The transformative power of the smart grid is enormous. It is receiving much consideration from utilities and commissions across North America. Several members of the European Union, China, Japan and other nations are also engaged in the same endeavor. The smart grid has the potential for revolutionizing the way we produce and consume electricity but because it contains so many new elements, its core value proposition remains untested. The unanswered questions include: • What new services will the smart grid provide customers? • Do customers want these new services? • Will they respond by changing their energy use patterns? The answers to these questions will help policymakers in federal and state government determine whether the benefits of the smart grid will cover its costs. It is widely understood that the new services enabled by the smart grid will include different rate designs that encourage curtailment of peak loads and make more efficient use of energy. Examples include dynamic pricing and inclining block rates. These innovative rate designs will be enhanced by various automating technologies such as Energy Orbs, programmable communicating thermostats (PCTs), whole building energy management systems (Auto DR), and in-home displays (IHDs). The smart grid will of course go beyond smart meters and rate design and enable renewable energy resources to be connected to the grid. This will allow optimal use of intermittent resources, such as wind, which often reach their peak generating capacity during off-peak hours. New off-peak loads, such as plug-in hybrid electric vehicles, which reduce overall energy consumption and improve the carbon footprint, will be energized by the smart grid. To address the likely impact of the smart grid on customers, utilities, and society as a whole, it may be necessary to conduct a pilot. When should a pilot be conducted and how should it be conducted? To be useful, a pilot must yield credible results. This requires that the pilot satisfy various validity criteria. These issues form the focus of this paper. We provide examples from several recent pilots that involved dynamic pricing, a key element of the smart gird. The concluding section discusses how a hypothetical company, SMART POWER, should go about designing its own pilot.
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