America’s Electrical Grid Crisis is on the brink of a crisis that no one is talking about. Government mandates and pledges from utilities to achieve “net zero” emissions by 2050 or sooner have led to the closure of traditional power plants fueled by coal, natural gas and nuclear energy.

However, the wind and solar energy that is supposed to replace these sources is intermittent, unreliable and artificially supported by government subsidies. “Net zero” policies may sound nice on paper but they are not ready for practice in the real world.

In fact, the crisis may have already begun. A recent capacity auction by the largest U.S. electrical grid operator resulted in an over 800% price increase for these very reasons. And, everyday Americans are going to pay the price through higher bills for less reliable electricity.

An Impending Grid Crisis

• One study of electricity plans in the Midwest found that, “Of the 38 major investor-owned utilities spanning the Great Lakes region, 32 are pledged to net zero by 2050 or sooner. Of the seven states analyzed in this report, three have net zero mandates by law, one has net zero mandates through regulation and the other three have no net zero mandates at the state level.”
• “The Midcontinent Independent Systems Operator, the grid operator for much of the Midwest, projects that by 2032, none of the five Great Lakes states in its territory will have enough electricity capacity to meet even the most conservative projection of demand load.”
• “Wind and solar cannot be relied on as a one-for-one replacement of existing generation sources, like coal, natural gas and nuclear. If the grid relies on forms of generation that are uncontrollable and unreliable, it must also maintain backup sources that are controllable and reliable. Because wind and solar production can fall to near zero at times, utilities may need to maintain up to another grid’s worth of generation capacity.”

Sources:

Joshua Antonini and Jason Hayes, “Shorting The Shorting The Great Lakes Grid: Great Lakes Grid: How Net Zero Plans Risk Energy Reliability,” Mackinac Center for Public Policy, 2024

The PJM Capacity Auction: An 800% Price Hike

“An annual power market auction by the largest U.S. electrical grid operator resulted in prices more than 800% higher than last year as supply dwindled and demand increased, the operator said on July 30. PJM Interconnection, which covers parts of 13 states from Illinois to New Jersey, revealed the results of its 2025 to 2026 capacity auction. Prices for power plants landed at $269.92 per megawatt-day, compared to $28.92 per megawatt-day for year-ago auction, the grid operator said in a statement.”

The Facts Behind PJM’s Huge Electricity Price Hike

• In a capacity auction, generation plants bid their capacity (how much energy they’ll produce) into the auction for a given period. The primary goal is to secure commitments from electricity generators to be available to supply power in the future, typically three years ahead. This ensures that a regional transmission organization (RTO) like PJM has enough capacity to meet peak demand to maintain grid reliability.
• Prices at PJM’s recent annual capacity auction skyrocketed to $269.92 an increase of 833% over the previous year. This means customers will pay $14.7 billion for capacity in the 2025/26 delivery year, a $12.5 billion increase over the previous year. This could increase wholesale energy costs by as much as 29% starting in mid-2025, when the capacity purchased in this auction is due for delivery.
• The rush to retire electricity generated by natural gas, coal and nuclear power with untested and unreliable renewable energy is a core reason for this huge price hike. In 2023, PJM stated the rapid retirement of thermal generators, like natural gas and coal plants, was at risk of outpacing new resource construction. While planned new resources were primarily from “intermittent and limited-duration” renewable resources. At that time, PJM predicted, “Given the operating characteristics of these resources, we need multiple megawatts of these resources to replace 1 MW of thermal generation.”
• The 833% increase in capacity price at the 2025/26 PJM auction will likely result in significant cost increases for industrial customers. For an energy intensive industrial customer even a small increase could mean millions per month—and that increase is likely to be passed on to everyday Americans through the higher cost of consumer goods.
• How the PJM capacity cost increase effects residential and other electricity customers will vary and depend on each state’s regulatory environment. Bottom line, though, everyone pays with a huge increase like a $12.5 billion over the previous year’s costs, whether directly through increases in electricity bills or indirectly as manufacturers and other businesses pass on their costs to consumers through increased prices.
• The spike in capacity prices was driven by power plant retirements, increased load, and new market rules that aim to better reflect risks from extreme weather. For that reason, future auction prices probably aren’t going down without new generation being built. The auction for the 2026/2027 delivery year, is currently scheduled for December 2024.

Sources:

“PJM power auction results yield sharply higher prices,” Mackinac Center for Public Policy, 7/31/24

“Power Supply Cost Soar to Record on Largest US Grid,” Consumer Energy Solutions, 2024

“Energy Transition in PJM: Resource Retirements, Replacements & Risks,” PJM, 2/24/23

Ethan Howland, “PJM capacity prices hit record highs, sending build signal to generators,” Utility Dive, 7/31/24