Pay-for-Performance Flexibility: Can Utilities Calculate at Scale?

Enrolling 10,000 devices in a flexibility programme is one challenge. Calculating what each device actually delivered, what it should be paid and whether the programme remains profitable is another.

As demand response and virtual power plants (VPPs) evolve, flexibility programmes are increasingly moving beyond participation-based incentives towards compensation linked to measured performance.

For utilities, this creates a new challenge: turning flexibility events into accurate, auditable financial outcomes at scale.

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From participation to measured performance

Recent developments in Nevada illustrate this shift. On 11 August 2026, Nevada regulators approved two new grid services riders for NV Energy, introducing performance-based compensation for distributed energy resources: energy delivered during events is paid at hourly market prices, while load reduction is valued on avoided generation and transmission costs.

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The riders replace a narrower demand response framework that had been in place for 15 years. Rather than rewarding customers simply for participating, these programmes link compensation to their measured contribution during grid events. The development raises an important operational question: how do utilities consistently measure, value and compensate for flexibility across thousands of participating assets?

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Why flexibility becomes a calculation challenge

Three concepts are central to pay-for-performance programmes:

• Baseline: an estimate of what a customer or asset would have consumed or produced without a flexibility event.
• Rating: applying pricing rules to determine the financial value of measured performance.
• Settlement: determining the final amount to be credited or paid.

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The exact methodology varies between programmes, but the underlying challenge remains the same. A pilot with ten participants is relatively straightforward to manage. A programme involving 10,000 devices, each with different consumption patterns, performance measurements and compensation rules, multiplies the work by a thousand.

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Consider a single four-hour event: that is 16 quarter-hours per device. For 10,000 devices, it means 160,000 baseline values per event. Over a season of 50 events, it adds up to 8 million calculations, before any corrections. Traditional billing systems were primarily designed for established billing cycles and consumption-based calculations. Flexibility introduces more granular, event-driven requirements. Meter data also arrives late or is corrected, which means recalculating while keeping every version, so that each payment can be traced back to the data and rules behind it.

And as participation grows, the ability to calculate accurately and efficiently becomes just as important as the ability to activate flexibility.

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A broader shift across energy markets

Nevada is not alone. In California, SB 905 and SB 913 were signed into law in September 2026, supporting greater integration of distributed energy resources into electricity systems. SB 913 explicitly requires compensating customers for energy exported to the grid during peak events.

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While these developments address different aspects of flexibility, they point towards a broader trend: distributed flexibility is becoming an increasingly important commercial and operational resource. Europe is moving the same way, with explicit flexibility, local flexibility markets and energy sharing, all valued per quarter-hour. For utilities, the question is whether their existing systems can keep pace.

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Three questions utilities should ask before scaling

1. Can we reliably calculate what was delivered?

Whether compensation is based on a baseline or another performance methodology, utilities need accurate, auditable calculations across participating assets, including when meter data is corrected after the event.

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2. Can we understand the financial impact of each event?

Measuring delivered flexibility is only part of the equation. Utilities also need visibility into compensation, programme costs and margins.

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3. Can our pricing rules evolve without a major IT project?

Regulations, tariffs and commercial models will continue to change. Utilities need the flexibility to adapt pricing and calculation logic to their own programmes without rebuilding their existing systems.

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Where Verity fits in

Flexibility platforms help coordinate assets and activate flexibility when needed. But activating flexibility and calculating its commercial value are two different challenges. Verity provides a cloud-native rating and insights engine that works alongside existing ERP and CIS systems. It calculates baselines, rates measured performance and prepares settlement results per quarter-hour, at any scale.

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When meter data arrives late or is corrected, Verity recalculates and keeps every version, so every payment remains auditable. By enabling granular pricing calculations, tariff simulations and visibility into financial outcomes, Verity helps utilities manage increasingly complex commercial models without replacing their core infrastructure. As flexibility programmes scale, these capabilities become essential to translating measured performance into reliable financial information.

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Sources: Utility Dive, Nevada performance-based DER tariffs (August 2026); pv magazine USA, How California’s latest climate and energy bills reshape the grid (October 2026); European Commission, EU day-ahead electricity trading becomes more dynamic (October 2025)

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