Feds Fine Durham Energy Efficiency Co $722M

https://www.theassemblync.com/news/business/american-efficient-ferc-durham-fine/

by ChuckMcM • 3 months ago

31 17 3 months ago

ChuckMcM• 3 months ago

This is a wild story about creating a business that buys and sells not using electricity. I jokingly suggested you could build an 'energy consumption facility' which was just a big resistor connected to ground (which is all an unprofitable bitcoin mining rig is) and then get paid for not using it.

The original source for this was Matt Levine over at Bloomberg. His take is also quite good: https://www.bloomberg.com/opinion/newsletters/2026-04-30/sel...

mitchbob• 3 months ago

Thanks for the Matt Levine link! Archived version:

https://archive.ph/2026.05.02-224747/https://www.bloomberg.c...

ryandamm• 3 months ago

It's worth signing up for Levine's free newsletter and listening to the podcast (though there is substantial overlap in the content, it's still fun to hear what you've already read).

His take on this, crypto, all things Elon Musk, and the current 'predictions market' are funny and insightful.

FergusArgyll• 3 months ago

I wish he interviewed more for his podcast. The Cliff Asness episode was great (and he knows it because they keep on rereleasing it ever month or two) as was Boaz Weinstein

prattmic• 3 months ago

“His specialty was alfalfa, and he made a good thing out of not growing any. The government paid him well for every bushel of alfalfa he did not grow. The more alfalfa he did not grow, the more money the government gave him, and he spent every penny he didn't earn on new land to increase the amount of alfalfa he did not produce. Major Major's father worked without rest at not growing alfalfa. On long winter evenings he remained indoors and did not mend harness, and he sprang out of bed at the crack of noon every day just to make certain that the chores would not be done. He invested in land wisely and soon was not growing more alfalfa than any other man in the county. Neighbours sought him out for advice on all subjects, for he had made much money and was therefore wise. “As ye sow, so shall ye reap,” he counselled one and all, and everyone said “Amen.”

-Joseph Heller, Catch-22

phkx2• 3 months ago

I guess this is popular because of the 'oh-so-stupid-government' vibes. Yet (almost) everybody buys the cheap meat (which the non-alfalfa farmer is also selling in reality) subsidized by not growing alfalfa. And when the subsidiaries eventually are withdrawn and the local farmer cannot compete with some other guy at the other end of the world who externalizes cost, then everybody buys from the other end of the world and complains that the local economy is going down. There would be more to this story, but currently it ends with (almost) everyone buying cheap meat and complaining about taxes.

edit: maybe my story is the same as the alfalfa one

idiotsecant• 3 months ago

This is possible, but the interconnect queues and costs are enormous. You'd be better off using a big battery instead of a resistor, then you can sell it both ways, and not rely on the portion of the day in the right portion of the year that there are widespread negative prices in California.

recursivecaveat• 3 months ago

I think you could actually build a small resistor (an energy efficient appliance if you will) and then get paid for not building a giant resistor (the hypothetical crummy appliance you didn't buy). I suppose one fix at least is to tie any ability to auction your load-reduction-services to the capability to actually reduce load on command. If you reduce load around the clock or at uncontrolled times (like an energy-efficient lightbulb) then your reward ought to be just the average price of power since you're not really helping to smooth out the peaks in any way. In general though these counter-factual pricing schemes are pretty prone to distortion I think and ought be be avoided. Ideally your reward for not using power during a peak is just you don't pay an inflated peak power cost.

phkx2• 3 months ago

The easy one first: The Matt Levine piece quotes the story linked here, so he's definitely not the original source...

And then, yes: If you can make more money by not using your big resistor than actually using it, then economically you would be better off not using it. If you can make money by not using it, then someone is willing to pay you because they get value out of it or they can avert some damage. If you threatened to use your capacitor without obvious use other than destabilizing the grid, that might just look a little too much like blackmail...

If you believe in markets, then someone coming up with the means to improve grid stability (here: by overall less consumption) should somehow be able to turn it into a profit. The issue here seems to be, that American Efficient didn't actually give any guarantees that they could reduce consumption. So it rather looks like whoever admitted them to the auction didn't do their due diligence. The whole market thing breaks down when there is actual fraud or when the identical thing gets sold more than once (actually, energy savings could probably be sold once for grid stability and once for reduced emissions - I'd say they're disjoint to first order, but might be connected indirectly).

That being said, there should be limits to markets.The whole market thing breaks down when there is actual fraud, when a party/faction has a disproportionate amount of power or when there are externalized costs that are not accounted for in the pricing.

skew-aberration• 3 months ago

I can't help but feel that this article is burying the lede. According to FERC, Home Depot sold 'Environmental Attributes' to America Efficient, not mere sales data. 'Environmental Attributes' are intrinsic to the energy saving device, and it should not be possible to sell them separately without a contract with the consumers. Therefore, Home Depot themselves would appear to be heavily implicated - but the possibility is not discussed.

The energy savings were sold by HD twice - once to the customer (who pays a premium for less energy usage, and may also have claimed federal tax credits), and once more to America Efficient (who sold them to the state / grid operator non-profits).

It's an interesting kind of subsidy arbitrage - since businesses can benefit from subsidies that consumers cannot, it creates an incentive to carve out the subsidy-granting-essence from consumers sales and sell them on in aggregate.

zelon882• 3 months ago

The article didn't do a good job of explaining why the agreement between Home Depot and America Efficient is dubious. The business model does seem very suspicious, but also so does the whole market they are engaged in. Why is my utility company wasting money on auctioned efficiency data? Why don't the manufacturers share this with the utility companies for the common good of everyone? Why doesn't Home Depot make an offer to sell this data directly to the utility company? Why would anyone want to bid on this data? Why create that middle man?

The whole thing sounds like late-stage capitalist hogwash. This all seems very inconsequential except to make a bunch of rich people richer.

lesuorac• 3 months ago

Why is my utility company wasting money on auctioned efficiency data?

If you lower the energy demand on the grid then you lower the price that the grid needs to pay by a lot.

Grids tend to take in bids from power companies of Volume + Price and then pick enough Volume (at the lowest Price first) until they get to the expected Volume and then payout to those winning bidders the Price of the last needed Volume. If you can decrease the Volume then the total price paid by the grid goes down.

If sharing some of that energy savings with another entity it's still a win-win because you're overall paying less.

It's like hiring a tax account where they get paid 50% of whatever taxes they save you. It's a win-win until they start committing tax fraud.

kingstnap• 3 months ago

This is such a bizarre setup.

American Efficient then used that sales data to calculate the energy savings from the anticipated use of the lighting and appliances, entering those projected savings into “capacity auctions.”
At capacity auctions, grid operators pay for the ability of traditional power suppliers and utilities— as well as energy-efficiency aggregators like American Efficient—to produce power when needed.

The home depot example shows it more succinctly. How does American Efficient sending a small check to home depot mean that they get to bid for having produced capacity?

If I squint I can almost imagine the goal of this setup. If you want people to use less power you could definitely promote energy efficient appliances and lighting via market forces.

But doing so at capacity auctions seems ridiculous. If your power company wants it then they should cut checks directly to the consumer as a discount/subsidy on energy efficient appliances.

mjd• 3 months ago

Matt Levine's introduction to this story made me laugh:

“If you have a certain sort of mind, you might think ‘no, people respond to incentives; if the grid paid for every efficient lightbulb, we’d save more electricity.’ If you have a certain, not unrelated, sort of mind, you might think ‘well, if nobody is getting paid for installing these lightbulbs, maybe I should get the money.’”

peterabbitcook• 3 months ago

I recently finished reading “The Smartest Guys in The Room.” This definitely rhymes with some of the “energy efficiency” shenanigans committed by Enron’s EES subsidiary.

Feds Fine Durham Energy Efficiency Co $722M

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