Mixing a third compound into the active layer of an organic bulk heterojunction solar cell to form a ternary system has become an established way to improve performance. Various models, based on different assumptions regarding the active layer morphology and the energetics, have been proposed but there is neither consensus on the applicability of the various assumptions to different experimental systems, nor on the actual device physics of these, mostly qualitative, models. Kinetic Monte Carlo simulations are used to investigate the role of morphology and relative energy levels of the constituent materials. By comparing with experimental current–voltage characteristics, a consistent picture arises when the (minority) third compound is predominantly incorporated between the other (majority) compounds and has energy levels that are intermediate to those of the binary host. Even if morphologically imperfect, the resulting energy cascade promotes charge separation and reduces recombination, leading to higher fill factors and short‐circuit current densities. The open‐circuit voltage sits between that of the binary extremes, in agreement with data from an extensive literature review. This leads to selection criteria for third compounds in terms of energetics and miscibility that promote the formation of a cascade morphology in real and energy space.