PJM's 4 GW modeling gap cost ratepayers ~$12B, SemiAnalysis says

PJM has wasted about $12 billion of ratepayers' money from 2025 to 2027 by underestimating its own existing power plants by roughly 4 gigawatts, according to a new SemiAnalysis report written with Nathan Iyer.

The authors argue the grid operator's Reserve Requirement Study "does not credit how cold, dense air makes gas plants stronger electricity generators by up to 25% in winter," and has not been updated to reflect winterization work at "400 of PJM's ~700 gas plants" done by 2024 after the December 2022 Winter Storm Elliott. The consequence, per the report, is a fleet-size undercount that flows into capacity auction clearing prices, which jumped from about $2.2 billion to $16.4 billion per year across four consecutive auctions.

Better modeling would have saved an estimated $6.7 billion in the 2025/26 auction and $4.9 billion in 2026/27, the authors write. A "Reliability Backstop Auction" for 6.8 GW is now scheduled for September 30 to October 21, 2026, with capacity contracts running to 2043 and a maximum liability the authors put at roughly $21 billion if the underlying demand, much of it AI data center load, does not show up. Credit markets are already tracking similar AI-demand-backed exposures, with bond investors flagging $70B in AI shadow credit backstops yesterday.

Fleet performance in cold weather has moved in the direction the report describes. Storm Elliott caused about a 24% generation loss; Storm Gerri in January 2024 saw a 9% outage rate, the January 2025 MLK Storm a 9% forced-outage rate, and Storm Fern in January 2026 a 10% outage rate.

Reform inside PJM is not straightforward. Proposals require a two-thirds majority across five equally-weighted member sectors, and a winter ratings change passed a task force 178-54 (about 77%) in July 2025 only to be voted down at the senior committee level on August 20, 2025 with just 30.7% support.

The debate sits in the middle of a run of AI-infrastructure-versus-grid coverage we've been logging on our climate desk and AI infrastructure feed. FERC comments on PJM's design close August 21, 2026, with backstop results due by December 2.