Dynamic energy procurement: Designed to meet the needs of your business
2 Minute Read
All businesses can benefit from keeping a close eye on their regular expenditure and business costs. Depending on the type of business, energy will be a significant cost.
Dynamic energy procurement
Energy prices have risen dramatically over the last decade and with the ever-changing array of contract options available, procurement has the potential to be complex. Dynamic Energy Procurement seeks to simplify the process whether it be fixed, flexible or a combination of the two and provide clarity and transparency through a consultative process taking into account strategy, appetite to risk, budget certainty and consumption.
Fixed energy contracts
Businesses looking for budget certainty generally opt for fixed price purchasing of energy, a perfectly sound policy if purchased at the right time, however, it provides a “once only” purchase option that is then fixed – perfect in a rising market but a falling market? Hindsight sadly is a rare commodity.
Wholesale market access
Those businesses that want to mitigate the inevitability of rising energy costs may go to the wholesale market and buy flexibly. how much energy they need to buy can be hedged and built up over a period, usually 3 years. This multiple purchase approach allows for the potential to mitigate against rising markets with the use of caps, floors, trigger points all of which are underpinned by market fundamentals and global information.
Once the domain of the high energy consumer, now suppliers are continually refining their products to make them available to originations with significantly less spend.
If a business has an energy spend in excess of £100,000 per annum, then the wholesale market option is one that should be considered but it is really a decision best made with a reliable and informed consultant.
There has been a general trend of increasing prices on the wholesale market in the last decade and there is no crystal ball to determine the trend for the next one. Wholesale prices are affected by market fundamentals, such as supply and demand, weather as well as unpredictable geopolitical events that can cause market volatility.
Whichever option you decide is best for your business, there is the option for you to specify that you’d like to purchase energy that comes from 100% renewable sources such as solar and wind.
You can find out more about renewable energy here.