Energy procurement: the purpose of developing a strategy

As business leaders will know, energy is expensive, and therefore their risk and procurement strategy will be a key point of discussion in boardrooms across the UK. A good strategy can shield a company from the negative effects of market volatility, and in some cases provide a significant competitive advantage, translating into higher profitability and growth.

While a procurement strategy centrally offers the potential for significant cost savings, it also ensures stability amidst fluctuating prices and contracts. This blog will walk you through the value of having a procurement strategy and the benefits for businesses that collaborate with an energy consultant.

Why should businesses have an energy procurement strategy?

In previous years, an energy procurement strategy might result in three quotes every two to three years to make sure the suppliers were offering competitive pricing. However, this assumes that the supplier margin is the biggest risk to a business.

When commodity and system charges are the elements which have changed the most in recent times, a straight tender won’t necessarily manage the predicted and unforeseen risks. In some cases, the best offer won’t necessarily perform over the term of the agreement as different offers contain hidden charges.

What are the key components of effective energy procurement?

Having a procurement strategy is not just about choosing a supplier but has other key components. Another key feature of a procurement strategy is ensuring the volume of forecasts and historical data is accurate. This is essential because commercial energy contracts will have penalties for over and under-consuming on the amount of energy procured.

By analysing energy usage and expenditure, businesses can gain useful insights for future planning, facilitating cost reduction, mitigating energy waste and avoiding costly penalties.

Is sustainable energy procurement important?

Businesses embracing sustainability are evaluating not only costs but also the environmental impact of energy procurement, aligning with their Net Zero goals and enhancing corporate social responsibility.

Businesses are increasingly adopting renewable energy procurement and corporate renewable Power Purchase Agreements (PPAs) to reduce their carbon footprint. Sustainable sourcing initiatives positively influence brand reputation and stakeholder relationships.

Using renewable energy sources is a way of demonstrating climate leadership, proving your business is committed to doing the right thing. By streamlining energy procurement practices, businesses can capitalise on cost-saving opportunities, mitigate risks, and contribute to a sustainable future.

Amber’s expertise with energy procurement

Amber have significant experience purchasing energy and reviewing supply contracts internationally and with a huge range of industries. We understand that it’s not a ‘one size fits all’ approach, and what works for one client may not work for another.

That’s why we take time to try and set a strategy without jumping the gun and matching you with a supplier. We carefully select and recommend suppliers based on their ability to accommodate a client with their individual requirements.