There is safety and power in numbers. Your business’s energy procurement is no exception to that rule. When several companies come together to purchase their energy, they can use that increased buying power to their advantage. This practice, known as energy aggregation, allows smaller companies to pool their business, opening up additional pricing and plan options unavailable to them as smaller, separate entities. Let’s answer some common questions about energy aggregation.
How does energy aggregation work?
Buyer energy aggregation
As an individual consumer, your company may have limited ability to negotiate prices or energy plans. However, if you pool your energy procurement with other companies, forming one large entity, your business becomes more valuable. As a group, your electricity or natural gas use is more significant. Because of the increased value of your contract, utility companies in deregulated markets will be more likely to want to gain your business. They may be more inclined to offer concessions or incentives to entice you to sign with them.
Project aggregation is the creation of a portfolio of energy projects that are then sold to utility users as a package. Just as a mutual fund allows a buyer to own small bits of many different companies, energy project aggregation blends multiple energy projects, allowing buyers to access all of them. Project aggregation is often used for renewable or experimental technologies, pooling several projects together to support innovation while providing user stability.
Community choice aggregation
Also known as municipal aggregation, community choice aggregation (CCA) allows local governments to procure power for businesses and residents. CCA enables them to access alternative energy sources, focusing on renewability and price while continuing to deliver power through the existing utility company. CCAs give communities more control over the source of their electricity, allowing them to access more ecologically friendly energy and lower rates by aggregating demand.
What are the benefits of energy aggregation?
The larger your account, the more power you have, whether you are buying printer paper or electricity. Energy aggregation allows you to supercharge your buying power by combining it with other moderate-sized users. Together, you offer an attractive block of business. Utility providers often offer discounts to secure the large account you form. Just as buying a truckload of paper gets you better pricing than purchasing one ream, buyer energy aggregation saves you money by giving you access to better pricing.
Aggregation may also save on transaction costs as these expenses are spread across all the members in your collective rather than being born by your business alone.
In the same way, your larger, pooled block of business can open up better pricing options, it can also give you access to more favorable contract terms. Because providers are eager to earn the business of your group, they may be open to terms not offered to smaller users.
A buyer might hesitate to source all or most of their energy from one renewable or experimental project due to the risk of failure or outages. By accessing projects through project aggregation, you remove much of this risk. Just as a mutual fund buyer doesn’t risk losing all their money if one company fails, businesses that use energy project aggregation see the benefits of using innovative, renewable energy projects without the risks of relying on only one source for their power or the inconvenience of needing to make multiple transactions. They are one of many users supporting multiple projects simultaneously.
You limit the financial risk by distributing the consequences of a single delay, output decrease, or failure across the pool of buyers. You also help ensure your contract continues to provide the agreed-upon load, even if one project goes offline or underperforms.
How do you know if aggregation is suitable for you?
An energy consulting firm can help you understand whether aggregation is right for your business and may be able to help you form or join a group of other buyers. They can work with you to understand the options available to your business as an individual account and what additional price structures or contract terms might open up if you pool your energy procurement with others.
Someday, your business may be a massive, influential economic force. But until you can compete with Amazon or the Royal Bank of Canada, you can combine forces with other moderately sized companies to procure your energy at preferred rates and terms through an energy broker like DNE. You can also use project aggregation to access multiple innovative, renewable energy sources. You can be a moderate energy user and still access the favorable pricing and terms usually only available to the largest companies. Energy aggregation can help you utilize the power of numbers to unlock those advantages.
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