inherent assumption is overlooked, and solar resources can be penalized for not producing energy during nighttime performance events.
ELCC and Load Growth
Another aspect to consider is how load growth affects capacity accreditation under PJM’s ELCC model. When the model is updated to reflect increased demand, the accredited capacity for resources—especially renewable ones—may be reduced. As a result, PJM may require these resources to acquire additional capacity to cover the perceived shortfall. For example, if a resource is credited with 10 MW when the load is 100 MW in the first year, and then the load increases to 110 MW in the next year, the resource’s accreditation might be reduced to 8 MW. This approach implies that even if a resource maintains its output, the increased load creates a shortfall that must be addressed. An alternative view might suggest that the overall system is 10 MW short due to load growth, meaning new capacity should be added to meet the higher demand rather than shifting part of the cost burden onto existing generation.
ELCC Notably Problematic for Accrediting Resources
ELCC modeling is notably complex and, as mentioned, not standardized. PJM has developed a sophisticated model that can be challenging for market participants to fully interpret. This presents an opportunity for the PJM community to consider exploring alternative methods for valuing capacity.