NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency’s (KBRA) Project Finance Group has seen significant volatility in Pennsylvania, New Jersey, and Maryland Interconnection LLC (“PJM”) capacity prices during the last five auctions. Capacity prices in the PJM regional transmission organization (“RTO”) have declined from a high of $164.8/MW-day in the 2018/19 auction to $76.5/MW-day in the 2020/21 auction. The most recent auction for the period of June 1, 2021 to May 31, 2022 saw a nearly 83% increase in capacity prices in the RTO region to $140/MW-day. KBRA believes the increase was mainly driven by lower energy prices and higher development costs for new power facilities. While the increase was viewed as a positive for merchant power projects, the question remains whether prices will hold in future auctions.
In this article, KBRA discusses the major factors contributing to this volatility and its impact on future capacity prices.
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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
