> ## Content Index
> Fetch the complete content index at: https://the-capital-memo.ghost.io/llms.txt
> Use this file to discover other available public pages before exploring further.

# Eleven Times the Price and Five Hundred Megawatts
- URL: https://the-capital-memo.ghost.io/eleven-times-the-price-and-five-hundred-megawatts/
- Published: 2026-10-12T11:10:44.000Z
- Updated: 2026-10-12T11:10:43.000Z
- Author: James Coleman

On the fourteenth of July the grid operator that runs the electricity market from Chicago to the Atlantic held its capacity auction for the 2028 and 2029 delivery year. Capacity is not energy. It is a payment made to a generator simply for existing and being available on the worst day of the year, and it is the mechanism by which a market is supposed to call new power plants into being.  
  
It cleared at 325 dollars per megawatt day, which is the administrative price cap. That is the third auction in a row to clear at the ceiling. Four auctions ago, for the 2024 and 2025 year, the same product cleared at 28 dollars and 92 cents. The price has gone up a little over eleven times in four years, and the total bill to load, which means to everyone with a meter, came to 16.4 billion dollars for one delivery year.  
  
Now the part that matters. New generation and uprates clearing in that auction: 525 megawatts. The prior auction brought 774\. The one before that, 2,669\. The market paid its maximum legal price and received a fifth of what it received two years earlier. It also came up 6,831 megawatts short of its own requirement, leaving a reserve margin of 14.4 percent against a target of about 20, while retiring coal removed a further 2,941 megawatts.

### The Historical Echo

California between 1998 and 2001 is the case study, and the detail usually left out of the retelling is the one that applies here.  
  
The state restructured its electricity market in the late 1990s and then built almost nothing for roughly thirteen years. Demand grew, a dry year cut hydro imports, and by the summer of 2000 wholesale prices moved from the twenty five to thirty dollars a megawatt hour range to averages near four hundred. At the worst of it something like fifteen thousand megawatts of capacity was out of service at once. Pacific Gas and Electric filed for bankruptcy in April 2001\. The state stepped in as buyer of last resort and signed long term contracts through its water agency at an average near a hundred dollars a megawatt hour, roughly sixty billion dollars of commitments, against a spot market that fell back toward thirty within two years.  
  
The lesson usually drawn is about market design and manipulation. The more useful one is about lead times. Prices in California signalled scarcity for about eighteen months. Generation takes four to six years. The signal and the response operate on different clocks, and in the interval the shortage is settled by whoever is holding the contract, not by new steel in the ground.

### Where Patient Capital Is Positioning

The clock problem is worse now than it was then. The median project in the interconnection queue took 61 months from its request to commercial operation in 2025, against about 36 a decade earlier. A price signal that lasts three years cannot summon a plant that takes five, and the regulator has already acknowledged the market cannot be trusted to settle this on its own: the price collar of 175 to 325 dollars was extended again in April, which means the ceiling that was hit three times running stays in place.  
  
Meanwhile the additions that are happening do not count for much when it matters. The federal energy agency expects a record 86 gigawatts of new capacity this year, of which 43.4 gigawatts is solar. For the purpose of a winter evening peak, that solar is credited at something like seven to ten percent of its nameplate. Eighty six gigawatts of headline construction is a far smaller number of gigawatts of assured supply, and the auction result is the honest accounting of the difference.  
  
For capital with a long horizon the positioning is straightforward and uncomfortable. The scarce asset is not generation in the abstract. It is a dispatchable, already interconnected megawatt, and the price of that thing is being set by an administrative cap rather than by any judgement about its worth. A queue position with a signed interconnection agreement is now an asset in its own right, independent of whether anything gets built on it. And the entities on the other side of this trade, the utilities and the industrial buyers who have to procure power through the next decade, are the ones who will do what California did and sign long dated contracts at the top. That has happened before. It ended with sixty billion dollars of obligations priced against a shortage that had already passed.

![](https://storage.ghost.io/c/44/88/44885750-7681-4d57-825f-5d69f4c60045/content/images/2026/10/eleven-times-the-price-and-five-hundred-megawatts-photorealistic.jpg)

The Capital Memo