ICAP Capacity Payments Under New York VDER: Alternatives 1, 2 and 3

How New York's investor-owned utilities pay a 5 MW battery for capacity under the Value Stack, how that differs from solar and wind, and what the battery must do every summer to earn it. NYSEG's tariff is the worked example.

A Gaiergy Corp explainer · September 15, 2026 · Sources are cited under each item

Statewide load curve drawn as a mountain with one glowing peak hour, fed by solar, wind and a battery 1234
  • 1 Solar farm: paid on Alternative 1 or 2
  • 2 Wind farm: paid on Alternative 1 or 2
  • 3 Battery: must take Alternative 3
  • 4 The single peak hour of the year, the moment Alternative 3 measures
    • Goal. Explain in plain words how the Installed Capacity (ICAP) part of the New York Value Stack pays a 5 MW battery, why the battery gets a different rule from solar and wind, what the battery must do each summer so the payment is not zero, and whether the rate is set to rise in 2027. The rule is the same at every New York investor-owned utility. NYSEG is the worked example because that is where the Chatham and Copake sites sit.

    Takeaways

    What ICAP is, in plain words

    Applies to any generator or battery on the Value Stack tariff of any New York investor-owned utility, 5 MW AC or smaller: Con Edison, National Grid, NYSEG, RG&E, Central Hudson and Orange & Rockland. Each utility posts its own rates. The rule is the same.

    ICAP means Installed Capacity. It is a payment for being ready on the one busiest hour of the year. It is not a payment for energy. Big power plants and big batteries sell capacity to NYISO in an auction. A battery of 5 MW or less on the Value Stack does not go to that auction. The local utility pays it a capacity credit instead, and every New York investor-owned utility uses the same menu of three "Alternatives" to work out that credit. The PSC wrote the rule once, in the VDER proceeding, and each utility carries it in its own tariff. This page quotes NYSEG's tariff because the Chatham and Copake sites are in NYSEG territory.

    UtilityAlternative 3 rate todayStatement
    NYSEG (PSC No. 120)$6.57 per kW per month, Rest of State and Lower Hudson ValleyVDER-CRED statement, read 2026-09-15
    National Grid, Niagara Mohawk (PSC No. 220)$7.15 per kW per monthStatement No. 105, effective April 30, 2026, read 2026-09-15
    Con Edison (PSC No. 10)$5.82 per kW per month in New York City, $2.39 in WestchesterStatement No. 98, effective November 1, 2025, read 2026-09-15
    RG&E, Central Hudson, Orange & RocklandNot read for this pageEach posts its own VDER-CRED statement

    Source: NYSEG PSC No. 120, Rule 40.B.6.ii "Value Stack Capacity Component", Leaf 117.46.26.2.2 and 117.46.26.3.0, https://www.nyseg.com/documents/d/nyseg/psc120_section-40, read 2026-09-15. NYSERDA VDER FAQ, https://www.nyserda.ny.gov/All-Programs/NY-Sun/Contractors/Value-of-Distributed-Energy-Resources/Frequently-Asked-Questions, read 2026-09-15.

    Alt 1
    Every kWh, all year. Solar and wind only.
    Alt 2
    Every kWh, summer weekday afternoons only. Solar and wind only.
    Alt 3
    The kW exported in one hour, the statewide peak. Required for batteries.

    The tariff is direct about who gets which. Intermittent generation, meaning solar or wind, picks Alternative 1 or 2, and defaults to Alternative 1. Dispatchable generation, which the tariff defines as "all other electric generating equipment served under this Rule," must take Alternative 3. A standalone battery is dispatchable.

    Source: NYSEG PSC No. 120, Rule 40.B.6.ii.2, https://www.nyseg.com/documents/d/nyseg/psc120_section-40, read 2026-09-15. NYSERDA 2019 VDER order overview slide 11: "Standalone storage must take Alt 3", https://www.nyserda.ny.gov/-/media/Project/Nyserda/Files/Programs/NY-Sun/2019-04-25-Updated-VS-Order-Overview-Slides.pdf, read 2026-09-15.

    Alternative 1: solar and wind, every hour of the year

    The credit is a cents per kWh rate applied to every kWh the project exports, in every month.

    One unbroken ribbon of energy flows from the same solar array and wind turbines through spring, summer, autumn and winter 12345
    1. 1 Spring: the array and turbines export, the ribbon flows
    2. 2 Summer: same equipment, same ribbon
    3. 3 Autumn: same
    4. 4 Winter: same, even in snow
    5. 5 The ribbon never breaks and never changes width. Every kWh earns the same small credit

    NYSEG takes the NYISO monthly capacity auction price, adjusts it, and spreads it over the expected annual output of a solar profile. The result is a flat rate on every exported kWh. On the current NYSEG statement that rate is $0.02030 per kWh for Rest of State projects qualified after July 26, 2018.

    Source: NYSEG PSC No. 120, Rule 40.B.6.a "Alternative One", https://www.nyseg.com/documents/d/nyseg/psc120_section-40, read 2026-09-15. Rate: NYSEG VDER-CRED statement, Phase 2, "Alternative 1 ... ROS: $0.02030 / kWh ... All Exported kWh", https://www.nyseg.com/documents/40132/5890417/STAT+VDER+120_97.pdf/1a537816-85e3-82f3-ae45-de5d59ea589a?t=1756924068970, read 2026-09-15.

    Alternative 2: solar and wind, summer afternoons only

    The same capacity dollars, concentrated into about 240 summer weekday afternoon hours. Higher rate per kWh, zero outside the window.

    Only the summer segment of the year is lit; spring, autumn and winter are in shadow with no energy ribbon 12345
    1. 1 Spring: dark, no credit
    2. 2 Summer: lit, the ribbon flows and earns
    3. 3 The clock wedge: 2 pm to 7 pm, weekdays, June 24 to August 31
    4. 4 Autumn: dark, no credit
    5. 5 Winter: dark, no credit

    For projects qualified on or after July 27, 2018, NYSEG sums the 12 monthly NYISO capacity prices for the prior capacity year, adjusts them, and divides by the number of hours between Hour Beginning 2 pm and Hour Beginning 6 pm on non-holiday weekdays from June 24 to August 31. That is 240 or 245 hours. The rate per kWh applies only to exports in those hours. A solar project can choose Alt 2 because it produces in those hours anyway.

    Source: NYSEG PSC No. 120, Rule 40.B.6.b.ii "Alternative Two", https://www.nyseg.com/documents/d/nyseg/psc120_section-40, read 2026-09-15. NYSEG VDER-CRED statement, "Alternative 2 ... Only applicable to June, July, and August generation", https://www.nyseg.com/documents/40132/5890417/STAT+VDER+120_97.pdf/1a537816-85e3-82f3-ae45-de5d59ea589a?t=1756924068970, read 2026-09-15.

    Alternative 3: the battery, one hour

    The credit is a $/kW monthly rate multiplied by the kW the project exported during the previous calendar year's statewide peak. Paid every month of the following year. Same rule at every New York investor-owned utility; NYSEG wording shown.

    A battery container and a transformer on a plain; one beam from the battery strikes the single summit of the load curve mountain; an hourglass with one band of sand floats beside it 12345
    1. 1 The battery: 5 MW, on the Value Stack
    2. 2 The pad-mount transformer, its connection to the NYSEG grid
    3. 3 The one beam that counts: full export striking the exact summit, the statewide peak hour
    4. 4 One band of sand: one hour sets 12 months of credits
    5. 5 The rest of the year: unlit, earns nothing under Alt 3

    This is the sentence that governs the battery:

    "Alternative Three: shall be equivalent to the customer-generator's service classification capacity cost and shall be calculated by multiplying the customer-generator's net energy export during the New York Control Area peak of the previous calendar year by the customer's capacity component based on their Facility's net export generation."

    Source: NYSEG PSC No. 120, Rule 40.B.6.c "Alternative Three", Leaf 117.46.26.3.0, Revision 1, effective July 1, 2023, https://www.nyseg.com/documents/d/nyseg/psc120_section-40, read 2026-09-15 (local copy: Sources/NYSEG_PSC120_Section_40_Rule40_ValueStack.pdf, page 9). NYSEG VDER-CRED statement, Phase 2: "Alternative 3 ... ROS: $6.57 / Capacity kw ... Based on kW coincident with NYISO Peak Hour", https://www.nyseg.com/documents/40132/5890417/STAT+VDER+120_97.pdf/1a537816-85e3-82f3-ae45-de5d59ea589a?t=1756924068970, read 2026-09-15. NYSERDA FAQ: "Alternative 3 - paid out according to each kWh injected into the grid during the single peak hour of the year", https://www.nyserda.ny.gov/All-Programs/NY-Sun/Contractors/Value-of-Distributed-Energy-Resources/Frequently-Asked-Questions, read 2026-09-15.

    The state's reason for this rule is in the PSC record. The Joint Utilities wrote that the capacity credit "is meant to compensate DER for injections that offset demand at the single hour of the year that determines the amount of capacity that each entity must" procure. That single hour is the same hour that sets every utility's capacity obligation. So a battery that is exporting in that hour truly lowers what NYSEG has to buy.

    Source: PSC Case 15-E-0751, Order Regarding Value Stack Compensation (April 18, 2019), Appendix D, Joint Utilities comments, p. 33, https://www.nyserda.ny.gov/-/media/Project/Nyserda/Files/Programs/NY-Sun/Updated-Value-Stack-Order-2019-04-18.pdf, read 2026-09-15.

    One hour or one day? Both readings, side by side

    Jason's operating view and the tariff wording, next to each other. They lead to the same summer plan.

    What the tariff and NYSEG say

    The measurement is the kW exported during the statewide peak hour. Not the peak day. NYSEG's own credit statement labels the Alt 3 rate "Based on kW coincident with NYISO Peak Hour." NYSERDA's FAQ says "the single peak hour of the year." A market operator that runs Alt 3 dispatch for New York batteries describes it as "the single hour of the NYCA's actual peak load."

    The hour is confirmed only after the fact. NYISO posts it in late August.

    Source: NYSEG VDER-CRED statement, link; NYSERDA FAQ, link; SYSO Technologies, June 16, 2026, link. All read 2026-09-15.

    Jason's operating view

    The state wants generators that show up when demand is highest. A battery proves that by pushing its full power on the day demand peaks. Nobody can predict the exact hour unless they see the whole state at once. So the battery does not try. It pushes full 5 MW across the whole afternoon window on every day that could be the peak day, June through August.

    Under the tariff wording, this works for one reason: the peak hour sits inside that window. Cover the window on every candidate day and the one hour that counts is covered too. The plan is the same either way. The difference is only what the meter reader looks at afterward.

    Where the peak hour has actually landed

    Statewide (NYCA) summer coincident peak, 2022 to 2025, as posted by NYISO. Hour Beginning (HB) 17 means 5 pm to 6 pm.

    YearPeak datePeak hourLoadSource
    2022Wed, July 20HB 17 (5 to 6 pm)30,505 MWNYISO 2022 Peak Dates & Times
    2023Fri, July 28HB 17 (5 to 6 pm)28,735 MWNYISO 2023 Peak Dates & Times V2
    2024Mon, July 8HB 17 (5 to 6 pm)28,990 MWNYISO 2025 Final ICAP Forecast, Dec 20 2024
    2025Tue, June 24HB 18 (6 to 7 pm)31,857 MWNYISO Summer 2025 Hot Weather Operations, NYSRC Nov 14 2025

    Source: All four documents read 2026-09-15. NYISO notes in the 2022 and 2023 documents: "The ICAP market peak hour is constrained to July and August non-holiday weekdays."

    Battery window 3 pm to 7 pm 1 pm 2 pm 3 pm 4 pm 5 pm 6 pm 7 pm 8 pm 2022 Jul 20 30,505 MW 2023 Jul 28 28,735 MW 2024 Jul 8 28,990 MW 2025 Jun 24 31,857 MW

    Four years, four peaks, all between 5 pm and 7 pm. A battery pushing full power from 3 pm to 7 pm would have covered every one. NYISO reports that behind-the-meter solar "has shifted the measured net peak load hour two hours later (from HB16 to HB18)." The window should not end early.

    Source: NYISO Summer 2025 Hot Weather Operating Conditions, NYSRC attachment 7.3.3, Nov 14 2025, https://www.nysrc.org/wp-content/uploads/2025/11/7.3.3-Summer-2025-NYISO-Hot-Weather-Operating-Conditions-EC-Nov-14-Attachment-7.3.3.pdf, read 2026-09-15.

    The 2025 peak day, hour by hour

    Measured statewide load on June 24, 2025, from NYISO's public real-time load file, summed across all 11 zones and averaged per hour. The cyan block is the battery's 4 hour full-power push.

    20,000 22,000 24,000 26,000 28,000 30,000 32,000 Peak hour 6 to 7 pm: hourly average 31,835 MW, NYISO integrated peak 31,857 MW 12 am 2 am 4 am 6 am 8 am 10 am 12 pm 2 pm 4 pm 6 pm 8 pm 10 pm Hour of day, June 24, 2025 (statewide load, MW, hourly average of 5 minute readings)

    Battery pushes full 5 MW, 3 pm to 7 pm (4 hours)    NYSEG DRV window, 2 pm to 7 pm

    Source: NYISO real-time actual load, file 20250624pal.csv inside http://mis.nyiso.com/public/csv/pal/20250601pal_csv.zip, downloaded 2026-09-15; hourly averages computed by Gaiergy. NYISO reported the integrated peak for that day as 31,857 MW at HB 18 (source above). The DRV window is from the NYSEG VDER-CRED statement, "Hour Beginning 2:00 pm through Hour Beginning 6:00 pm non holiday weekdays", link.

    Note the shape. Load is still above 31,000 MW at 7 to 8 pm. The 3 pm to 7 pm block catches the peak hour with one hour to spare on each side of the 2022 to 2024 pattern. A 2 hour battery would have to pick 5 pm to 7 pm and would have missed nothing in these four years, but it has no margin.

    The summer plan: fire on every hot afternoon

    The battery cannot know which afternoon holds the peak hour. So it treats every candidate day the same.

    A row of twelve hills under twelve suns, one battery at the base of each, every battery sending up the same beam; one hill is taller with the brightest sun 12345
    1. 1 The same 5 MW battery, every day
    2. 2 The same full-power beam, every day, 3 pm to 7 pm
    3. 3 One of those days is the true peak day. It looks like the others from the ground
    4. 4 Its sun burns brightest: the statewide peak hour is in that afternoon
    5. 5 The other hot days: the battery still fires, and earns energy and DRV credits while it does
    June July August

    Cyan = 2025 days over 30,000 MW (June 23, 24, 25 and July 29). Gray = weekends. Purple = other weekdays.

    Source: Days over 30,000 MW and the note "10 days with NYCA peak demands above 28,000 MW (all in June and July)": NYISO Summer 2025 Hot Weather Operating Conditions, https://www.nysrc.org/wp-content/uploads/2025/11/7.3.3-Summer-2025-NYISO-Hot-Weather-Operating-Conditions-EC-Nov-14-Attachment-7.3.3.pdf, read 2026-09-15.

    How to pick the candidate days

    What the hour is worth

    5 MW battery, Rest of State, at the Alternative 3 rate on the current NYSEG statement. Twelve monthly credits, one per block.

    Full 5 MW exported in the peak hour $32,850 per month x 12 = $394,200 per year 2.5 MW exported (half charged, or half power) $16,425 per month x 12 = $197,100 per year 0 MW exported (charging, idle, or offline) $0 per month x 12 = $0 per year

    Each block is one monthly credit at $6.57 per kW (NYSEG VDER-CRED statement, Phase 2, Rest of State, read 2026-09-15). ESTIMATE: the rate is refiled by NYSEG and changes.

    Full export in the one hour is worth about $394,000 over the following year. Half export is half that. Zero export is zero for the whole year. There is no partial credit for the other 8,759 hours. That is why the summer plan above matters more than any other single operating decision.

    Source: NYSEG VDER-CRED statement, Phase 2, "Alternative 3 ... ROS: $6.57 / Capacity kw", https://www.nyseg.com/documents/40132/5890417/STAT+VDER+120_97.pdf/1a537816-85e3-82f3-ae45-de5d59ea589a?t=1756924068970, read 2026-09-15. The statement says the rate "Will be filed on one days notice," so it changes over the year. The $394,200 figure is an ESTIMATE that holds the current rate flat for 12 months.

    Will the Alternative 3 rate go up in 2027?

    The Alternative 3 rate follows the NYISO monthly capacity auction price for the zone. So the question is whether upstate NYISO capacity prices rise in the 2027-28 capability year, which starts May 1, 2027. Nobody has published a confirmed 2027 number. The signals below are what exists, with who said each.

    Source: Potomac Economics, 2025 State of the Market Report for the NYISO Markets, May 19, 2026, https://www.potomaceconomics.com/wp-content/uploads/2026/05/NYISO-2025-SOM-Report__5-19-2026-final.pdf, read 2026-09-15 (local copy in Sources). Modo Energy, "Capacity prices in New York City hit a record $32.6/kW-month for summer 2026," June 25, 2026, https://modoenergy.com/research/en/nyiso-capacity-prices-record-summer-2026, and "NYISO in May 2026," June 9, 2026, https://modoenergy.com/research/en/nyiso-bess-may-2026-reference-price, read 2026-09-15. NYISO, Demand Curve Model CY 2026-2027 (final for filing affidavit), https://www.nyiso.com/documents/d/guest/demand-curve-model-cy-2026-2027-final-for-filing-affidavit, read 2026-09-15. NYISO for NYSRC ICS, 2027-2028 IRM PBC Tan45 and LCR Results (Revised), August 5, 2026, https://www.nysrc.org/wp-content/uploads/2026/08/2027-2028-IRM-PBC-Tan45-LCR-Results-presentation-Revised.pdf; 2027-2028 IRM FBC Parametric Results as of August 24, 2026, https://www.nysrc.org/wp-content/uploads/2026/08/2027-2028-IRM-FBC-Parametric-Results.pdf, read 2026-09-15. DPS Staff Proposal on Updating DRV and LSRV, Cases 15-E-0751 and 19-E-0283, December 11, 2025, Tables B-1 and B-2, https://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId=%7B80570F9B-0000-CF28-A6B7-644C6FA478D9%7D, read 2026-09-15.

    Two more items shape 2027 but do not carry a number yet. NYISO filed "Winter Reliability Capacity Enhancements" at FERC on February 18, 2026, with seasonal statewide capacity requirements that NYISO "will first utilize" in the 2027-2028 capability year. And Luminary Energy's read of the 2026 Gold Book: "Capacity prices are likely to stay elevated, particularly in Zones J and K, for as long as the system depends on retained units." Zones J and K are New York City and Long Island, not upstate.

    Source: NYISO FERC filing letter, Winter Reliability Capacity Enhancements, February 18, 2026, pp. 1 and 2, https://nyisoviewer.etariff.biz/viewerdoclibrary/Filing/Filing5402/Attachments/20260218_NYISOFlngLtr_WRCE.pdf, read 2026-09-15 (local copy in Sources). Luminary Energy, "2026 NYISO Gold Book: tighter margins," May 7, 2026, https://www.luminary.energy/articles/2026-nyiso-gold-book-tighter-margins-as-the-system-leans-on-retained-retirements/, read 2026-09-15.

    What this means for the battery. The 2027 Alternative 3 credit is set by the export in the 2026 statewide peak hour, times the monthly rate that NYSEG posts through 2027. The 2026 peak hour has already happened or is about to. The rate is the part still moving. If the reserve margin lands near 30% and upstate supply does not grow, the monthly rate should sit above the 2026 rate. That is a Gaiergy ESTIMATE, not a published forecast.

    Open items, marked UNCONFIRMED

    • UNCONFIRMED Which hour NYSEG used for 2025. The tariff says "New York Control Area peak of the previous calendar year." NYISO's posted "ICAP market peak hour" is limited to July and August non-holiday weekdays, which would exclude June 24, 2025. If NYSEG follows the NYISO ICAP definition, the 2025 measuring hour would be the July 29, 2025 peak instead. Either way the summer plan covers both.
    • UNCONFIRMED The first year for a new battery. A project that was not online during the previous year's peak hour has no export to measure. How NYSEG credits that first year is not stated in the tariff text read for this page.
    • UNCONFIRMED Which NYISO price NYSEG multiplies by. The tariff sentence says "the customer's capacity component." The credit statement shows that as $6.57 per kW for Rest of State today. Whether that figure is the monthly NYISO spot auction price with adjustments, or a 12 month average, is not spelled out on the leaf. The dollar figures on this page hold the posted $6.57 flat.

    Details and sources

    Glossary

    Source list

    Artwork: editorial illustrations generated on kie.ai (Seedream 5 Pro and Nano Banana 2) on 2026-09-15 for Gaiergy Corp. They are illustrations, not engineering drawings.