Efficient Energy Is Cheap Energy

Unlike Thomas Edison, the name Samuel Insull may not immediately ring a bell. But, together these men made electricity available and affordable to the masses. They combined a new industry structure and an ingenious business model that enabled electricity and the economy to embark on an unbroken century of growth. The principals of Insull and Edison still apply today – creative thinking that optimizes equipment and systems plus the right capital can lead to tremendous growth opportunities.

In the late 1800s, electricity was only available to the wealthy that were willing to pay high dollar, flat usage fees. Although everyone knew the appeal of electricity, the economics of bringing it to market were difficult. Thomas Edison had the vision to change this, saying “We will make electric light so cheap that only the rich will burn candles.” Yet, it was truly his former colleague, Samuel Insull, who helped turn this vision into a reality.

While others in the industry forecasted profits based on the amount of electricity sold, Insull recognized demand was the true profit driver. Two key pieces of information drove the development of his unique business model: First, electricity had to be generated and used simultaneously. Second, turbines were not being used to capacity at off-peak times. This resulted in Insull developing a new demand-based billing system while expanding his client base to maximize the productivity of his equipment. He began to offer to wire houses at no cost. Electricity rates quickly declined with a diversity of customers using electricity at different times.

There are a few key lessons that we can learn from the story of Insull. The first is that efficiency, whether in electric use or systems operation, decreases operating costs and increases profits. Insull’s electric grid delivered cheap electricity to businesses by maximizing his output. Prior to that, electricity was unnecessarily costly and, therefore did not achieve its true economic potential. The same can be said for any business model; even if energy is cheap, if you’re not operating efficiently in terms of equipment and systems your business is losing money.

When considering energy efficiency improvements we often think of equipment upgrades but neglect process modifications and control systems that can allow you use your current equipment at maximum capacity. For example, variable frequency drives are control devices that increase efficiency by adjusting a motor’s speed to match required output. Recent improvements in the technology of these VFDs allow them to be applied to an array of motor driven systems.

The second lesson is to never underestimate the value of smart capital, and those who can provide it. Samuel Insull was brought to the U.S. by Thomas Edison because of his business savvy and his ability to secure European financing for the world’s first central power station in New York after American investors declined the opportunity. This illustrates that the capital intensive nature of many energy projects have been a deterrent to progress since the industry began in the 1800s. Financial expertise was as much a necessary complement to operational ingenuity then as it is today.

When combined operational ingenuity and financial expertise lead to great things. But, this may be difficult for many Tennessee businesses to achieve. Alone, a business owner typically does not have access to all the technology, best practices, and financial solutions they need to make their business completely efficient. Like Edison and Insull, Pathway Lending can partner with your business to turn its vision of efficiency into a reality. We provide our clients with the financial capacity to make projects happen and the support they need to identify opportunities for efficiency in their business.

 Ingenuity, financial capacity, and the passion to help Tennessee’s businesses grow: It’s what Pathway Lending brings to all of its client relationships. Let us help you unlock energy savings that exist in your business.

 For more information, visit www.PathwayLending.org