PJM’s Reliability Backstop Procurement Is Coming This Fall: What Developers Need to Know Now

A one-time auction targeting >6 GW of new capacity is approaching quickly, pending FERC approval. Here’s what storage and renewable developers should know about this unique long-term revenue opportunity.

On July 31, PJM filed a request with FERC to conduct a Reliability Backstop Procurement (RBP) this fall. Together with PJM’s separate proposal to create an Interim Resource Adequacy Service (IRAS, formerly known as Connect & Manage), RBP represents the culmination of nearly a year-long effort by PJM to address a persistent and significant supply shortfall in its capacity market. 

Along with the Bring Your Own New Capacity (BYONC) construct under the IRAS proposal, RBP represents a unique opportunity for storage and renewable developers to secure a long-term capacity revenue stream. The timeline for RBP is approaching fast, with the procurement window planned for September 30 through October 21. Although FERC approval is not expected until late September, PJM is already moving ahead with preparations for the RBP. 

PJM’s latest 2028/29 BRA cleared 6,831 MW short of its reliability requirement. This was the second consecutive BRA to clear below PJM’s reliability target. RBP is designed to be a one-time mechanism used to bring additional capacity online to address this reliability shortfall. RBP is composed of two key phases: 

Phase 1 – Facilitated Bilateral Matchmaking: PJM and Charles River Associates are facilitating the direct contracting between large loads and new supply. Bilateral agreements that are in place prior to the Central Procurement (described below) will serve to reduce the shortfall PJM is aiming to procure. While PJM and CRA are helping to facilitate matchmaking, bilateral contracting is directly between buyers and sellers, and can occur without any matchmaking from PJM involved. 

Phase 2 – Central Procurement: For any capacity needs remaining after the bilateral phase, PJM will attempt to procure capacity through a one-time auction for terms of up to 15 years. RBP sellers will offer their capacity to PJM directly and will not have a load counterparty. The goal of the Central Procurement is to close the >6 GW shortfall in capacity observed in the 2028/29 BRA. After the RBP, PJM expects bilateral contracting to continue as part of the BYONC construct. 

Eligibility: Only new resources (including uprates and repowering) are eligible to offer into the RBP. Resources that cleared a capacity obligation in the 2028/29 BRA or earlier will not be eligible to participate in the RBP. Resources offering into the RBP must demonstrate that they will achieve commercial operations no later than June 1, 2032. PJM will conduct a COD feasibility evaluation, reviewing documentation related to interconnection status, site control, project financing, equipment purchases, and construction schedules. Failure to pass the COD gating evaluation will result in resources being disqualified from offering into the RBP. 

Multiyear Commitment: The RBP will cover a 15-year period, from 2028/29 through 2042/43 Delivery Years. Resources are only expected to offer capacity for Delivery Years that begin on or after their planned COD. 

Pay as Bid: Unlike the “pay as clear” structure of the RPM, where all cleared resources receive the same clearing price for their respective LDA, the RBP will be structured as a “pay as bid” procurement. Under this construct, sellers will offer their desired price and quantity for each Delivery Year during the 15-year period. If selected, resources will receive the price they offered for each Delivery Year, as opposed to a uniform clearing price. 

Network Upgrade Costs: RBP sellers are expected to take into consideration any potential network upgrade costs when crafting offer prices. No adjustments will be permitted after the fact to RBP sell offers to account for actual network upgrade costs. 

RPM Participation and Contract for Difference: Resources that clear an RBP obligation will be required to participate in all RPM auctions for each relevant Delivery Year as a price-taking resource. The RBP obligation will then be settled as a “contract for difference” with the RPM price for a given Delivery Year. Resources will be “made whole” via RBP Settlement Credits to their offered RBP price for each Delivery Year, which may be less than or greater than the relevant RPM price. 

RBP Selection Criteria: RBP offers will be selected in rank order across two stages. First, all offers will be ranked from earliest to latest based on COD, with PJM giving preference to offers with earlier CODs. Second, offers will be ranked on a least-cost order based on their levelized cost over the 15-year term. The RBP is subject to a MW-weighted average cap of $555/MW-day across all selected offers. 

ELCC: RBP sellers must take into account expected ELCC ratings for future Delivery Years when crafting offer quantities. PJM is planning to publish Preliminary ELCC Class Ratings for 2028/29 through 2036/37. Resources without a Class Rating can request a unit-specific ELCC analysis for that timeframe. RBP offer quantities will not be able to exceed 120% of the ELCC Class Rating (or unit specific rating) times the resource’s ICAP quantity. 

Implications of Not Delivering: Resources that clear an RBP obligation may fail to deliver on that obligation in a future Delivery Year if they are delayed in their COD, or if their ELCC is lower than expected. PJM makes a clear distinction between these scenarios. Resources that fail to achieve COD for a Delivery Year with an RBP obligation will not be eligible for RBP Settlement Credits for that Delivery Year and will be subject to an RBP Shortfall Charge equal to 20% of their offered RBP price. Resources that fail to achieve COD for three years of an RBP obligation will have their obligation terminated. Resources that achieve COD but experience a reduction in their ELCC are not subject to an RBP Shortfall  Charge but will only be paid their RBP price for the UCAP MW they ultimately commit in the RPM for each Delivery Year. 

Credit: Developers must post credit with PJM to participate in the RBP, which is distinct from the credit required for RPM participation. PJM has set the credit requirement equal to three years of potential RBP Shortfall Charges, or 20% of the RBP offered price times the UCAP MW across the first three Delivery Years offered. Credit can be provided to PJM either via cash or a letter of credit. Letters of credit must be approved by PJM prior to RBP offers being submitted. 

*Timeline is subject to FERC action 

RBP and BYONC both represent significant opportunities for renewable and storage developers to secure long-term capacity commitments for projects in the PJM footprint. However, these opportunities contain key differences that developers should consider as they assess their options. 

As described above, RBP will be a one-time procurement this fall, with obligation terms for as long as 15 years. Resources with an RBP obligation will be required to offer into the RPM as a pricetaker and will be subject to a contract for differences settlement to make them whole to their awarded RBP price. To participate in RBP, resources must post credit with PJM, demonstrate COD viability prior to June 1, 2032, and must not have cleared a capacity obligation in the 2028/29 BRA or earlier. 

Under BYONC, resources will be able to enter into long-term capacity arrangements with large loads or LSEs on a rolling basis going forward. For large loads looking to avoid curtailment risk under the IRAS contract, BYONC offers them a path towards firm, reliable power. This demand for accredited capacity creates an attractive opportunity for capacity sellers. Terms related to capacity price, settlement mechanics, credit obligations, and ELCC risk will be negotiated between buyers and sellers under BYONC. Similar to RBP, a resource committed under BYONC will be required to offer into the RPM as a price-taker for each Delivery Year the BYONC agreement is being used by the large load(s) to avoid curtailment under IRAS. To be eligible for BYONC, resources must not have cleared in a BRA prior to the 2027/28 BRA. 

If you are interested in participating in the RBP procurement, there are several steps to take immediately: 

• BYONC vs RBP: The RBP procurement and BYONC are mutually exclusive paths. However, resources that offer into RBP and don’t clear an obligation can still pursue BYONC after the procurement. Developers should understand both pathways and assess whether participating in RBP is a viable option for their projects. 
  

• Revenue Modeling: Under a pay-as-bid model, it’s critical for developers to understand their capacity market revenue needs. Modeling forward revenue expectations from the energy & ancillary services markets, as well as understanding risk related to ELCC scenarios and potential network upgrade costs, are critical to informing well-structured RBP sell offers.

• Credit: RBP participation entails meaningful credit requirements, which can be met via cash or a letter of credit. If using a letter of credit, PJM will require the submission of a draft LC (using a PJM-approved form) from the developer’s banking institution by September 7, 2026.
  

• Documentation: Projects can only participate in RBP if they can demonstrate to PJM’s satisfaction that they will achieve COD prior to June 1, 2032. Ensuring you have sufficient documentation in place and submitted properly to PJM will be critical. 

• Training: PJM is slated to host a training for RBP participants on September 14, 2026. Parties can register here. 

The RBP is a rare chance to lock in long-term capacity revenue; however, the window is short and fast-approaching, the diligence is complex, and the penalties are steep. If you’re evaluating whether, and how, to participate in RBP, our team helps developers and asset owners navigate the complexity of PJM market participation. SYSO offers a full suite of market participation services in PJM, including daily asset scheduling, 24/7 control room communications, outage management, asset telemetry via PJMNet, market settlement, and capacity market management. Contact us today to learn more.