Here's a cool story about electricity markets/auctionsHere's a cool story about electricity markets/auctions

In Bitcoinland we're pretty familiar with demand response programs: electricity (=capacity) has a shelf-life of roughly zero, so the grid engages in a delicate balancing act all the time. There are day-ahead/hour-ahead/week-ahead auctions and there are energy traders and exchanges and power plants bidding etc. In a pinch, it's valuable to revert some use from its ordinary use to extra heating/cooling/light in, say, a winter storm #1434263

There are also savings programs, where e.g., ERCOT pays you to shut down your activity -- in essence, giving capacity back to the grid. A megawatt saved or returned is as useful as an extra megawatt generated

So some inventive schmuck out of North Carolina figured... hang on, all these electricity-efficient lightbulbs and fridges and air conditions etc that have come on the market in the last decades have electricity saving over their previous appliances. You should get paid for that savings... come to think of it, maybe I should get paid for that?!

That usage reduction is valuable: Power grid operators have capacity auctions where they pay for energy efficiency, so, American Efficient figured, someone should sell this stuff — the usage reduction from the appliances — into those auctions. Selling electricity into capacity auctions is not the core business of the retailers or manufacturers or certainly consumers. All of that energy efficiency is just being wasted, not being turned into capacity payments. Someone should sell it. Why not American Efficient?

uh-hu, clearly.

some people think this is, uh, fraudulent?

1. Buy market data/sales data about energy-saving devices
2. write some claims in there about "environmental attributes"
3. pretend you now own said "attributes" (really just savings usage, ignore Jevons paradox #1470476)
4. Sell them into electricity auctions as if they were real (peak) capacity reductions

Fucking ingenious business planFucking ingenious business plan

Just, like, capitalism, maaaan:

There was not a ruthlessly efficient market for not-using-as-much-electricity; lots of people went around reducing their electricity use without getting paid for it. American Efficient was in the business of creating a ruthlessly efficient market for it. If you can get paid for not-using-as-much-electricity, American Efficient was going to buy up as much not-using-as-much-electricity as it could find

Didn't work out so well for American Efficient!

The FERC fined them over $1 billion and referred them for criminal prosecution; they’re out here like “paying $0.05 per light bulb adds up to real power capacity.” I can see both sides! The way the FERC thinks about it is: You can’t get paid for an energy efficiency program unless you are actually causing a reduction on power usage

market eeeefffiiiccciencymarket eeeefffiiiccciency

It is better for the grid to pay only for programs that cause a reduction in electricity usage. But doesn’t American Efficient’s argument have a certain charm? Every day, people are doing stuff that uses less electricity. That is valuable, and the grid operators would pay for it. Those people were getting paid $0 for something that had value. The market was inefficient! American Efficient made it efficient.

Beautiful

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