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Five energy procurement strategies for businesses

9 April 2024

Securing the right energy contract isn’t just about locking in the best rates. Energy procurement includes safeguarding your bottom line, reducing risk, and aligning with your sustainability goals. Sounds complex? It can be, but navigating the complex landscape of business energy procurement is easier with a few simple strategies.

Imagine this: You’re managing a thriving enterprise, but it’s time to renew your energy contract. Lurking in the shadows is the uncertainty of volatile energy markets and the risk of being locked into unfavorable contracts. This is where having a few key facts ensures that you make informed decisions that propel your business forward.

Energy procurement is similar to many other business tasks. If you possess certain knowledge, or better yet have an expert partner in your corner, you can take the credit for genius business decisions. Read on to learn some insider knowledge about the energy procurement process.

Strategy 1: Know where the money is going

Before diving into the intricacies of energy contracts, it’s crucial to conduct a thorough assessment of your energy needs. A savvy way to conduct an assessment is to examine the factors that contribute to your energy usage. Many people will simply look at historical energy usage patterns and assume that nothing will change. However, if you break down your total expenditures into smaller categories, you may find areas where large energy savings can be made.

Once you’ve got a new baseline, identify peak demand periods and forecast future requirements based on your business growth projections.

This will help you gain a clear picture of your energy profile rather than a vague notion of where all that money is going. With a clear picture of your energy needs, you can negotiate a contract tailored to your risk tolerance and energy demand requirements. For example, fixed-rate plans for budget certainty or flexible options to accommodate fluctuating demand.

Moreover, consider factors such as your industry’s energy consumption benchmarks, seasonal variations, and any upcoming projects that may impact your energy requirements. Armed with this insight, you can engage with energy suppliers from a position of knowledge. Rather than blindly following what the suppliers say you might want, you can ask for what you need.

Strategy 2: Negotiate favorable terms

Negotiation is an art form, especially in the realm of energy contracts where the contracts last for months and the costs are ever-changing. If you focus entirely on the best rate, you may end up having a brittle contract that makes energy consumption a constant stress. In addition to demanding competitive rates and negotiating favorable terms, asking for terms and conditions that offer flexibility, transparency, and risk mitigation can be especially powerful. Pay close attention to clauses related to contract duration, early termination fees, and price escalation mechanisms to safeguard against unexpected cost hikes.

Furthermore, explore opportunities for value-added services such as energy efficiency audits, demand response programs, and access to renewable energy sources. Leveraging these offerings not only enhances your sustainability credentials but also contributes to long-term cost savings and resilience against market volatility.

Strategy 3: Don’t discount renewable energy options

In an era defined by climate change and environmental consciousness, the transition to renewable energy is no longer a choice but a strategic imperative. Incorporating renewable energy sources into your energy procurement strategy not only reduces your carbon footprint but also insulates your business from the rising risks associated with fossil fuel dependence.

Whether it’s solar, wind, or hydroelectric power, the renewable energy landscape offers a myriad of options to suit diverse business needs and geographical considerations. Explore power purchase agreements (PPAs), renewable energy certificates (RECs), and on-site generation solutions to harness the full potential of clean energy while maximizing cost savings and sustainability impact.

Engaging with suppliers who demonstrate a commitment to environmental stewardship can make a bigger difference than hundreds of individuals trying to live sustainably. By forging partnerships with like-minded entities, you not only amplify your sustainability efforts but also contribute to the collective goal of building a greener, more resilient future.

Strategy 4: Don’t sign and resign

Securing the perfect energy contract can feel like making it over the finish line. It’s tempting to catch your breath, shake hands, and then move on and forget all about it. However, businesses that see signing as just the beginning will win in the long run. Implement robust energy management systems and monitoring tools to track your consumption patterns. This will identify areas of inefficiency and uncover opportunities for further optimization during the contract.

Stay up with market trends, regulatory developments, and technological advancements that may impact your energy strategy, and be prepared to adapt accordingly.

Strategy 5: Hire an energy consultant

If all the previous suggestions sound like a lot of work, there’s still a way to cash in on their undeniable benefits. Energy procurement consulting can assess energy needs, read the small print to secure favorable terms, and keep you up to date on the latest from the renewable energy market. All of this in only a few hours. Finding a consultant you trust is key to ongoing monitoring and the best long-term results.

In today’s dynamic business landscape, energy procurement is not merely a transactional one-off but a process that demands foresight and agility. By embracing these energy procurement hacks, you empower your organization to navigate the complexities of the energy market with confidence.

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Five energy procurement strategies for businesses

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