What Is Capacity?
Capacity represents the need for adequate generating resources and ensures there is enough electric supply to meet demands, especially at peak times.
Regional Transmission Organizations (RTOs) are responsible for ensuring there is sufficient capacity available to accommodate customer demand. The RTO serving our region is PJM Interconnection, L.L.C, which conducts an annual forward capacity auction – the Reliability Pricing Model (RPM) – to ensure there is enough capacity to serve the region three years from the time of the auction.
Suppliers, including developers of new generation, can offer to provide capacity during the delivery year. The RPM also accepts offers from demand response and energy efficiency providers who commit to restrict or control electricity use to reduce demand during the delivery year. The RPM sets the clearing price for capacity and varies across different zones in the PJM region. The clearing price is dependent on zonal needs and generation offered and accepted.
For more information about PJM’s function, click here.*
How to Determine Your Capacity Costs
Capacity typically is the second largest component of your generation price. For help in calculating your capacity costs, download this quick reference guide which includes an easy-to-use worksheet.
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