Energy deregulation can have a significant impact on your business's bottom line. It results in choices that can change how you purchase ene...6 December 2022
How Wise Energy Procurement Decisions Benefit Your Business4 October 2022
Every decision you make for your business, from how much to pay your employees to what to include in your marketing plan, affects how your business runs. With so many things on your mind, how much thought do you give to what happens when you turn on your computer or power up your machinery? How you use the energy that keeps your company running and where it comes from is an important decision. It is as critical a part of your operations as payroll and marketing. Expertly navigating the energy procurement process can significantly benefit your business, and in this article, you’ll learn the basics of smart energy decisions.
What is Energy Procurement?
Just as you likely shop around for an office supply provider or your company’s insurance needs, you have options when it comes to energy suppliers. Energy procurement is the process by which you identify the most beneficial energy product for your business. This process includes many steps beginning with gathering information about your options before negotiating pricing and signing a contract.
You can purchase natural gas and electricity directly from suppliers, through an energy management consultant, or from a public utility. Each provider offers plans with different price structures, contract lengths, and energy sources. That means there are choices to optimize the purchasing of energy for any type and size of business, but it also means you need to be strategic in how you shop.
How Does Strategic Energy Procurement Help My Business?
We will start with price since, for many companies, competitive pricing is at the heart of their energy procurement strategy. Optimized energy procurement can save your business significant money.
In open, deregulated markets in the United States, Canada, and Europe you can price-shop for energy the same way you do other supplies and services your business uses. Different providers will have different price structures based on how much you use or even what time of day you use it. Comparing plans can help you determine the best fit for your energy consumption patterns.
But price isn’t the only consideration. Just as you may be willing to pay more for a shipping company that gets your merchandise to the customer more reliably or a marketing firm with a proven track record of increasing sales, there are other factors to consider.
A power outage can damage your business and your bottom line in multiple ways:
- Equipment Costs – Repairing or replacing equipment damaged by the outage
- Lost merchandise or supplies – Products spoiling due to a loss of refrigeration or climate control
- Productivity Losses – Your people and equipment sitting idle
- Disappointed Customers – Client dissatisfaction if you miss deadlines or are unreachable
One study showed that in 2016, the mean cost per minute for an unplanned outage at a data center was nearly $9,000 USD. So while it may feel like an outage is only a minor inconvenience, the fiscal repercussions can be significant to your bottom line and your reputation as a reliable business. When merchandise or equipment might be damaged or customers lost if you have an electric outage, it makes sense to prioritize reliability. As part of your energy procurement decision, you can research a provider’s history to determine the likelihood of them keeping the lights on, the refrigerators running, and the computer servers cool.
Your energy procurement choices affect the environment just as they do your bottom line and efficiency.
Not only can renewable energy allow you to feel better about your operations, knowing they do less harm to the environment, it can also attract customers looking for ways to reduce their own environmental impact. This way, the demand for renewable energy keeps growing, and as more energy customers focus on carbon emissions and environmental concerns, energy providers are responding with more sustainable options. Most will have at least one plan that allows you to dictate that some or all of your energy comes from renewable sources.
Dealing with variable utility expenses can be a significant challenge for businesses, especially those running on tight margins or considering major new expenses. Some energy providers help you address this with plans that stabilize your billing. A structured energy plan can help you avoid hidden fees, have more accurate budget forecasting, and control costs better.
You can also look for plans allowing you to pay an average expense over multiple months, so you know what the bill will be in advance. Also, if stabilizing your energy budget is a concern, you can look for contracts that will keep monthly or seasonal variations low.
How Do These Factors Come Together in Your Energy Procurement Decision Making?
It can be challenging to know how much weight to give each of these factors and how they apply to your business. A data center might prioritize reliability due to the high cost of outages. A smaller company that handcrafts merchandise may care more about environmental impacts, as outages affect them less. A start-up on a tight budget might need to focus initially on costs or budget predictability.
There’s no one right answer; you’ll need to evaluate your business and goals to determine what factors are most important to you and which suppliers and plans best fit those priorities. An energy audit can help you better understand your company’s usage patterns. Applying that knowledge to energy procurement decisions can help guide your choices and ensure the plan you choose will bring the desired benefits.
If you need help finding energy retailers, understanding various plans, and optimizing your procurement strategy, consider working with an energy consultant. They use their knowledge of the energy industry and their relationships with providers to get you the best deal on the plan that gets your business where it needs to be.
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