The PJM Capacity Market: A Tale Of Missing Money

Abstract

Electric grid failures in California (2020), Texas (2021), and the Mid-Atlantic (2022) have reignited a long-standing debate over resource adequacy. A key question that remains unanswered, however, is how much money is truly ‘missing’ from generators to induce sufficient investment in capacity. This paper explores the shifting nature of missing money in two ways. First, merchant generator cost of capital is estimated using a sample of public comparable firms. Second, generator performance—and by extension, financial health—is evaluated by comparing simulated wind and solar power production data with real performance assessment intervals during Winter Storm Elliott.