Saving Money and Energy: The Way of Pre-Packaging

The software-as-a-service business model has succeeded by outperforming the pre-packaged software in cost—by outsourcing the necessary hardware infrastructure to the cloud—and by giving users instant access to innovation. It may be the case that this model outperforms in an environ like InfoTech, where the underlying commodity is increasing in supply and falling in price. With energy, however, given that its depleting nature (in most cases) necessitates long-term falling in supply and rising in price, it may be that the pre-packaged model would work best.

It’s well known that running a washing machine in the late afternoon will cost quite a bit more than doing so in the middle of the night, because the former is a time of peak power usage, while the latter is not. Well, what if we reacted not only to times of peak power usage, but also to regions of peak power usage in relation to each device in question?

What if we sold electric cars, fans, dryers etc. with an average lifetime’s worth of pre-packaged energy costs—specific to each exact region—built into the price of the product? I believe that this model would have three direct benefits:

1) Consumers would get a better deal by buying all of the expected energy usage up front because the energy purchase would be made in bulk for each regional product line.
2) Manufacturers, or market makers for this system, will be able to provide customers with another wave of savings by exposing each to their sophisticated hedging techniques.
3) And the upfront pre-packaged energy cost component in each product’s price—with savings demonstrable and comparable from region to region—will incentivize the purchase of the most efficient products, on average, for their specific regions.

Moreover, if this technique is spread across enough products, it will have the effect of greatly increasing the size of our futures markets. Thus, the economy will more efficiently allocate E&P, CleanTech etc. capital.

As energy usage for a product’s lifetime paid upfront would, in many cases, be a huge amount, it will instead usually—at the consumer’s request—be financed over time. But the interest and principle will not fluctuate with spot energy prices; it will be just like a car note. Except, however, those who use more than the average energy usage for a product’s lifetime will, at benchmarked increments tracked by the smartgrid, be charged for their excess energy usage. Likewise, those who use less than average energy will be refunded at those benchmark increments. This debit/credit system will iron out any outlier usage effects on the benefits of the pre-packaged energy system.

One caveat: regarding innovation in the field of energy, any major advances in some energy source or another that results in great savings will require that those savings be funneled back to the consumer who bought more expensive pre-packaged energy contracts. Our purpose is not to lock in non-competitive rates, but only savings.