VDER Settlement

The Value of Distributed Energy Resources (VDER) tariff is New York’s compensation framework for distributed energy resources, including battery energy storage. A battery enrolled in VDER is a front-of-meter asset connected to the distribution network within a utility’s service territory. It trades energy at the wholesale locational marginal price (LMP) for its zone, and settles delivery costs and locational credits through that utility’s retail tariff.

This is a different commercial route from wholesale-only participation. A VDER battery gives up ancillary services entirely and takes on retail delivery charges, in exchange for locational credits that no wholesale participant receives.

VDER and the Indexed Storage Credit (ISC) are mutually exclusive. A single asset takes one route or the other, never both. See Dispatch Model for the ISC contract mechanics.

VDER settlement is modeled for seven New York utility territories

Each utility prices VDER on its own delivery tariff, with its own rates, permitted price nodes, and eligibility band. Capacity floors differ because each utility mandates standby or multiple-rate-period service above a different threshold. All seven share the 5 MW cap that applies to distributed storage under VDER.

Each territory sets its own delivery service classification, DRV window, DRV ceiling, and posted LSRV rate. Select a territory below to see the terms the model prices for it.

The settlement combines locational credits against retail delivery charges

Four components are credits and three are charges. Some are valued inside the dispatch optimization, so they change the charge and discharge schedule the model chooses. The rest are applied after the solve, shifting reported revenue without changing dispatch.

Energy settles at the zonal LMP adjusted by the utility’s loss factor, applied to both the charging and discharging leg. The DRV credit pays for exports during a narrow summer window when distribution peak demand is highest. Import delivery is the volumetric transmission and distribution charge on imported energy. Only the Con Ed and LIPA tariffs set one. The other five recover delivery through demand charges rather than per unit of energy, so no volumetric import charge applies to them.

Capacity settles under Installed Capacity Alternative 3, which pays the zone’s monthly clearing price on the battery’s capacity tag, spread across the month. No duration-based accreditation factor applies, unlike the wholesale capacity stream. The tag is set by the project’s export during the prior capability period’s NYCA peak hour, so crediting the full nameplate rating would assume the battery discharged at full power in that hour. The model credits 75% of nameplate by default. See Capacity Prices for the clearing price methodology.

Demand charges bill the highest import in each window, not every hour of import

Within each billing window, the as-used demand charge responds only to the single highest import the battery draws, measured in kilowatts, however many hours it imports at that level. The optimization holds one peak for every window and pays that window’s rate on it. Imports outside the windows carry no demand charge.

Charges spread across each billing window’s full duration, so a run covering part of a period bills the proportional share. LIPA bills on the monthly rather than the daily peak.

Delivery rates escalate while the DRV credit steps down

Delivery rates compound at 1% real a year from the rate base year, taken as roughly 3% nominal delivery escalation less around 2% inflation. The DRV rate does the opposite. It locks at the enrollment vintage without escalating, then steps down as the contract ages, so the margin between credit and cost narrows over a project’s life.

One step-down schedule applies across all seven territories. The DRV is paid in full to contract year 10, at half from year 11 to year 25, and nothing after.

All windows fall on weekdays. Six exclude public holidays, while LIPA excludes only July 4. NYSEG is the only territory with a winter DRV window, which gives it the most window hours of the seven.

LSRV is an opt-in credit paid only at designated substations

The Locational System Relief Value pays batteries connected at substations the utility designates as needing relief. Designation is site-specific. Each utility publishes its eligible substations and their rates in its value stack statement, and a project earns LSRV only while its substation remains designated with headroom.

LSRV is off by default and enabled per simulation. When enabled, the model credits the utility’s posted rate as a flat monthly payment on the battery’s nameplate rating for the 10-year rate lock from enrollment, and nothing after. The rate is locked at the enrollment vintage and does not escalate. Where a utility posts per-call rates, the model annualizes them at ten called events a year, the convention NYSERDA’s own calculator uses. Where a utility posts a range across substations, the model carries the average. Central Hudson currently designates no LSRV areas, so its rate is zero.

The result is a territory-average view of LSRV rather than a site-specific one. It shows what a battery at a designated location would earn, assuming full performance in every called event.

Eligibility is checked when a simulation is configured

A VDER simulation is rejected at configuration if any of the following is unmet.

• Distribution connection within one of the modeled utility territories.
• Capacity within that utility’s band, up to the 5 MW distributed storage cap.
• A price node in a zone the utility serves.
• No ISC contract and no ancillary services, both of which are incompatible with VDER.
• Forecast mode, since VDER is not supported in backtests.

Riders settle outside the tariff and are excluded

A reader comparing model output against a real utility bill will find items the settlement does not carry. Per-unit riders and non-bypassable charges reconcile through monthly statements rather than the tariff rates, and are excluded across all territories. Several currently settle as small credits rather than costs.

Assumptions and caveats

• Rates are real, not nominal, held in the rate base year and escalated in real terms from there.
• The DRV step-down is a single modeled schedule, applied uniformly rather than following each utility’s own published re-vintage terms.
• Day-ahead settlement only, consistent with the rest of the dispatch model.
• Window clocks are fixed in the model, so a rate case that moves a window requires a model update rather than only new rates.
• Where a tariff admits more than one rate row, the more expensive is modeled. Con Ed carries the New York City gross-up, conservative for Westchester sites, and National Grid and O&R read large-customer rows.
• Capacity is credited at 75% of nameplate by default. Alternative 3 pays on the capacity tag rather than on a duration-derated quantity, so no accreditation factor applies. The 75% share is an operating assumption about peak-hour tag capture, and is adjustable per simulation.
• LSRV is opt-in and territory-average. With the toggle off, reported revenue excludes any locational relief payment. With it on, the credit assumes a designated substation, full performance in every called event, and the average posted rate where a utility publishes a range.

Data sources

Rates are taken from each utility’s filed electric tariff and its VDER value stack credit statement.