PJM Interconnection faces a pressing challenge: ensuring resource adequacy at a time of rapid demand growth, rising prices, and accelerating retirements of thermal generation. The gap between supply and demand is increasingly imbalanced. Electrification is driving load higher, while new generation is not coming online fast enough to replace retirements. Growing data center demand is turning resource adequacy concerns into major affordability challenges.
PJM has a significant role to play. While PJM has struggled to adjust, a well-functioning regional transmission organization (RTO) remains the best tool to preserve both reliability and affordability. Competition lowers costs, fosters innovation, and speeds the adoption of non-emitting resources. Reliability is also best protected across a broad geographic footprint, where renewable energy can be balanced and extreme weather impacts are less concentrated. PJM must address its interconnection backlog and reform market rules to better incentivize energy sources, like storage, that offer valuable reliability benefits. PJM should also refine its load forecasting methodology so there is not overbuild.
State action can also help tackle the growing resource adequacy challenge. Consistent and clear policies, along with action to invest in transmission, can create an environment that is favorable to bringing more energy resources online and closing the gap between supply and demand.
State Policy as a Driver of Reliability
States play an essential role in shaping PJM’s future resource mix. Clear, stable policies encourage investment in renewable energy and storage, which in turn add zero-fuel-cost generation that stabilizes consumer prices. Developers depend on these stable rules to make long-term investment decisions.
Despite solar, wind, and battery storage representing the fastest, least-cost energy resources available, proactive transmission investment is critical to ensuring these projects move forward. Without this investment, interconnection costs remain prohibitively high. A Lawrence Berkeley National Laboratory study found that costs in some PJM states exceed $1,000/kW—levels that make new projects financially impossible. And without new projects coming online, the region will struggle to maintain adequate and affordable electricity resources.
Transmission reform through the State Agreement Approach and FERC Order 1920 will enable coordinated, cost-effective upgrades. Planning at a large scale avoids piecemeal investments and ensures that new generation—renewable or thermal—can reliably connect to the grid. As outlined in our June 2025 fact sheet entitled “PJM Transmission Planning, Order 1920: What is At Stake?”, PJM has a valuable opportunity to use insights from new cluster studies to inform its Regional Transmission Expansion Plan (RTEP). These studies reveal where added resources are located and where the grid lacks capacity. PJM should act now and incorporate this information into the next RTEP cycle, rather than waiting for the full Order 1920 compliance process to unfold.
Interconnection and Market Barriers
PJM’s interconnection backlog remains one of the largest barriers to new supply. More than 150,000 MW of projects are in the queue, most of them renewable energy. Nearly half of the projects in the first cluster withdrew after receiving multi-billion-dollar upgrade cost estimates. Without reform, PJM risks losing significant capacity that could help close the supply gap.
Market design is another obstacle. PJM’s capacity market has slowed retirements but has not triggered new greenfield investment. Large-scale projects with 30-year lifespans cannot be financed on one- or two-year market signals, particularly in a high-interest environment.
Capacity accreditation rules under the Effective Load Carrying Capacity (ELCC) framework have also created imbalances. Offshore wind, which performs strongly during winter peaks, earns high-capacity credit. Solar, however, rates poorly under PJM’s winter-focused ELCC despite its clear value on hot summer days when demand peaks. A sub-annual capacity market could better reflect these seasonal differences, allowing solar to support summer reliability while rewarding other resources for winter performance. It is encouraging that PJM is examining the merits of a sub-annual market design. Until then, under the current market rules, solar takes a hit from its low ELCC rating and the newly implemented price collar and must-offer rule. The new must-offer framework for renewable energy is reasonable but, when it is combined with a price collar, solar projects are unable to fully bid their risk into the market. The net effect of the must-offer rule and price collar may be to push some solar projects to relinquish their Capacity Interconnection Rights, further constraining supply.
Battery storage faces similar misalignments. Four-hour batteries are penalized if they cannot sustain output over extended windows, even when they provide real reliability benefits. And because PJM integrates fewer renewables than ERCOT or SPP, storage has fewer opportunities for energy arbitrage—shifting low-cost renewable power into higher-value periods.
Near-Term vs. Long-Term Resource Options
Over the next decade, wind, solar, and storage are the only resources that can realistically scale in PJM. Gas turbine orders are already pushed into the 2030s, while new nuclear projects would take even longer. Small Modular Reactors (SMRs) remain unproven at commercial scale.
Gas will continue to play a role, particularly as a peaking resource. But overreliance is risky. PJM is already gas-heavy, and additional buildout would increase fuel price exposure, strain pipelines, and heighten vulnerability to global LNG market volatility. More gas capacity may be needed, but the goal should be to minimize its run time while balancing renewables and storage.
Nuclear and low-carbon gas options may provide new pathways in the 2030s. For now, the best approach is to maximize deployment of proven renewables, accelerate storage, and build the transmission needed to integrate them.
The Role of Demand Response and Forecasting
Resource adequacy is not only about adding supply. Demand-side tools can lower peaks and reduce costs. Demand response programs give PJM flexibility to avoid expensive overbuilding.
Accurate forecasting is equally important. PJM, states, and large-load customers—particularly data center developers—must ensure that load growth projections are realistic. Speculative projects should not inflate forecasts, and efficiency gains must also be factored in. Better forecasting reduces the risk of both underbuilding and overbuilding.
Policy and Market Priorities
To ensure resource adequacy while protecting consumers, PJM and its states should prioritize:
- Transmission investment – Coordinated regional planning is needed to lower interconnection costs and unlock new projects.
- Stable state clean energy policies – Predictable policies attract private capital and support the deployment of solar, wind, and storage.
- Capacity market reforms – Sub-annual market design for solar and storage.
- Balanced resource planning – Avoid overreliance on gas while preparing for next-generation nuclear and low-carbon fuels.
- Demand-side solutions – Expand demand response and refine load forecasting to reduce peak stress and avoid costly overbuild.
PJM currently clears around 134,000 MW of accredited capacity but has more than 150,000 MW of mostly renewable projects waiting in the queue. With federal clean energy tax credits set to expire in 2026, the urgency to bring these projects online has never been greater. By advancing transmission investment, reforming capacity markets, and maintaining stable state policies, we can ensure reliability, protect consumers, and secure a clean energy future for the region.