As energy markets become more open, it is becoming easier to participate in the electricity economy.
Energy procurement has become increasingly important for businesses and organizations in recent years. Every business needs energy to operate, but the cost of energy can be a major expense. Energy procurement is the process of strategically securing energy to power your business or community. Stakeholders in the energy procurement process might include corporations, utilities, consultants, or developers.
Organizations might do this for several reasons:
- Manage energy price risk. (Especially if their business uses a lot of energy)
- Meet clean energy goals.
- Meet energy demand.
- Diversify your energy mix portfolio.
The end goal is the same – to source energy from a supplier to a buyer.
What is Energy Procurement?
Energy procurement is the process of purchasing energy to meet the needs and requirements of an organization. It involves evaluating different energy sources, negotiating with suppliers, and evaluating projects based on your goals. It also involves understanding the energy usage and environmental aspects of proposals to meet the organization’s long-term energy and environmental goals.
Energy procurement can come in many forms. For example:
- Power Purchase Agreement with a power resource.
- Purchase agreement with a power resource.
- Installing solar panels on your assets.
The process
Energy procurement is the process of finding, negotiating, and securing the best possible energy prices, terms and services for a business. It’s a complex process that requires research, comparison shopping and an understanding of the market.
- The first step in energy procurement is to assess your energy needs. You’ll need to decide what type of energy you need (e.g. electricity, natural gas, etc.) and how much of it you’ll need. You’ll also need to consider your budget and timeline.
- The next step is to research and compare energy suppliers. There are a variety of energy suppliers available, so it’s important to compare their prices, services, and terms. Once you’ve identified a few potential suppliers, you can begin the negotiation process. It’s important to be aware of the market and have a clear understanding of the terms and conditions of each offer. You should also consider any hidden costs and fees that could add to the total cost of your energy.
- Finally, once you’ve secured the best deal possible, you’ll need to implement the new energy supply. This includes ensuring that your equipment is compatible with the new energy source and that your systems are properly set up to take advantage of the new energy supply.
Energy procurement is a complex process, but it’s an essential part of running a successful business. By taking control of your energy procurement process, you can ensure that you’re getting the best deal possible and that your business is running as efficiently as possible.
Benefits of Energy Procurement
Why do companies choose energy procurement? For corporations, choosing an energy procurement strategy can manage price risk and allow you to meet clean energy goals.
Managed price risk
Businesses, especially industrial businesses, can use a lot of electricity. With the recent events such as winter storm Uri or the global energy crisis electricity prices can reach high peaks and provide heavy burdens on companies that use a lot of energy. As a heavy energy user, you can hedge your price risk if you own your own energy resources or if you have a fixed price contract. Then, when energy prices are high, you could make money on resources you own or pay a lower price for energy.
Meeting clean energy goals
Many companies have goals of going “100% clean”, “Net-Zero”, or “Carbon-Neutral”. Since a lot of the carbon produced comes from the electricity they use, it makes sense to decarbonize starting with the electricity used. One of the biggest ways companies can meet these clean energy goals is by receiving Renewable Energy Credits (RECs). Renewable Energy Credits are basically tokens of energy that only apply to energy produced from a renewable energy resource like wind or solar. If organizations invest in Renewable Energy Credits then, theoretically, more will be invested in renewables and more of our electricity will be produced from renewables.
3 challenges in Energy Procurement
Businesses need to ensure that they are taking steps to protect themselves from the risks associated with energy procurement. This includes understanding the terms of the energy agreement and understanding the potential risks of energy price volatility. Businesses should also consider their long-term energy procurement strategy, understanding the changing energy market, and ensuring that their energy procurement strategy is in line with their overall business goals.
Finding the right suppliers
Finding the right suppliers can be challenging. It’s important to have a good funnel to finding the right energy supplier. Finding a wide enough pool of suppliers to evaluate is the first challenge. With the decreasing complexity of building wind and solar projects, there has been an influx of renewable energy developers. There are many renewable energy developers in the US today. It can be challenging to make sure you cast a broad enough net and capture the necessary developers to participate in your process.
Data
There are many good sources of information and data that can be used to gain insights into an energy proposal. Information such as:
- Capacity factor
- Historical Location Marginal Prices (if the project is in an open energy market)
- Market data model
It is important to consider outside data sources that can contribute to evaluation of proposal success.
Evaluation
Evaluating many different proposals can be challenging. There are often time constraints and proposal selection deadlines that prevent us from carefully evaluating all resources effectively. It is important to have a structured evaluation and scoring methodology to evaluate proposals efficiently and effectively.
Solutions for the Energy Procurement process
Centralized location for finding suppliers
A centralized location to find suppliers can help make the energy procurement process more effective. Then, you can ensure that you are reaching a wide enough audience of bidders. Having a wide range of bidders can make you feel comfortable with your decision knowing that you didn’t miss a potentially attractive proposal.
Connected data sources
Data about energy projects and sellers most likely comes from various sources. Without the experience and skills you might miss out on key project and company information that can help you with the evaluation. A connected database of project data and company information helps you find important information quicker.
Evaluation tools
There are many factors that go into evaluating each project. Cost is important. There are also company evaluation metrics and risk factors for ensuring that projects come online when you need them. Consider an evaluation tool like Energy Adepto to help guide you through evaluation. Tools like Energy Adepto can help you have a faster evaluation process with automated evaluations. It can help you feel comfortable with your decisions with more data insights.
Conclusion
Companies often have trouble knowing where to start on their energy procurement path. It can be challenging creating an energy procurement process from scratch. Having a tool that can help you overcome common obstacles to an effective and efficient energy procurement process is important. Consider Energy Adepto to help you with your energy procurement process.
