01The Setup
DR participation traditionally paid through two channels: capacity payments (you commit to be available to curtail) and energy payments (you actually curtail during called events). Capacity has been the larger component, but the structure was opaque and dollar amounts were modest in most ISOs.
Three changes in 2024-25 reshaped the math: (a) capacity market clearing prices jumped (especially PJM, see BR-15), (b) ancillary services demand increased (ERCOT especially, with summer scarcity events), (c) program designs got more flexible (MISO, ISO-NE introducing more granular products).
For customers who shrugged off DR in 2022-23 because the numbers didn't justify operational complexity, the underlying calculation has shifted. The conclusion may or may not change for any given customer, but the math should be re-run.
02The Data
- PJM capacity payment: ~$98K/MW-year
- ERCOT reg/RRS combined: $40–90K/MW-year
- ERCOT ECRS premium: Summer scarcity
- MISO constrained zones: Up to $260K/MW-year
- Stack opportunity: Multi-product
- Aggregator spread: 20–40%
A 1 MW curtailable load in PJM is now worth roughly $98K/year in capacity payments alone, before considering energy event payments. That's 5-10x what the same load was worth in 2022-23.
ERCOT participants stacking regulation, RRS, and ECRS can capture $50K-120K/MW-year depending on availability profile and price scenarios. Summer scarcity events provide upside, but the base revenue is more stable than the headline numbers suggest.
MISO's constrained zones (Zone 7, Zone 4) saw clearing prices that put DR payments in a similar range to PJM. The customer profile that fits: 500 kW+ curtailable load, ability to respond in 10-30 minutes, available year-round.
03The Implication
DR economics for the right customer profile now justify capital investment in flexibility — load controls, backup generation that can island, smart building systems. The payback periods that didn't pencil in 2022 pencil now.
Customers who previously dismissed DR as 'not worth the operational complexity' should re-run the numbers. The capacity price changes alone are 5-10x what they were three years ago. ESPs and aggregators are racing to enroll capacity; customers should evaluate direct participation vs aggregator (the spread matters).
04The Recommendation
- Audit your curtailable load. Most customers don't have an inventory of what loads can be reduced and how quickly. Build the inventory before bidding the value.
- Run the stack math. For PJM customers, capacity is the foundation. For ERCOT, ancillary services and ECRS. For MISO, capacity in constrained zones. Stack what's available; don't accept aggregator-default product packaging.
- Aggregator vs direct participation. Aggregators take 20-40% spread. Direct participation requires operational maturity but keeps the spread. Run both options and decide deliberately.
- Treat it as procurement, not afterthought. The economics now justify making DR participation a procurement decision, not a 'side income' decision. Allocate the team accordingly.
DR was always a real revenue line for the customers willing to operationalize it. Through 2024, the economics were marginal — interesting but not transformative. From 2025 forward, the math is different. Customers running 'we don't bother with DR' as the default policy should re-examine that policy. The capacity market told them why.