Electric utilities and regulators accelerate pilot projects to boost innovation speed

A recent study by the U.S. Department of Energy shows that electric companies can simplify the process for innovative applications through smarter pilot program design to address challenges such as load growth and affordability.

A June report on pilot program design from Lawrence Berkeley National Laboratory (LBNL) found that current pilots are often duplicative, lack conclusive results, and lack a clear path to scale.

The report states: "Safety is the top priority for electric companies, so they are cautious about new technologies or methods, but it is crucial that electric companies can quickly test good ideas."

Facing growing electricity demand, especially from data centers, some electric companies have begun to accelerate their actions to address the risk that new generation and storage may not be able to keep up in time.

A data center load flexibility demonstration conducted by Salt River Project on May 3 using Emerald AI software has led to a scaled deployment announced in the PJM Interconnection. Many electric companies are seeking ways to achieve this level of innovation speed.

Chanel Parson, Director of Clean Energy and Demand Response at Southern California Edison, said: "It is more important now than ever to rapidly scale innovative projects and pilots because customer adoption, expectations, and technology are developing at an exponential rate." She added that the faster electric companies scale solutions, "the better they can keep up."

The LBNL study found that electric companies are working with regulators to find pilot designs that accelerate innovation.

To address the rapidly growing electric vehicle penetration rate, Pacific Gas and Electric launched a controlled charging program for 1,000 customers in January, which is nearing its next phase, said Marina Donovan, Vice President of Global Marketing at smart meter provider Itron. "This shows that electric companies want to move at this pace," she said.

The LBNL report states that streamlined pilot design frameworks, often called "regulatory sandboxes," can support innovation speed. These frameworks have validated new value propositions as well as implementation, operation, planning, and investment approaches.

Barriers include financial and regulatory disincentives

Pilots are key to innovation, but according to another LBNL analysis from 2022, electric companies tend to underinvest in new technologies and methods compared to more innovative industries.

Some electric companies have achieved success in gradually scaling up pilots.

Kristin Carlson, spokesperson for Vermont investor-owned electric company Green Mountain Power, said the company's pilots "laid the foundation for where we are now." She added that during a peak period in June 2025, Green Mountain Power's distributed storage virtual power plant (VPP) program "saved customers approximately $3 million in one hour."

But like the company's VPP program, most traditional pilots grow slowly. Carlson said the program began with 20 customers in 2017 and now has 5,035 participants, providing over 75 megawatts of dispatchable peak resources.

Jeff Monford, spokesperson for Southern California Edison, said the company has also been cultivating its VPP innovation. Its 5-megawatt Power Flex solar-plus-storage VPP pilot launched with Sunrun in 2020 now has multiple suppliers, a capacity of 25 megawatts, and plans for continued growth after 2027.

The LBNL analysis found that financial disincentives for electric companies are a key barrier to accelerating innovative pilot programs.

LBNL analysts said that to obtain approval for cost recovery of investments, electric companies must demonstrate to regulators that their proposed technologies will benefit customers. This hinders electric companies' pilot investments in unproven tools and methods and biases them toward "the status quo that has historically provided them with a stable business environment."

Analysts also noted that traditional pilot frameworks often fail to clearly define pilot parameters, leading to misleading metrics, biased or uncertain results, duplication, participant disputes, approval and implementation delays, and critically, pilots lacking a clear path to scale.

Anne Hoskins, an executive at Generac Power Systems and former commissioner of the Maryland Public Service Commission, said these challenges can be overcome through better policies. For example, pilot frameworks could include cost limits, timelines, experience-sharing requirements, and clear next steps for completed projects.

She said: "Regulators can create 'sandbox' frameworks to quickly approve innovative pilot projects that meet guidelines." She added that this could be a low-cost pathway for testing new technologies, tools, or methods.

Piloting large load flexibility

A key innovation emerging in recent pilots is data center flexibility. Although this concept is still relatively new, it has been embraced by Energy Secretary Chris Wright, who has called on federal regulators to simplify interconnection approvals for flexible data centers.

Salt River Project collaborated with participants in the Electric Power Research Institute (EPRI) DCFlex program in May, becoming one of the key public demonstrations of data center flexibility potential.

Anuja Ratnayake, Executive Director of Emerging Technologies at EPRI, said that as the first in a series of demonstrations in the program, it shows that data center flexibility is achievable without compromising the value proposition of participating data centers.

Unlike the rigorous, repeatable pilot process described by LBNL, the demonstration in Arizona using Emerald AI software was "a specific controlled test," Ratnayake said. It set predetermined conditions and plans to test the software in live operations by mid-2026.

The fourth demonstration of Emerald AI is planned for mid-2026 at the 96-megawatt Aurora AI facility in Virginia on the PJM system, and will be conducted under full-scale, real-time, real-world conditions, Ratnayake said. This will show how much flexibility the software can provide at scale.

Varun Sivaram, CEO of Emerald AI, said AI companies lack patience because the speed of data center interconnection will determine when general artificial intelligence can be developed.

But according to the November PJM market monitoring report, the certainty of data center flexibility must be proven before the system operator will accept it as a solution for faster interconnection of large loads. The report questioned the viability of flexibility as a feasible solution for the nation's largest grid operator.

Sivaram said Emerald AI's streamlined four-step demonstration process, with progressively escalating challenges, is designed to give electric companies confidence to connect flexible data centers faster. He expressed confidence that once flexibility is successfully demonstrated at scale, "this cautious, careful industry will open the floodgates and move faster."

"I want to see utilities use our sandbox"

State regulators and regulated electric companies are also working to achieve innovation speed through pilots, but with mixed results. Researchers and stakeholders say that if policymakers set clear goals and remove regulatory barriers, innovation can be achieved faster.

The LBNL report states that policy directives and vision statements can identify a goal "around which stakeholders can unite and work toward." It pointed to examples such as New Jersey's Energy Master Plan, Hawaii's 2014 "Commission Inclination Regarding the Future of Hawaii's Electric Companies" and its 2024 follow-up document, and the District of Columbia's PowerPath DC, all of which have driven "ambitious energy goals."

To further advance the pace of innovation, Hawaii's commission's 2020 innovation pilot framework streamlined pilot implementation, LBNL said. Specifically, it limited regulatory review to 45 days and reduced uncertainty around cost recovery.

In 2019, as Green Mountain Power's distributed storage program grew, the Vermont Public Utility Commission ordered a multi-year regulatory plan that included an innovation pilot project framework, enabling the electric company to scale multiple pilots.

VPUC Commissioner Riley Allen said two important features of the plan are the requirement for advance notice to stakeholders and limiting cost growth to 2%.

Allen said: "Electric companies are reluctant to deviate from known frameworks, but the industry needs to address emerging factors such as growing electricity demand." The sandbox concept "creates space in the regulatory process to do good things."

Michigan's 2019 Power Grid program includes a 90-day pilot approval process and incentives for electric companies to collaborate with stakeholders, LBNL said. But according to the Michigan pilot database, pilots under this program "have not yet advanced to full-scale projects," researchers added.

Michigan Public Service Commissioner Katherine Peretick said progress is still being made through slower general rate cases. "I want to see utilities use our sandbox," she said, adding that "growing electricity demand may make electric companies more interested in leveraging its rapid pilot framework."

LBNL said two other models—New York's "Reforming the Energy Vision" and Oregon's "Smart Grid Testbed" program—also represent significant efforts at sandbox frameworks.

Randomized controlled trials (RCTs) are another method for innovation speed outside the sandbox, advocated by Renew Home, an aggregator of customer-owned devices. Renew Home CEO Ben Brown said RCT data can approximate the value brought by customers' smart devices, bypassing the pilot process entirely.

The Connecticut model

Connecticut's "Innovation Energy Solutions" (IES) sandbox framework is gaining attention as a potential model, as it prepares to evaluate its first completed round of pilots.

LBNL said that in 2023, the Connecticut Public Utilities Regulatory Authority (PURA) launched its first round of pilots, and a new round will be launched each year thereafter. The framework requires four phases: proposal, selection, deployment, and final evaluation.

The LBNL paper said that to reduce deployment barriers and promote collaboration, IES allows pilots to be led by vendors, electric companies, or electric company-vendor partnerships.

Former PURA Chair Marissa Paslick Gillett, who oversaw the design, said IES aims to overcome regulatory barriers and provide regulatory certainty to "bring results" to the pilot process. It also provides an "innovative regulatory environment."

Gillett said: "A 'fail fast' mindset is built into the process, and milestones must be met to receive continued funding." She added that scaling has not yet been clearly defined, but Connecticut has legislation allowing PURA to compel electric companies to scale up pilot projects that have proven viable in the regulatory process.

"Regulatory sandboxes accelerate innovation within existing regulatory frameworks, and the IES program is one of the best examples," said Matt McDonnell, co-founding partner of regulatory consulting firm Current Energy Group and independent administrator of the Connecticut program.

McDonnell said IES shortens the time for a typical pilot from at least four years to two years. All three participation pathways include ratepayer protections, he added.

Piclo's grid flexibility marketplace recently completed its first IES cycle in partnership with Eversource Energy and United Illuminating. In the final report, both electric companies and Piclo agreed that the market launched faster than expected and attracted more flexibility providers than expected.

"But the most important part of building a market is continuity," said James Johnston, CEO of Piclo. "If there is a second year and the prospect of a five-year revenue opportunity, participants will grow."

However, Connecticut's electric companies are not convinced. Eversource Energy reported that the Piclo pilot fell short in provider participation, location specificity, cost efficiency, and operations.

Due to a lack of system infrastructure for visualizing and controlling customer-owned resources, Piclo's market is premature for Connecticut, both Eversource and United Illuminating concluded. United Illuminating said Piclo's solution "may be viable as market conditions and grid needs evolve."

Former PURA Chair Gillett said concerns about load growth, reliability, and affordability make better use of the grid important.

McDonnell said: "The IES framework gives PURA commissioners final decision-making authority over pilots in the sandbox within two years." He added that its rulings on Piclo and other projects in each round "will provide guidance on how to resolve such disagreements between electric companies and vendor participants."

The IES administrator's final report is due December 15. The commission has stated its commitment to issuing a final ruling as soon as possible.