About 24 GW to 58 GW of thermal resources — or 12% to 30% of the PJM Interconnection’s installed capacity — are at risk of retiring by 2030 without a clear source of replacement generation, according to the grid operator’s market monitor. 

“Providing clear information to regulators and market participants about the actual and expected supply-demand balance is essential so that decisions about market design, about the timing of environmental regulations, about pipeline siting, and about transmission siting can all recognize the likely impact on the balance between supply and demand and therefore reliability,” Monitoring Analytics, PJM’s market monitor, said in its annual state of the market report released Thursday.

Power plant owners have said they plan to retire about 4.3 GW in PJM while an estimated 19.6 GW could retire for regulatory reasons before 2030 — including 10.5 GW of coal, mostly in 2030 — and 33.8 GW may be uneconomic based on forward capacity prices from 2024 through 2026, according to Monitoring Analytics. A year ago, the market monitor estimated that about 51.8 GW was at risk of retiring by the end of this decade.

However, the retirement estimates are uncertain, according to the report. Higher market prices, for example, would keep some of the capacity online, the market monitor said.

In addition, the level of potential retirements roughly matches the 54.2 GW that retired in PJM from 2011 to 2023, according to the report.

Even so, there is a major difference now compared to the earlier period that saw a wave of gas-fired power plants come online in PJM. “Renewables can replace a significant amount of the energy output but cannot replace the capacity,” the market monitor said. “The simple fact is that the sources of new capacity that could fully replace the retiring capacity have not been clearly identified.”

PJM has about 196 GW of installed capacity. It expects to process about 7.2 GW in projects that are in its interconnection queue by mid-2025 and 230 GW — mainly renewable generation — over the next three years, Jeff Shields, a spokesperson for the grid operator, told Utility Dive in late February.

The market monitor urged PJM to immediately “identify the availability of firm gas supply; ensure transparent information from pipelines; identify the need for dual fuel capacity; modify the [reliability must-run, or RMR,] process; add expedited queue options for retiring resources; and improve the capacity market design.”

RMR contracts — which are used to keep power plants from retiring when they are needed to maintain reliability — are a symptom of failed market design, according to the market monitor.

“It should never be the case that a resource does not clear in the capacity market auction and then, when it wants to retire as a result, is deemed critical to reliability and not allowed to retire,” the market monitor said. “The substantial overpayments that result from PJM’s interpretation of the current rules create an incentive to request RMR contracts because the RMR payments generally exceed market revenues.”

Power plant owners should be required to give at least 18 months notice when they want to retire generating assets to give markets time to respond, according to Monitoring Analytics. Currently power plant owners must give PJM three months’ notice. A PJM stakeholder group is considering revising its rules governing power plant retirements.

Also, PJM should develop rules so it can advance projects in its interconnection queue if they would resolve immediate reliability issues from generating unit retirements, the market monitor said.

The key parts of PJM’s market design are “robust”  but could be improved, partly by making the market more reliable and competitive, according to Monitoring Analytics.

“PJM and its market participants will need to resist the temptation to try to become all knowing system planners, identifying in advance the exact asset value of every resource and deciding exactly where risks lie,” the market monitor said.

They must avoid trying to define “correct” market prices instead of fostering a competitive design that allows market fundamentals to set prices, Monitoring Analytics said.