What is energy procurement?
Energy procurement is the sourcing, identification and acquisition of the gas and electricity contracts that will best suit the needs of your business. Whether you practice energy procurement in-house or work with a third party specialist, the basic aims and objectives remain the same – to obtain the most economically practical energy deals for your organisation, while also taking into account the potential sustainability and renewables targets your business may have set.
How does energy procurement work?
Whether you run a large organisation, an SME, or even a start-up company, sound energy procurement is vitally important. However, the size of your business and the resources available to you may have an impact on how energy procurement will work for you.
There are a number of methods of putting an energy procurement strategy into place. Firstly, you can compare and work directly with the energy suppliers themselves. Although savings can be made thanks to a lack of broker or consultancy fees, it’s worth noting that this method can be very time-consuming due to the amount of research needed to find the best deal for yourself. Additionally, poorly implemented strategies, without the help of experts, could result in your business being stuck in uncompetitive fixed-term energy contracts, costing the business more money than is necessary. You may also struggle to access the best tariffs if you deal with these companies directly.
Alternatively, for many businesses, the energy procurement process works with help from industry experts in the form of energy management consultants and brokers. These third party intermediaries can be authorised to work on behalf of your business to weigh up all available options and select the best suppliers and tariffs to suit your organisation’s needs. The advice of most consultants and brokers will involve the use of qualitative research, keeping the entire process as transparent as possible.
Managing your energy procurement plan
Regardless of how you’ve decided to manage your energy procurement plan, the process itself should follow a similar set of standard steps. Typically, the process will start with a complete energy audit of your business to identify the current energy needs of your organisation across all facilities. This will not only give you a good idea of what the specific energy requirements of your business look like, it can also highlight any areas of your organisation that could be easily modified to help cut down your business’ carbon output before new energy contracts are even sourced.
Using the data found during your energy audit, you can now begin to research, source and compare energy suppliers and their specialist business tariffs to find the best rate for your business. The quickest and easiest way to do this is to use a comparison site. In modern industry, businesses will use the energy procurement process not only to find cost-saving new energy plans, but to find gas and electricity suppliers that will also help to facilitate any corporate energy efficiency and sustainability projects and goals. This could involve helping to put new technology-aided energy management processes in place and offering dynamic pricing structures through the use of smart technology.
Energy procurement for businesses
Although a crucial aspect of running your business, the importance of sound energy procurement strategies still tends to be overlooked in the UK, with many companies seemingly unaware of the cost-saving opportunities available. Research from the energy regulator Ofgem even suggests that more than one third of UK organisations are paying too much for their gas and electricity, with a staggering one in five businesses admitting to not knowing that switching suppliers was even an option. With this in mind, the need for well-structured and properly implemented energy procurement strategies has never been more important for UK businesses.
In today’s difficult economic landscape – one in which gas and electricity prices for businesses can fluctuate by as much as 40 per cent a year – making the best possible decisions when it comes to energy procurement is becoming an increasingly vital element of any business plan and commercial strategy. Although the process can be complex and very time-consuming, the cost-saving benefits, not to mention the potential advantages regarding energy sustainability within your organisation, may be too great to pass up.
The energy procurement measures outlined above are fairly generic and can be adopted by a wide range of businesses and organisations from a selection of industries and sectors. Below, we’ve highlighted some more specific aspects of energy procurement that can be utilised by particular types of organisation.
Energy procurement for schools
Although traditionally managed by local councils, the new national model of academies and ‘free schools’ has enabled the UK’s school system to modernise, giving these institutions the opportunity to save money on their utilities as a result. Historically, local schools would not have a system in place for procuring energy themselves and this led to many being tied into numerous local authority-organised independent energy contracts, all with differing end dates, renewal clauses and management issues.
The ability for schools and academies in the UK to now streamline energy costs through the use of a properly implemented, corporate-like energy procurement plan has allowed schools to simplify the way energy works in educational organisations. For example, being able to efficiently manage contracts and renewals thanks to a single company supplying both gas and electricity, with co-terminus contract end dates, can save a school thousands of pounds each year.
Energy procurement for data centres
Designed to house the computer systems and servers that store large amounts of important information, data centres require a great deal of energy, making energy procurement and management vital in these facilities. As the use of data centres has become more common over the past two decades, energy efficiency strategies have evolved to help optimise performance and cut unnecessary energy usage. The success of these strategies relies on good energy procurement.
Whether your business is looking to build its own data centre or simply find a better energy deal for an existing centre, a sound energy procurement plan can ensure the right supplier and tariff is found. This can cut costs and wastage, as well as help to meet future sustainability and efficiency goals.
Energy procurement for warehouses
With the use of large storage buildings integral to the operations of many businesses, the price of warehouse gas and electricity can have a huge impact on your bottom line. However, as with the other types of organisations discussed, a well-structured energy procurement policy can help save your business time and money. From finding the right energy supplier to help with new energy management strategies that can both cut down on energy wastage and highlight expensive-to-run outdated equipment, to benefiting from dynamic pricing structures through the use of half-hourly meters and smart technology, adopting a sound energy procurement process for your business’ warehouses is a no brainer.