What Do You Need To Know About Business Energy Procurement?
With the current unsettled energy market and fluctuating prices, finding the right package for your business has never been so important.
Even in the current climate, it is possible to find a bespoke energy package which fits your business’s particular needs and ensures greater financial stability for the future. You just need the right strategy.
Business energy procurement is simply the process of purchasing gas and power on behalf of a commercial user. It is a business in itself, and to do it well you will need up-to-date knowledge of your own business’s workings and requirements, an idea of future targets, and an understanding of the energy market.
Here is all you need to know to develop an effective business energy procurement strategy for your business.
Why is business energy so expensive?
Before looking at how business energy procurement can help your business, let’s look at the market to answer the question every manager has asked themselves: why is business energy so expensive?
The answer is that around 50% of business procurement energy consists of the commodity cost, meaning the price of gas and electricity on the open market. This makes the market highly volatile, easily affected by a number of external factors.
These factors include supply and demand, weather and climate, oil prices, and global politics, none of which are known for their stability.
The COVID-19 pandemic and the subsequent return to normality led to problems with supply and demand, as, with most people working from home, there was simply not enough demand for the energy to run offices, shops, and other commercial premises, followed by a surge in demand as workers returned to the workplace.
On top of that, climate change means that the weather of recent years has not been as predicted. The UK, like many countries, did not produce enough renewable energy to counteract this in 2021, meaning our gas reserves were used. We now require more gas than intended, a demand we share with other countries. Countries which have invested more heavily in renewable and nuclear energy do not have this problem.
Add war between Russia and Ukraine to that, and it’s easy to see why energy is as expensive as it is. But what can your business do to ensure it gains the best energy deal for the fairest price, despite the current volatility?
Making purchasing energy and gas simple
With energy prices being what they are, agreeing to the wrong contract or buying at the wrong time can cost your business a lot. Conversely, buying well at the right time can lead to big savings, especially for a business with high energy usage.
The important thing is to be informed, especially about what your business needs from its energy package. Look at your recent energy usage and determine whether that usage is going to continue into the future, or whether changing targets and goals will impact it.
A more risk-averse company may do better to seek out longer term contracts with greater security, whereas a risk-seeking corporate organisation may prefer a shorter contract which allows them to diversify their strategies.
Document the links between your corporate goals and energy procurement strategy. Listing your goals and mapping procurement objectives to each one will make your search for the right deal much more focussed.
Approaching different suppliers will give you a better sense of their price, reputation, customer service, and turnaround times. It will also help you cultivate a trusting relationship with suppliers, a key part of any successful business deal.
If you do not have the time to deal with business energy procurement yourself, employing the services of an energy procurement professional could give you peace of mind. They will work with you to ensure you get the best deal for your business needs.