(if they choose to do so). As described above, states in restructured regions have chosen to rely on wholesale electricity market structures that allow private investors to dictate the ultimate resource mix in response to price signals reflecting supply and demand conditions in the wholesale markets. Some states have expressed preferences for zero emission resources by providing local state incentives.¹ The federal regulator Federal Energy Regulatory Commission (FERC) is generally resource-neutral and does not have jurisdiction to plan the resource mix. Therefore, by implication, the independent system operators (ISOs) and regional transmission organizations (RTOs) are not able to plan the resource mix and instead rely on a variety of resource adequacy mechanisms to ensure that grid reliability standards are met (CAISO 2021; ERCOT 2023; ISO-NE 2025; NYISO 2025). This raises a challenge with respect to providing long-term investment stability to manufacturers of certain key technologies and components—such as those pertaining to transformers, energy storage, and grid communications—because they will be subject to market risk and will have to make their own forecasts regarding future demand. A state of uncertainty as to demand or market support for these products may lead to under-investment to achieve strategic state level or federal level goals.

Internationally, there are examples of intentional planning for the electricity system that are worth highlighting as potential reference points. In Australia, the Australian Energy Market Operator (AEMO) uses its Integrated System Plan (ISP) as a roadmap for the National Electricity Market (NEM) power system over at least the next 20 years. Australia’s National Electricity Rules require AEMO to produce an ISP every 2 years. A key requirement of the ISP is an Optimal Development Path (ODP), which outlines the mix of generation, storage, and network investments required to meet both consumer needs and government energy and emissions targets. The ODP assesses options available and identifies the lowest cost, resilient, pragmatic path to the NEM’s energy future of net zero by 2050, including innovative electricity system technologies and capabilities. The ISP is used by governments and industry to inform policy and investment in energy infrastructure (AEMO 2025). In the United Kingdom, the energy regulator Ofgem sets price controls for companies operating the nation’s gas and electricity networks using the RIIO framework (Revenue = Incentives + Innovation + Outputs) (Ofgem 2018). RIIO framework price controls support energy network companies in treating customers fairly, improving their service, and movement toward to low-carbon energy sources. The RIIO framework also lets energy network companies access or compete for funds to support innovation projects, advancing electricity RD&D.²

Singapore experiences different challenges on its electricity system than the United States and Europe. The top challenges for Singapore’s electric grid are not feed-in-tariffs, microgrids, natural disasters, or transmission over hundreds of miles; rather, Singapore faces challenges deploying and integrating renewables, managing a transition to electric mobility, and ensuring operational stability and reliability. The drivers of Singapore’s Smart Grid 2.0 strategy are decarbonization, decentralization, and digitalization;

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¹ As of January 2026, the Database of State Incentives for Renewables & Efficiency® (DSIRE) features 384 state-administered financial incentive programs applicable to renewable energy technologies, including solar, wind, energy storage, biomass, fuel cells, geothermal, hydroelectricity, and ocean energy (NC Clean Energy Technology Center 2026).

² RIIO price controls are set in 5-year increments and cover gas and electricity transmission, gas distribution, and electricity distribution. The first set of RIIO price controls, RIIO-1, ran from 2013 to 2023. The current set of price controls, RIIO-2, includes RIIO-T2, RIIO-GD2, and RIIO-ED2. RIIO-T2 is the price control for the electricity transmission and gas transmission networks and runs from 2021 to 2026. RIIO-GD2 is the price control for the gas distribution network and runs from 2021 to 2026. RIIO-ED2 is the price control for the electricity distribution network and runs from 2023 to 2028. The future price control period (RIIO-3) for gas and electricity transmission and gas distribution will run from 2026 to 2031. For electricity distribution, RIIO-3 will run from 2028 to 2033.

objectives include sustainable growth while maintaining energy security and affordability (SPECS n.d.). Singapore’s Smart Grid 2.0 strategy is intentionally flexible but focused on the distribution network and challenges unique to a densely populated metropolitan city-state in the tropics (cooling load, heavy industry). Its priorities include clean energy generation, energy efficiency, and grid resilience. Innovations that would support these priorities include power generation from natural gas and hydrogen, deployment of solar and storage, building and industrial energy efficiency, transportation electrification, digital technologies, artificial intelligence (AI), and data analytics.

In addition to the above international examples, there are also examples of U.S. state-led integrated resource planning, whereby the state authorities and local utilities work together to plan both the resource mix and the transmission system. These examples include Georgia (commitments to nuclear power and gas; Georgia Power 2025) and Minnesota (commitments to renewables, storage, and gas; MN PUC 2025). Other states have chosen to restructure the electric industry and rely on wholesale electricity markets and competition to drive investment in the most efficient resources, with some states choosing to “steer” the market by creating investment incentives for favored resources. These examples include Texas, New York, California, and the New England region (New York State Energy Planning Board 2025). Other regions of the country such as the Southwest Power Pool and the Midcontinent Independent System Operator rely on a hybrid where individual states and their utilities develop local integrated resource plans that drive market entry (Ehrendreich 2020; MPSC 2017; SPP 2025).

States are able to make long-term commitments to resource developers and infrastructure investors, except in smaller regions like New England where they typically do not plan on a collective basis. This leaves the federal government as the backstop for ensuring investments in strategic grid technologies or components, either through congressional action or through DOE. DOE has a long history of supporting RD&D efforts and more recently investments in domestic manufacturing capabilities. Given the current global supply chains and the massive demand from data centers and electrification initiatives, policymakers, regulators, and researchers have raised the question of whether current planning structures are sufficient. This question is difficult to answer with certainty because government interventions inevitably create potential tradeoffs and potential efficiencies, particularly because policies can vary greatly from one election cycle to the next. This Issue Paper sketches out the possibilities and tradeoffs of government support in RD&D.

Innovation from the Technology Sector and Large Loads

To advance well-supported RD&D efforts for the electricity system, it is essential to understand the breadth of institutions and industries that produce innovations for the grid. This section begins with an overview of the structure of actors influencing innovation in the system. Once defined, specific sectoral categories where innovation is entering the electricity system are described: data centers and large loads, opportunities for co-location and load flexibility, transmission system planning and interconnections, grid hardware components, and decision-support and energy management tools (including AI).

Innovation in the electricity sector is typically bifurcated between power system owners and power users, with the relationships between parts of this system shown in Figure 1. Owners of power system assets

approach the system with the intention of generating electricity and/or extending the useful life of existing system resources to meet demand. Their primary motivation is to increase revenues and manage competition (ICF 2020; Monast et al. 2019). On the other hand, typical power system users are motivated to lower costs of power consumption (Brennan et al. 1997; NASEM 2023). At a basic level, expected cost savings enabled by adopting innovation at the user level must exceed a certain threshold for them to invest in the technology or approach.

Innovations in the electricity system used to come from a relatively small number of sectors but are now increasingly coming from a range of sectors, notably including software (Rai 2025). In addition to products from the software sector influencing how the electricity system operates, the inputs to this sector (e.g., data centers for computing) also impact demands on the grid. These are prime, though not the only, examples of the changing locus of electricity RD&D (the software sector is more integral now) and the broadening of the set of relevant actors (technology majors).

At the time of writing, data centers constitute the majority of large loads seeking to connect to the grid in certain regions; as a result many utilities are now seeking tailored rate designs and/or interconnection tariffs for these large loads (Frick and Lam 2025; Quint et al. 2025; Satchwell et al. 2024; Wilson and Zimmerman

2023). The size of these loads and the speed at which data center developers and users are seeking to add these to the system have been part of a prompt for utilities and grid operators to reexamine their processes for interconnection (Agrawal 2025). These dynamics are an example of innovation from an outside sector (e.g., AI and its computing and data center needs) now prompting actors in the electricity system to pursue innovative approaches to reforming the interconnection queue and related study processes, as well as regulatory and pricing innovations pertaining to large loads.

One innovative approach to meeting the power demanded by data centers and other large loads is co-location. Co-locating generation with demand was noted in the Secretary of Energy’s letter to FERC directing the commission to initiate rulemaking on large loads (Wright 2025), with co-location offering one potential means for meeting the timing and load demanded by data centers (Lew 2025). One prominent example of such an effort at the time of writing is an announced project between Google and Interest Power to co-locate renewable energy generation and storage with data centers (Howland 2024). DOE also announced projects leveraging siting on DOE lands to develop AI infrastructure along with energy infrastructure (DOE 2025b). While multiple efforts to co-site generation with load are being explored outside of the traditional monopoly utility setting, innovation efforts in this space will likely influence practices for large loads in monopoly utility, vertically integrated, and other settings. While there is overlap between these operational environments, cross-learning is often insufficient and slow, and there is not currently a broad understanding of which innovative approaches show promise in this space and which do not. Thus, it would be important to facilitate knowledge-sharing and cross-learning opportunities in this space.

Innovative efforts are also being explored to leverage load flexibility from data centers (Silverman 2025) with curtailment-enabled headroom providing the possibility to integrate large loads on to the system while minimizing the impact on reliability and affordability (Norris et al. 2025). Curtailment, demand response, and load flexibility from data centers would require their participation—something that some analysts have deemed a “regulatory fiction” (Allsup 2025). While there are particular concerns on whether data centers would find the incentives to participate in flexibility efforts valuable enough for the Pennsylvania-New Jersey-Maryland Interconnection, some other areas of the country have explored efforts to create this headroom through legislation. Texas SB6 requires large loads with on-site backup generation to either curtail load or deploy backup generation in emergencies. Accordingly, co-location and load flexibility for data centers are current illustrative examples of technologies prompting explorations and innovations in grid operations and regulation.

The area of improving transmission system planning and grid interconnections, typically with an eye to speeding up interconnection queues, is receiving attention, with focus recently increased due to FERC involvement in the context of large loads (Rosner 2025). Accordingly, RD&D is of interest and importance in this space. Much of the work is in automating interconnection processes (managing project intake and updates, error identification, and other ways to do the large number of small tasks). There are companies in this space (including GridUnity and Enverus) using AI to speed up interconnections, whereas companies like Energy Exemplar allow grid planners to model networks and conduct scenario analysis to better inform investment decisions. Many of the tools to accomplish improvements in this space are proprietary, which may hinder DOE or its National Laboratories’ abilities to deftly navigate this innovation space. Accessible tools

could provide the opportunity to enhance pre-competitive RD&D across both public- and private-sector actors. This is also an area ripe for R&D investment. The R&D budgets are relatively thin compared to the technology sector and the locus of activity in this area is well diversified among the United States, Europe, and Asia.

At the same time, it is important to consider RD&D as inclusive of more than just the “high-tech” system components and products that garner popular attention. The innovation sources for important hardware components that are essential to the electric power system are, in many cases, now largely outside of the United States. For example, the United States has mostly outsourced the RD&D and manufacture of the high voltage (HV) and extra HV components to Asia and Europe (DNV 2024; Ford 2025), including power transformers, switchgear, high-voltage direct current (HVDC) cables and converter stations, and HV power electronics used for grid stabilization and renewable integration (including inverters). The area of HV power electronics (e.g., inverters, Static Var Compensators or StatComs) is especially important for managing grid stability, which is affected by large penetrations of renewables and data centers. Accordingly, this leaves the U.S. system vulnerable to disruptions in supply chains, introduces potential cyber and physical security risks, and potentially makes these components more costly (McCalley 2023). Wait times for key grid components are now many years, limiting the ability to expand and scale the grid quickly. Part of the cause is vendors experiencing many up and downswings in cost or demand over time, leading them to move their manufacturing to places with either low labor costs or stable demand (ACORE 2023). Incentives can be leveraged to support domestic manufacturing; however, businesses and investors prefer incentives with certainty over a long time period (~10–20 years), as well as access to accelerated funding to support the necessary significant investments in domestic manufacturing. If businesses or investors believe there is a risk in receiving incentives, few will take that risk because it will impact their return on investment. Instead, they will pivot to areas with lower total costs. There is growing recognition of the importance of increasing domestic manufacturing for electricity system elements, but policymakers have different ideas of the appropriate mechanisms to incentivize and support such investments. A successful future initiative on this topic would require buy-in from all major parties and people. Pursuing this outcome in fits and starts would create confusion and investment uncertainty for producers, manufacturers, and other key actors in this system.

The general area of Energy Management Systems (EMS) and operational decision-support tools could benefit from more investment, given the economic leverage one might create from a more efficient dispatch of the system while maintaining overall grid reliability. This topic ranges from the classic EMSs provided by traditional vendors to a wide range of smaller companies that provide grid monitoring tools to monitor and advise operators on key grid metrics (e.g., inertia, voltage stability). Many vendors have R&D plans to integrate inputs from other complementary vendors and software solutions and to integrate AI-driven innovations in some form to improve operational decision-support tools. Non-traditional vendors such as Google with its Tapestry platform are seeking to develop a unified data architecture and AI-informed platform for operational decision support (Google X n.d.). The locus of RD&D is more diversified in this particular arena, with a relatively strong center of competence in the United States, but also relatively poor funding compared to other sectors (generally because the regulated utility sector and its vendors have a relatively low R&D budget compared to other industries).

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³ See Recommendation 4.1 in NASEM 2021a.

emissions-free technologies. While venture and infrastructure capital (for technologies at the early and later stages of commercialization, respectively) are both readily available, there is a “missing middle” gap in financing for technologies that have matured past the stage for venture financing but are not sufficiently scaled and de-risked for infrastructure investors (Herzlinger et al. 2024; O’Sullivan and Ragahavan 2023).

One commercialization challenge particular to the electricity sector relates to utility pilots, which may be constrained by cost or regulation. One model offering a path forward is Energy Impact Partners, a venture investment firm with utilities sitting as limited partners on the fund who can provide feedback from their vantage point and expertise with the grid and then take on technology demonstrations and provide feedback to the other partners (Energy Impact Partners n.d.). Innovation is not a linear process and structures such as this can provide the means to create communication and connection between what is occurring in the market and occurring in the electricity system.

Getting electricity innovation to market (typically in generation and utility companies) is a long and intensive process (Gross et al. 2018; NASEM 2021a). Many players are involved and each need to interface with other players, bilaterally or multi-laterally, for different parts of the technology development and adoption value chain (Gao and Rai 2023; Kiesling et al. 2025; NASUCA 2022). Figure 3 presents an illustration of the breadth of entities in this innovation ecosystem.

One common pitfall in innovation is the availability of independent testbeds to benchmark performance against standards and utility and financing expectations occurring at the third “valley of death” between demonstration and deployment. Some examples in the United States context can be found in a summary of DOE and utility-supported, blockchain-based pilots, which supported and assessed the trial of blockchain technology in multiple energy applications ranging from grid control to supply chain management (Credle et al. 2025). Another key barrier entails demonstrated technology to scalable manufacturing. Other sectors can be a helpful guide here, from approaches to creating a bio-industrial pilot plant network (Starr et al. 2025) in chemical engineering to the defense sector’s efforts to create a strong innovation pipeline through the adoption and use of technologies (DIB 2023).

Ofgem provides some illustrative examples to address hand-offs and seams in the innovation process, including funding and network-building efforts supported by its Strategic Innovation Fund (Innovate UK n.d.a) and Network Innovation Competition (Ofgem n.d.a) for funding.

Just as there is variety in those creating RD&D in the electric sector, there is also variation in the electricity system these innovations are entering. It is critical to acknowledge that there is not one, homogenized electricity system for the entire United States. Instead, the electricity system is a patchwork of different market designs, grid operators, and regulatory landscapes (Heard and Holmes 2025). These differences affect the likelihood, ability, and forms in which innovations may be taken up throughout the electricity system. These differences can present opportunities for RD&D (if one area of the grid is more amenable to demonstrations or to the adoption of innovative technologies) but also challenges (e.g., if different areas of

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⁴ See Recommendation 4.4 in NASEM 2021a.

the U.S. electricity system (see Figure 4). As one example, Portland General Electric created a regulatory-approved sandbox (“smart grid testbed”) for testing DERs, interoperability, and customer-side technology (PGE n.d.). Another model can be seen from Avista that, to accompany its utility business, developed a venture arm allowing for non-regulated R&D and equity investments (PitchBook n.d.).

Some emerging best practices for regulatory sandboxes include establishing clear objectives and terms, identifying the innovation barriers the sandbox is attempting to address, providing clear guidance on project eligibility and related processes, conducting evaluation and reporting, providing sufficient staffing

and resources, creating channels for feedback and continuous learning, and communicating information both about the sandbox and the results and findings from its efforts (Relf et al. 2025). Additionally, the circumstances under which sandboxes are a better approach to innovation than pilot projects remains an open research question.

Building examples of experimentation necessitates creating more intentional pathways that make space for experimentation while containing customer risk. Emerging mechanisms include dedicated innovation allowances, streamlined pilot approval processes, “safe-to-fail” prudence standards, performance-based incentives for measurable innovation outcomes, and platform approaches that let third parties bring new solutions onto utility systems under clear rules. These can be paired with hybrid models—localized innovation zones, outcome-based procurement, pay-for-performance pilots, or large-load innovation cost sharing—to shift utilities from passive participants to active integrators of breakthrough technologies.

One other possible pathway for innovation in the regulated utility space is that the third-party innovator—potentially supported by the government—agrees to wear the risk rather than the utility or its ratepayers (Herzlinger et al. 2024). Examples include PacifiCorp and TerraPower, where PacifiCorp’s risk is limited and TerraPower and DOE carry the technology risk (DOE n.d.b; TerraPower n.d.) and Google (Terrell 2023) and Fervo (Fervo n.d.), where Google is financing and demonstrating early-stage technology risk rather than a utility bearing that risk.

In addition to federal funds and support being able to mitigate technology risk, DOE and the National Laboratories’ involvement with an innovative testbed project (even at a relatively small funding amount) can provide reputational benefits that support the effort. Also at a low cost is the use of the convening power of the federal government, which can help elevate efforts from particularly innovative efforts in the electricity system (see the section The Convening Power of the Federal Government for further discussion).

Consortiums among researchers, utilities, industry, and/or academia are another means of intentional partnership to advance innovation, which can realize greater gains for members of such a group than could be obtained individually (discussed in detail in the following section). Reliable multi-year funding streams by states directly investing in electricity RD&D can play an instrumental role in cultivating a stable environment for innovation and can create models for other states to reference in their innovation efforts.⁵

Partnerships and Collaboration

The Necessity of Partnerships to Bring Innovation to Practice

The electricity system is comprised of numerous actors, and for RD&D to be effective at producing advances that can be put into practice, any innovation will need the support of multiple parties and partners.

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⁵ See Recommendation 4.4 in NASEM 2021a.

further involvement in interconnection and DER research, resulting in NLR’s work to revise the standard in 2018 (NLR 2021).

Collaborative efforts within DOE can be limited when these endeavors run up against technology-specific silos. One prominent barrier of this type is when congressionally appropriated funds are siloed to a technology-specific area. Another is when a project spans multiple technology domains within DOE, such that it does not get considered as a core priority for any one collaborator.

Federally funded R&D corporations are a way of incorporating the PPP model, which can draw on the expertise of the National Laboratories and university system. This model first began in the defense sector and has since expanded and been adopted by other sectors and parts of the federal government, including DOE. One such example with the private sector is the long-standing partnership between Los Alamos National Laboratory and Procter & Gamble, which was developed for predicting, preventing, and reducing equipment failures (thus reducing operating costs and capital expenditures) (Sauers 2010). Encouraging partnerships within different levels of the same organization can also present benefits to break down silos and create coordinated RD&D; for example, between a procurement team and an innovation leadership team within a utility.

Given the growing operational complexities of the electricity system, ISOs and RTOs are now seeking direct partnerships with universities and researchers through grantmaking. Past awards for joint research between grid operators and universities have been made with support from DOE, presenting an opportunity to connect academia, grid operation, and the federal government in collaboration on shared projects. Accordingly, grants, federal funding, and collaboration with entities outside of the federal apparatus (e.g., nongovernmental organizations, community organizations, state and local governments, Tribes) can strengthen opportunities to advance electricity RD&D.

The private sector can also find multiple pathways to capitalize revenues with the digital innovations as shown with increased venture capital funding in this space. A PPP would benefit the private sector to understand the motivations of the public space and to focus its efforts accordingly. These partnerships can be beneficial for the public sector by leveraging the private sector’s experience in product delivery and potential comparative efficient gains (Castalia Strategic Advisors 2018). Examples of PPPs have been successfully utilized in smart grid efforts from Singapore to Germany to Houston (Volodarsky 2021).

There are opportunities for collaboration and innovation in sectors moving toward greater amounts of electrification in their operations. Examples include electrification in industry and manufacturing, which motivate needed upgrades in the grid from utility patterns—particularly in the distribution system—but also creates avenues for the simultaneous adoption of greater digitization and Internet of Things technologies from the technology sector (Donadel 2021; Industry Signals 2025). Another example is increasing the electrification of transportation technologies, where the Joint Office of Energy and Transportation has engaged with partners in electric utilities to collaborate on topics including streamlining permitting, reducing time to power, leveraging existing rights-of-way for electricity

infrastructure, and coordinating vehicle charging and discharging with the system as a grid-edge asset (Joint Office of Energy and Transpiration n.d.).

Airports represent one specific facility type exemplifying collaborations of the facility operators with electricity utilities and equipment vendors to implement new innovations for meeting emerging facility needs. These emerging needs relate to increasing resilience for facilities, meeting increasing electricity demands, and improving power quality (e.g., voltage changes that impact equipment). Electricity outages at Hartsfield-Jackson Atlanta International Airport in 2017, New York’s John F. Kennedy International Airport, and London’s Heathrow Airport in 2025 all resulted in large-scale flight disruptions throughout the system and each caused tens of millions of dollars in damages (Dubec 2025; ET Online 2025; Yamanouchi 2017). Events like this and numerous smaller-scale power disruptions documented by the U.S. Government Accountability Office at a majority of airports responding to the agency’s survey help motivate many airports to invest in new electricity resilience innovations (GAO 2023). Those investments include microgrids, on-site electricity generation and storage, and grid interconnection redundancy (Chokshi 2025; Macias et al. 2025; Miller and Rutledge 2025; San Diego International Airport 2019). These investments are not only used to help with potential disruptions in the electricity grids but airports are also dealing with an overall growth in electricity demands and technological innovations that allow self-generation of power that help reduce power demands from the grid. The wide interests of airports have spurred the development of tools to help other facilities assess innovations related to resilience and microgrids and sector-wide conferences on topics such as energy management (ACI-NA n.d.; NASEM 2021c, 2024).

Benefits from Partner Engagement and Transparency in the Funding Opportunity Announcement Process

At a high level, when DOE typically implements RD&D efforts, it identifies an area of priority, releases a Funding Opportunity Announcement (FOA), and receives and reviews replies. If FOA and RD&D topics are defined first by the government without seeking input from the relevant partner communities and potential recipients, they could result in the agency overlooking key RD&D needs. Accordingly, it is important to think about how DOE can engage the relevant innovation ecosystem early in the FOA creation process. Expanding engagement with private entities and states can ensure that efforts are aligned and not duplicated, targeted to the right problems, and create greater transparency and inclusion of stakeholders’ needs for particular innovation solutions. One specific approach could be DOE’s Office of Electricity developing joint R&D FOAs with states to pool federal and state resources that could expand the impact of funding, especially during limited funding availability.

A variety of different FOAs with different deadlines and different requirements can be challenging to navigate, not only for potential grantees but also for the interested public and other entities such as states. Participating in the FOA response process could be burdensome for those in the innovation ecosystem without university or corporate backing. It may be worth considering approaches to create less restrictive or even open FOAs, which can then widen the pool of possible respondents and participants. One possible solution could be to expand the navigator concept that allows for broader searches of opportunities (see, e.g., the U.S. Department of Transportation’s navigator [DOT n.d.]). Such an approach would also allow stakeholders an

opportunity to understand funding priorities and upcoming RD&D funding opportunities could be grouped by theme (i.e., storage, grid communications) and accompanied with a summary in accessible, plain language. This approach could also enable the structuring of FOAs, which are oriented toward solving particular challenges, instead of prescribing a particular technology as a solution to the issue.

When RD&D efforts are underway, transparency is often lacking. DOE’s Office of Electricity could update the stakeholder community often about the schedule and success or failures of a project. Discussing not only successes but also failures openly allows stakeholders and other innovators to learn alongside DOE and not repeat mistakes. This increased transparency, coupled with greater communication with prospective FOA respondents, can build a stronger fabric of partnerships that can strengthen the network of actors working to bring electricity innovation into practice.

Leverage

Creating Maximum Impact from Innovation Efforts

Creating the largest possible impact from an innovation effort benefits from having a defined goal or end state one is trying to reach. Specifically, this could be a defined state for the grid (e.g., high performance along reliability metrics, price stability, low marginal costs of generation) and then working backward to determine which innovations are needed to reach that end state. DOE program offices establish long-term goals and strategies that they can then align with their programmatic activities. Working backward from a defined future vision for the grid can enable RD&D efforts that target high-leverage breakthroughs, rather than just what the next incremental step in the development of a particular technology might be.

DOE has a history of creating strong successes in advancing energy technologies, from the SunShot Initiative reducing the total cost of solar energy (DOE n.d.c) to early DOE investments enabling the technology for the hydraulic fracturing revolution in shale gas (DOE 2011). One vision DOE could adopt for its innovation efforts is creating a “hotbed of spillovers” with learnings and advancements from various efforts and projects informing each other. Importantly, to create maximum impact, this cannot just be successes. Mistakes and failures should be communicated accessibly, broadly, and without judgment, so that they are not repeated.

Viewing RD&D support in the context of “leverage” and utilizing a limited set of resources present an incentive for identifying disruptive innovation, which may yield larger returns than incremental innovation. However, it is important to note that even though the benefits of incremental innovation may be marginal, many of these may create improvements of electricity system operational capabilities. An evaluation of the returns on DOE-funded research in energy efficiency and pollution control programs from 1975 through 2000 found that these programs generated benefits amounting to approximately three times the research’s cost (NRC 2001). A 2001 National Research Council report concluded that the highest net benefits accrued to programs focused on end-use energy efficiency. This was namely where research prompted changes in DOE-issued minimum energy efficiency performance standards, which, in turn, increased the adoption of newly developed technologies.

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⁶ See Recommendation 5.8 in NASEM 2021a.

are open questions about the costs of large-scale field experiments, who would cover these costs, and how replicable results would be.

DOE has a strong and established role in supporting the early stages of RD&D for the electricity system. It has opportunities to extend its influence on technology transfer, commercialization, and other later-stage impacts in the innovation process. Extending and expanding efforts for cooperation, cost sharing, and other partnerships with the private sector could build out DOE’s capabilities in the space. Enhancing these efforts would directly align with DOE’s Office of Electricity’s vision statement of “work[ing] closely with industry and other stakeholders to drive technological and operational advancements to sustain U.S. global leadership in energy” (OE n.d.).

To effectively support RD&D in the electricity sector, it is important to understand which efforts have been successful and which have failed. Devoting organizational resources and funding toward tracking impacts and conducting evaluation on active efforts are essential for informing the design of effective and efficient programs in the future. Disseminating the results of such evaluation efforts can provide insights for states, industry consortia, and other actors who seek to support RD&D themselves.

Getting the Most Out of the Existing System

One point of high-leverage investment can be in technologies and operational capabilities that increase and improve the utilization of existing system assets. The general area of grid-enhancing technologies (GETs) is growing fast. These technologies first emerged in Europe, and while there are now numerous U.S.-based GET companies, due to policy and regulatory support and funding from DOE, the locus of RD&D in this area is Europe (INL 2022). The opportunity presented by these technologies is to extract more capacity from the existing transmission network. GETs generally include dynamic line rating technologies that allow the system operator to run the transmission system closer to the thermal limits; power flow control technologies (see the information on StatComs and HV power electronics above) that facilitate the integration of inverter-based resources on the grid while managing for any stability problems, and in doing so, allow more flow than what would otherwise be possible without them; and advanced conductors, as reconductoring with advanced conductors allows for more flow in the same right-of-way (ESIG 2025b).

There are several regulatory hurdles to the adoption of GETs. U.S. transmission system operators (TSOs) prefer a more traditional “wires” investment approach because they have strong incentives to increase their rate base as they are paid a cost-of-service return on assets (Kiesling 2025; Makholm 2024). Current regulatory structures do not incentivize utilities to invest in GETs prior to new transmission lines. Also, in Europe, it is a requirement to give preference to the dispatch of renewable energy (EU ETS 2024). This requirement coupled with the TSO model results in more frequent switching of systems to manage congestion (compared with the United States, where the transmission is mostly “locked down” during real-time operations and congestion management is done through redispatch of the system). The idea of the locational marginal pricing–based markets in the United States is to have the generation market respond to the congestion rather than dynamically altering the transmission topology in real time. To do both in real time is complex and will affect price formation in the markets. Accordingly, there would be

benefits in an RD&D effort to investigate the feasibility of combining the best of the European approach (dynamic transmission topology management with less dynamic generation dispatch and scheduling) with the U.S. approach (dynamic generation dispatch and management with less dynamic transmission topology management) within the context of the existing wholesale market structures, which is a complex optimization problem.

Physical energy innovations often take years if not decades to perfect and the private markets generally do not take on risk without known short- and long-term return on investments. This is an area where public funds and support can be beneficial (Murray 2017). Physical energy innovation includes not only new generation technologies and existing technology enhancements (increase production and/or increase useful life) but also the creation and manufacturing of the hardware to support digital innovation (i.e., smart meter programs [DOE n.d.d]). RD&D efforts that can improve the electricity system do not need to be constrained to physical, engineered assets. There are opportunities to leverage existing policy and planning assets such as existing transportation rights-of-way that can be used for siting transmission infrastructure (NASEM 2025b), which also fits into this general strategy set.

One non-physical asset that could create benefits for the electricity industry is AI technologies and capabilities. The opportunities offered by this set of tools is not without precedent. The internet has revolutionized all aspects of commerce, industry, and everyday life and the electricity sector is no exception. In addition to the enterprise-level changes with myriad changes to managing and automating approaches to engineering and administration, real-time operations have been similarly revolutionized. One example was the implementation of wholesale power trading. In the mid-1990s, FERC mandated transmission deregulation and the internet was the enabling technology for how this was implemented.⁷ These changes were the beginning of dramatic structural changes to the entire electricity sector, including the introduction of entirely new organizations to implement and manage these changes (including ISOs).

In another example of leveraging non-energy technology for the benefit of the electricity sector, precision timing available from global navigation satellite systems (GNSS) revolutionized time-synchronized measurements, specifically PMU technology. These measurements have driven substantial enhancements in system reliability, leveraging the billions invested in deploying GNSS.

The Role for Prizes

DOE and other federal agencies have the authority to administer competitive prizes to incentivize innovation (DOE n.d.e; Gallo 2020). The structure of prize competitions can vary substantially, with possible rewards including both cash and non-cash assistance (Kempe 2024).

Prizes can be a useful tool for engaging innovators with limited funding, as competitions operate on an accelerated timeline, do not require any direct cost sharing or government contracting, and typically have low barriers to entry. As summarized by the Congressional Research Service, the Office of Management

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⁷ Issued in 1996, FERC Order 888 mandated open access to interstate transmission to facilitate wholesale electricity competition. The companion order, 889, described how this would be implemented, mandating an internet-facing trading system.

and Budget and the Office of Science and Technology Policy have characterized the benefits of federal prize competitions as allowing agencies to:

Prizes have been a tool used by DOE’s Office of Electricity with recent notable instances including the Energy Storage Innovations Prize, the Feeder of the Future Prize, and the Digitizing Utilities Prize (DOE 2023, 2025c, 2026). Prizes are not the perfect tool for every application or intended result. They may not be the appropriate tool when close funder oversight is beneficial, if the path to success is already well known, if success is difficult to define, or if the goal is to fund a particular community or multiple teams (Kane 2025). It is important to understand prizes as part of the innovation ecosystem. They can be leveraged to create communities of practice around a certain technology or capability, but they could also disrupt the development of a healthy innovation ecosystem (e.g., if a “winner takes all”). Accordingly, as with all tools in the innovation toolkit, evaluating the appropriateness of using prizes for the intended goal is important.

The Convening Power of the Federal Government

An asset for innovation and coordination that should not be overlooked is the convening power of the federal government. DOE and other federal agencies create convenings and coordinating sessions that, as a result of being hosted by the federal government, rise in importance and prominence above those hosted by non-federal organizations. These efforts can also play an important role in bridging language and conceptual gaps between different sectors or areas of expertise through common engagement at an event or on a particular topic. These engagements can even provide the means to improve communications within organizations like utilities, where employees with different expertise and working in different roles also experience these communication and coordination challenges. Through these convenings, the government can prompt coordination and galvanize action on particular important topics while incurring only the cost of event planning and hosting.

The highest impact of the federal government will vary at different stages of the innovation process. In early research it may be as a funder, but in later stages (such as demonstrations) it may instead be as a convener or a platform for information sharing.