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Google/NRG Report: ERCOT's Proposed REP-Driven Residential DR Program Would Increase Residential DR Compensation By 2x-3x; Hit 500 MW Within a Few Years
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A report prepared by a consultant for NRG Energy and Google says that ERCOT Nodal Protocol Revision Request (NPRR) 1296, which would create an ERCOT-funded program providing incentive payments to retail electric providers (via REPs' QSEs) for residential demand response, would support payments to DR participants that are 2x to 3x higher than current compensation to residential customers, and would result in the program's 500 MW compensation cap being hit within "a few years".
See background on the proposed ERCOT-funded residential DR program here
Under the proposed residential DR (RDR) program, the report states that market participants can earn up to $140/kW-yr or a 3-year rolling average of Peaker Net Margin for the accredited reductions during top net load hours, averaged across all
seasonal accreditation hours.
ERCOT would limit total RDR participation to a specified seasonal MWh cap. The report notes, "Compensation is effectively capped at 500 MW in each season (3,000 MWh in
Summer and Winter; 1,500 MWh in Fall and Spring) across all ERCOT participants."
The report states, "As currently structured, there is no advanced registration at the start of a season. If participation exceeds the cap, incentives will be reduced
accordingly across participants."
"In our analysis, maximum incentive payments
increase by between 77% and 204% with the
introduction of ERCOT’s proposed DR program,
depending on the DR technology," the report states
The report states that, without the RDR program, current smart thermostat demand
reductions provide $63/participant on average in annual
energy and ancillary value (2019-2024).
The report states that, under its modeling, "With the RDR program, REPs could earn an additional
$29 to $64/participant on average for targeted dispatch
during peak net load hours, depending on accuracy of
foresight into market conditions."
Such available earnings to REPs are gross and exclude program implementation costs
Considering such implementation costs, the report projects that the additional maximum cost-effective DR participation incentive that would result from the RDR program, by technology, would be:
• Smart Thermostat: + $23 to $55/participant/yr (77% - 180% increase)
• Residential Battery: + $25 to $33/kWh/yr (154% - 204% increase)
• Residential EV Managed Charging: + $44 to $53/participant/yr (122% - 147% increase)
The range of increased incentive payments reflects whether the REP has imperfect or near perfect foresight of the load hours used for compensation
The report states, "Around 3% of ERCOT customers currently participate in a smart thermostat
DR program, based on EIA-861 (2023) data.
If participation increase to 8%, residential smart thermostats alone could
provide more than 500 MW of new DR capability in ERCOT. Based on
experience in other jurisdictions, ERCOT could expect to reach 8%
participation within the next 3-5 years".
The report states, "Significant annual variation in the energy value
highlights a challenge for the REP DR business model in
ERCOT. The more consistent year-to-year benefit from
RDR helps to mitigate that challenge to a degree."
The report states that the RDR program has the potential to exceed the 500 MW compensation cap if the cap is eventually lifted.
Addressing concerns about wholesale price suppression, the report also states, "With the 500 MW participation cap, we do not expect the RDR program to
lead to significant price suppression relative to increasing forward prices."
The report states, "The impact of the RDR program could be on the order of a 3-4%
reduction in average annual prices, or less than $2/MWh on average."
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January 19, 2026
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Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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