What’s Hodge’s “Amazon of Energy” pitch about?

Teaser for Nick Hodge's Foundational Profits says, "Every dollar of the $110 trillion “New Energy” revolution will flow through this one website... And you can buy the company behind it for 1/100th the price of Amazon!" So... what is it? We've got answers

By Travis Johnson, Stock Gumshoe, April 22, 2021

This latest teaser pitch from Nick Hodge for his Foundational Profits newsletter has gotten a lot of raised eyebrows and questions from the Gumshoe faithful — whatever is this “Amazon of Energy” idea, and is it real?

As always, the answer is, “kinda” — so let’s look through the ad (they’re currently selling Foundational Profits, Hodge’s “entry level” newsletter, for $99). The marketing campaign for this started over the course of a few days, including free lead-in articles here and here, but this is the basic promise:

“All power is about to go online… becoming far cheaper, cleaner, more reliable… And available to buy and sell immediately like a stock or crypto.

“That’s what MEMS achieves.

“It transforms what energy actually is, which means…

“No more waiting and paying at the pump.

“And no more bills from the power companies.

“Energy becomes a tradable good like any other.

“You can carry energy on your phone. Like downloading a song. Or uploading a video to YouTube.

“Or, more precisely, like buying and selling a product on Amazon.”

OK, I guess that makes some logical sense — just don’t take it too far. Energy is its own thing, it doesn’t actually get carried on your phone or get sent from your account to someone else, that energy has to travel on power lines or be stored in batteries and both of those things cause energy loss… but it is becoming easier in many ways to trade energy, utilities do this all the time and it is now, to some extent, more viable for individuals, too.

So maybe your solar panels generate more power than you need, and your electricity flows back into the grid… but to some degree electricity is fungible, so you can sell that electricity to some other buyer. In reality, you’re selling it into your energy grid, and your utility is selling it to someone else connected to that grid, but since the electricity you generate is the same as the electricity someone across the world needs, perhaps someday we’ll get to the point where it’s all fungible and trading on one central exchange — the electrical current that you’ve generated won’t itself move across the globe, but the right to have a certain amount of electricity could become a more standardized and tradable asset eventually. That’s a little utopian (or dystopian, depending on your perspective), but that’s generally the direction we’re moving, even if the local importance of generation, the immediate need to balance the grid wherever you are, and the cost of storage or transmission are always going to make trading electricity more complex than trading stocks, beanie babies or NFTs.

Hodge exaggerates in the ad, implying that he can sell his electricity to someone in need in Africa… there is, of course, no direct connection between his power grid in the US and the power grid in Zimbabwe or wherever else, so he can’t directly provide that electricity if they’re having a blackout across the world… but it gets the idea across. Just don’t take it too literally.

And the way I see it, using MEMS (micro-electromechanical systems) in this context is just a way to insert a mysterious buzzword — MEMS have little to nothing to do with energy trading (though these distributed sensors and machines can certainly make panels or electric grids more efficient — and yes, “smart energy” systems, including sometimes devices that could probably be considered MEMS, are part of balancing the grid, including managing the shift of outflow to inflow for home solar/battery systems).

The basic theme of the ad is that this “Amazon of Energy” is being created because of the rise of “Virtual Power Plants” — the growing ability, essentially, to treat networked solar panels and battery storage (like the panels and batteries installed across thousands of homes in a particular area) essentially the same as traditional power plants are treated. Here’s some more from the pitch:

“Back in September, the Federal Energy Regulatory Commission (FERC) issued Order No. 2222 — a change which removes regulatory barriers to virtual power plants by requiring grid operators to accept power from them — and to pay them at the same rate as traditional power plants.

“The order, which grid operators must implement by September of this year, has been compared by energy economists to the 1993 computer networking regulatory changes that allowed private companies to use the previously-public-sector-only NSFNet telecommunications infrastructure, creating the modern commercial internet.

“In the aftermath of those 1993 NSF changes, several entrepreneurs launched startups with the then-experimental idea of selling goods and services on the newly-opened network.

“Today, we call a few of those startups Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), and Netflix (NASDAQ: NFLX).

“Just like back then, one company is set to dominate this new virtual power plant space.

“I’m calling it the “Amazon of Energy”. And I think the gains could be similar.”

OK, so somebody is “set to dominate” virtual power plants — who is it? We do start to get some clues as the ad progresses, like this…

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“Every dollar of the $110 trillion ‘New Energy’ revolution will flow through this one website…

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