The Price of Payback

Wednesday, October 15, 2014

I've been thinking about appliances lately, and I keep noticing their energy star ratings. Devices bearing the energy star seal are more energy efficient than other devices. Buyers can do a bit of reading and quickly determine how long it will take for the savings in energy costs to offset a possibly higher purchase cost.

For homeowners with a bit of spare cash, buying a more efficient appliance is usually a great idea. But not everyone owns his own home - in the United States, for instance, roughly a third of all folks rent.

Renters have little say in the appliances purchased for their domiciles and landlords are incentivized to buy appliances with the lowest up front costs, because any energy savings will go to their renters instead of them.

As a result, everyone loses. The tenants lose because they are forced to pay more than if they used more efficient appliances. Landlords lose because they are not receiving their "share" of a potential payback from energy efficiency. Society loses because increased energy demands mean more pollution in the environment and more stress on the energy grid.

So what's the solution? I'm not sure. Perhaps a rating system for the energy efficiency of apartments would make tenants look for energy efficient housing. Perhaps tax penalties for out of date appliances might work too.

Most likely, there is no solution. The dollars in savings that the average tenant could potentially accrue in his short tenure at any given location are likely too small to warrant the cost of administering a program to correct this inefficiency.

Fortunately, the world of software follows very different rules. Why not check out my book on pricing software systems?