PJM, Fossil Fuel Power, and Environmental Justice

How the nation’s largest power market props up coal and gas, and the plants’ proximity to overburdened communities

December 8, 2021

Fossil fuel power plants still dominate the energy landscape from Chicago to the Jersey Shore to Virginia. This region’s electricity grid and markets are run by a company called PJM Interconnection , which significantly lags behind other regional transmission organizations around the country in transitioning to clean energy.

What holds back transition away from fossil fuel power in PJM?

One key factor is how plants get paid. In PJM’s annual “capacity market,” plant owners are paid for their offers to make power available if needed during times of peak customer demand. The problem is that PJM routinely buys far more capacity than needed, and at too high a price. This excess—or “fat market”—keeps fossil fuel plants in business that wouldn’t otherwise be viable. Consumers are left footing the bill, and these plants—and their pollution—are often located in or near neighborhoods of color and/or households living on lower incomes. It is worth noting that both nationwide and in the PJM region, low-income Black people face the highest risk of death from power plants’ fine particulate emissions.

So exactly how big a problem is this “fat market” in PJM? How many plants are being propped up? Where are they? And at what cost to consumers? PJM and plant owners keep capacity market bids secret, so it’s difficult to say for sure. But there should be greater daylight for consumers and communities, and a ray of light comes from a new study by the Applied Economics Clinic (AEC) that estimates plant owners’ bids and locations based on available data. Any plant owners that want to challenge the estimates are invited to share their actual bids with the public. This site elevates some of AEC’s key findings and data, with more detail and full methodologies available in the report itself.

Fossil Fuels in PJM

As of 2017, there were 1,060 existing gas and coal generating units and an additional 133 proposed gas units that were in stages of approval or construction across PJM’s 13-state territory. Most power plants house multiple units, making for a total of 383 plants with existing and proposed fossil fuel units in the region, as shown in the first map below. Of the 1,050 existing units AEC analyzed in its report, more than three quarters of existing units—81 percent or 851 units—are located within 5 miles of an environmental justice (EJ) community.

An EJ community, as defined in Pennsylvania, where PJM is headquartered, is a census tract in which more than 20 percent of residents live at or below the federal poverty level and/or more than 30 percent are people of color. The majority of existing fossil fuel units in PJM—58 percent or 609 total units—are within 1 mile of an EJ community. More than a third—36 percent or 376 units—are sited directly within these communities.

Existing and Proposed Fossil Fuel Plants in the PJM Region

Costly, Unneeded, Unjust

The glut of uneconomic fossil fuel plants in communities across the PJM region in part stems from flaws in the way PJM buys capacity. The AEC analysis finds that by consistently overestimating future consumer demand and the costs of new generating units, PJM’s capacity markets result in “fat markets.” A “fat market” is one in which the “clearing price” that determines whether a generator’s bid is accepted or not is set too high and results in payments made to unnecessary high-cost power plants at customer expense.

The maps below draw from AEC's in depth look at 450 of the total 1,193 units in PJM’s 2021/22 capacity market (which was held in 2018) to enable users to zoom into their geographic region to see which of these existing or proposed fossil fuel units in their area were too expensive and only got paid for capacity because of PJM’s fat market (red dots). The next map then plots units that are so expensive they aren’t clearing even with the fat market (black dots).

*Note: Because power plant capacity market bids are not made publicly available, classification of 'fat market' and 'high bid price' generators is based on AEC's estimation of bid prices based on public data regarding their size, age, location, plant type, and history of use.

**Also note that a single plant may have different units falling into different categories in this analysis (e.g. one unit is "fat market" and another is "high bid price"). This means that a few plants may show up in both the maps below.