Value Stacking in Demand Response

Value stacking refers to the ability of a single energy resource – like a C&I facility's flexible load, battery storage, or generator – to participate in multiple Demand Response (DR) programs or market services simultaneously or sequentially, thereby "stacking" multiple revenue streams from the same asset.

This is a key strategy for maximizing the economic benefits of demand-side resources.

Why is Value Stacking Important?

  • Increased Revenue: Earning payments from multiple sources (e.g., capacity + energy + ancillary services + utility incentives) significantly improves the return on investment for enabling DR participation (e.g., controls, aggregator fees).
  • Full Resource Valuation: Allows the resource to capture the full value it provides to the grid across different timescales and service needs (e.g., providing long-term capacity, short-term energy balancing, and fast frequency response).
  • Enhanced Program Viability: Higher potential earnings make DR participation more attractive to C&I customers.

How Value Stacking Works (Examples):

Example 1: New York (Dual Participation)
  • A C&I facility in NYC enrolls 1 MW of its load in the NYISO ICAP SCR program, earning monthly capacity payments ($/kW-month).
  • Simultaneously, it enrolls the *same* 1 MW in Con Edison's DLRP program, earning additional monthly capacity payments ($/kW-month) for local reliability.
  • It also earns performance payments ($/kWh) from ConEd when DLRP events occur.
  • Coordination: Rules prevent double payment for the *same reduction during overlapping events*. If NYISO calls an SCR event while a DLRP event is ongoing, the SCR performance might be measured net of the DLRP reduction, or specific priority rules apply. The aggregator manages this coordination.
Example 2: PJM (Capacity + Energy)
  • A facility commits 500 kW to the PJM Capacity Performance DR program via a CSP, earning capacity payments ($/MW-day) based on the RPM auction.
  • The CSP also bids this 500 kW reduction into PJM's Economic DR program (day-ahead or real-time energy market).
  • If energy prices (LMP) are high enough to clear the bid, the facility curtails and earns energy payments ($/MWh) *in addition* to its capacity payments.
  • If a mandatory Capacity Performance event is called, the facility must curtail and may also receive energy payments alongside its capacity revenue.
  • Coordination: The same MW provides both capacity availability and potential energy market value, but payment mechanisms are distinct.
Example 3: ERCOT (Multiple Ancillary Services - Sequential/Split)
  • A large industrial facility with 2 MW of highly controllable load might register:
  • 1 MW in the RRS market (requiring UFR) for high-value instantaneous reserves.
  • The *other* 1 MW in the ECRS market (10-minute response).
  • Or, it might offer its full 2 MW into different services during different hours of the day based on market prices and operational constraints.
  • Coordination: A single MW cannot provide multiple *exclusive* reserve services (like RRS and ECRS) simultaneously. Capacity must be split or offered sequentially. The QSE manages the bidding strategy.

Challenges and Rules:

  • Double Counting Prohibited: The primary rule across all markets is that a single MW of load reduction cannot be paid twice for providing the *exact same service* during the *exact same time interval*.
  • Program Exclusivity: Some programs are mutually exclusive by design (e.g., you can't be in both NYISO SCR and EDRP for the same MW; CA BIP generally excludes other programs for the committed load).
  • Coordination Complexity: Managing participation, bidding, dispatch, and settlement across multiple programs requires sophisticated coordination, often handled by the DR aggregator/CSP.
  • Baseline Interactions: Measurement and verification can become complex if multiple programs call overlapping events, requiring clear rules on how baselines and performance are calculated.
  • Regulatory Variations: The rules governing value stacking differ significantly between ISO/RTOs and states. Some actively encourage it (like NY's dual participation), while others have stricter limitations.

FERC Order 2222 aims to further enable value stacking by allowing aggregated Distributed Energy Resources (DERs), including DR, storage, and generation, to participate more seamlessly across multiple wholesale market services.

Effectively leveraging value stacking opportunities requires careful analysis of program rules, operational capabilities, and often partnership with an experienced DR provider.