For any business, energy is likely to be one of the largest overheads in the current climate. This means that securing the right deal is crucial. However, with an ever-changing market and fluctuating prices, that is easier said than done.
Energy procurement isn’t just about securing the best price for the short term, but finding the best deal over time for your company’s needs. A comprehensive business energy procurement strategy can make all the difference, helping to mitigate risk and ease operational pressures.
The energy market is vast, but if you know how to navigate it, you can find a range of bespoke options for your business, helping to secure its future success.
What to consider when developing your strategy
Your business’s budget will inform decisions surrounding the length of your energy contract and whether to opt for a fixed or flexible energy procurement. Striking a balance between savings and budget security is important, but every company will have different budget requirements.
Understanding your risk profile will help you find the right fit. Risk-averse companies will likely be attracted to long-term contracts with greater security, whereas risk-seeking corporate organisations may prefer to diversify their strategies.
Legislation and policy
Internal or external legislative or policy requirements will influence your procurement strategy. Sustainability and green policies are common considerations for corporate energy users. Therefore, any procurement activity must remain in line with any green corporate objectives.
Supply and consumption data
Providing suppliers with up-to-date supply and consumption data will increase the accuracy of pricing and the success of the tender. For best results, provide the supplier with information about the last 12 months of consumption, along with a forecast of the future if you’re expecting a change compared to your previous usage.
A step-by-step guide to forming an effective energy procurement strategy
Analyse the current situation
Every good manager understands the objectives of their business, and that understanding will help you find the best energy deal.
Consider what your company wants to achieve in the future, and how the right energy deal might support that. Also, look at areas where your business could be improved. Could more efficient, cost-effective energy make up for some of these shortcomings?
Educate yourself on the risks and market position associated with your business, considering factors such as market volatility and stakeholder management.
Keep your goals in mind
Once you’ve evaluated your situation, your next move should be to document the links between your energy procurement strategy and corporate goals.
This will differ from industry to industry, but making a list of your company’s goals and mapping procurement objectives to each one will make finding the best energy package much easier.
Develop relationships with suppliers
As with any business transaction, a massive part of energy procurement is cultivating relationships. The way you deal with energy suppliers will play an important role in increasing operational and cost efficiencies, so take the time to establish trust and credibility with any suppliers you are considering working with.
Don’t hesitate to shop around, meeting different suppliers to gain a better sense of price, reputation, customer service, and turnaround times.
Create specific targets
All business targets should be specific and measurable, and that includes energy procurement.
A consistent method of tracking key metrics, and then linking these metrics to your procurement strategy, will enable you to track progress more effectively over a period of time.
Plan your approach to the market
Your approach to the market determines your tender process, your pricing mechanism, and the type of contract you’ll require for certain projects.
Consider the delivery model and the nature of the work, as well as any anticipated risks and the timeframe for delivery alongside deciding on a contact type that ensures cost-effective, high-quality outcomes.