Is There a Gold Standard for Hedging New Capacity in Power Markets?

Comparing PJM and Western Resource Adequacy Programs

Capital is ready to fund new generation, and load growth from hyperscalers makes the need clear. But the tools for hedging that investment were built for flat demand and plenty of thermal supply, and they’re showing their age.

PJM’s capacity auction has swung from $28.92/MW-day for 2024/25 to a capped $333.44/MW-day for 2027/28, and the last two auctions fell short of the required reserve margin. Out west, the Western Resource Adequacy Program (WRAP) takes a very different approach. Its first binding season slipped about 18 months while participants weighed how much they could owe in deficiency charges, the penalties for falling short of their capacity obligations.

This white paper compares the two models side by side so you can judge where investment risk sits today and how market reforms could shift it.

What You’ll Learn

How the five building blocks of resource adequacy each carry their own risk tradeoffs
Why PJM’s “credibility trap” is weakening the price signals for new buildout, and the three reform paths under consideration
How WRAP deficiency charges replace scarcity pricing in the Extended Day-Ahead Market (EDAM) and Markets+
What a gold standard market would need to give investors stable forward pricing