Serving fast-growing power demand is top of mind in the energy space. For data centers in particular, securing accredited capacity has become increasingly make-or-break for bringing facilities online within desired timelines — especially as regulators, policymakers, utilities, and grid operators tighten requirements around data center interconnection and energization.
Nowhere is this capacity pressure more manifest than in PJM. As the market's already enormous amount of data center demand expands further, PJM has taken matters into its own hands. In September, the grid operator will launch a "Reliability Backstop Procurement" (or "RBP") for ~15 GW of new capacity resources. This process will see PJM and Charles River Associates pair large loads with sources of UCAP (unforced capacity) PJM's plan proposes a price cap for resulting UCAP commitments of $555/MW-day, and a requirement for generators to begin operation by no later than June 1, 2032.
The RBP will be an important moment for many PJM-focused capacity players. But capacity-focused buyers in PJM and elsewhere should feel empowered to explore capacity-sourcing approaches beyond the RBP. As we'll see, a portfolio approach to sourcing accredited capacity can bring substantial timeline and cost benefits for buyers — benefits LevelTen Capacity+ was custom-built to provide. These efficiencies can substantially ease the interconnection process for large loads.
Insights on pricing and contract structures for capacity products remain scarce in PJM and elsewhere — leaving market participants navigating an immensely opaque landscape. To address this, LevelTen has leaned on our extensive network of PJM developers and capacity sellers to surface granular pricing insights on an array of capacity resources that stand to inform both buy- and sell-side strategy in PJM.
Uncovering Capacity Insights in PJM
LevelTen's PJM capacity RFI closed in early July, and received ~150 offers from dozens of solar, wind, storage, and thermal developers.
The prices shown below plot the offers received under an "as-accredited" structure. In theory, prices for these capacity attributes should be quite similar, since regardless of the underlying technology, they're providing the same unit of product in the same market. To the surprise of many buyers, our PJM RFI reveals that accredited capacity pricing varies widely across different technologies, and often under the $555/MW-day cap that the RBP prescribes.
As-Accredited Offer Price Spreads by Technology — PJM
Cost advantages for accredited capacity from solar in particular was a notable finding — a trend we believe may stem from the general unimportance of accredited capacity revenues in solar project financing. And while it's well-known that solar receives low marks from PJM with respect to its ELCC rating, a unit of accredited capacity is a unit of accredited capacity, regardless of its source.
Solar's low ELCC ratings may actually confer a benefit for buyers building accredited capacity portfolios of mixed technologies. Since solar's ELCCs in PJM start lower, their long-term vulnerability to ELCC degradation should be significantly less than other technologies — meaning that the solar portion of an accredited capacity portfolio could provide enhanced durability from an ELCC-risk perspective.
Needs, Meet Speed
While thermal generators can capably provide the firm power data centers seek, heightened global demand for gas generators has caused turbine delivery timelines and costs to balloon. In a business where speed to market is paramount, the allure of powering gigawatt-scale data center campuses with gas generation is increasingly bumping up against the logistical realities of actually attaining the equipment necessary for doing so.
Meanwhile, the speedy deployment timelines clean-power assets can provide are garnering growing attention. Solar and storage projects in particular benefit from relatively swift development, and are typically further along in their interconnection journey compared to the wave of gas assets that entered the queue in the last few years.
Buyers have the opportunity to identify and contract with assets that are already developmentally mature, further improving speed-to-market advantages. But overarchingly, the mere availability of assets with pre-2030 CODs is a major leg up for buyers willing to undertake an aggregation approach to securing accredited capacity.
The Portfolio Effect
While developing a portfolio of capacity contracts introduces some complexity and need for active management, buyers who take a portfolio approach can achieve timeline and cost benefits. The chart below shows a real-world example of a multi-technology accredited capacity portfolio in PJM, with annual volumes supporting a hypothetical load ramp schedule.
Example of Accredited Capacity Blocks in a PJM LDA, Adjusted for ELCC Risk
An important component of developing these portfolios is creative thinking around contract structures. While many buyers would ideally contract exclusively for capacity-only structures, satisfying load interconnection objectives may require compromise. Hitting aggressive timelines for data centers will likely necessitate openness to an array of contracts, including storage tolls, fully bundled PPAs inclusive of capacity attributes, and other agreements that will confer access to pre-2030 supply.
LevelTen is here to help you assemble winning accredited capacity portfolios. The LevelTen Capacity+ team surfaced more than 22 gigawatts of nameplate capacity in PJM during H1 alone, and can swiftly assemble portfolios in buyers' target LDAs that optimize for speed, cost, ELCC resilience, and contract mix.
Knowledge Is (Literally) Power
Whether your team plans to participate in PJM's RBP process or forge your own capacity path, real-world data makes all the difference. LevelTen's full report breaking down the results of our PJM capacity RFI is now available to subscribers. Explore it today via the form below to access granular PJM capacity pricing data, learn more about buyer and seller preferences, and much more. For a sneak peek, our recent webinar diving into our PJM RFI results is now available, in addition to thought leadership that explores precisely how clean-power assets can meet the power needs of even large-scale data centers.
For parties looking to take a more hands-on approach to securing accredited capacity, LevelTen's Capacity+ team is here to connect your team with the resources needed to meet energization goals. Real-world success stories proving the effectiveness of this approach continue to mount. If you're ready to leverage this strategy, let us know.
For parties looking to uncover — or offer — clean-power capacity in PJM, reach out at info@leveltenenergy.com. We look forward to turning your team's aspirations into reality.
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