The following environment variable settings have proven valuable.
Implement these as appropriate for your platform. What is shown here is Linux Bash syntax.
The -Xms2m increases the stack size - the scala compiler is highly recursive and uses deeper stacks than conventional Java programs generally use.
The -Xmx10G allows the JVM to use as much as 10 Gig of RAM - adjust this depending on your RAM size. 5Gig is probably minimum (as of release 2.0.0 of Daffodil)
The JAVA_OPTS, SBT_OPTS, and DAFFODIL_JAVA_OPTS respectively set these flags for the java command, the sbt command, and the daffodil command (aka daffodil CLI).