A renewed approach to commercial energy procurement

5  Office Building[2]Throughout the UK, businesses remain unaware of the opportunities energy purchasing can provide to their bottom line. In fact, the latest research by Ofgem has revealed that 40% of SMEs have not switched their energy supplier in the past five years. Scott Birley, sales director at Utility Team, explains how the implementation of a bespoke energy procurement strategy can not only save money but also offer countless benefits to property managers.

The latest figures suggest that more than one third of small firms are paying over the odds for their gas and electricity. And perhaps more concerning, nearly half (47%) of UK businesses have never switched suppliers or tariffs, with one in five not knowing that switching is an option for them. Faced with these stark figures, it is no surprise that commercial property managers are placing an increased emphasis on energy procurement.

In today’s energy market, with gas and electricity prices fluctuating by as much as 40% a year, making the correct decision about energy procurement is becoming a critical element in any commercial strategy. The opportunities provided by taking the correct approach to purchasing energy are abundant, but often companies see the process as too complex and time-consuming.

Taking control of energy purchasing

5  Lightbulb Shot[2]There is no ‘one size fits all’ approach when it comes to energy procurement so a bespoke solution, tailored to the requirements of the business, is usually the best approach for commercial property managers wishing to make the switch.

Factors such as whether the business is sourcing energy for a single site, a complex multi-site portfolio or for a new connection, all play a pivotal role in the decision. Considerations should also be taken to the size of the business and the budget available when considering which energy procurement strategy to adopt.

Both risk-managed fixed procurement, which offers stability with long-term fixed contracts, and flexible procurement strategies, which allow property managers to take advantage of rises and falls in the energy market, are available. But with a complex energy market and an abundance of choice for energy contracts, businesses are often reluctant to make a switch.

Purchasing strategies

5  Meter[2]In order to implement an energy procurement strategy, property managers firstly need to have a strong understanding of their current energy consumption. By carrying out energy surveys and using smart meters alongside the latest energy management platforms, businesses can analyse every aspect of their energy consumption – allowing them to make an educated decision on the energy contract they require.

Choosing the right procurement strategy is key to any business for making energy and cost savings. Property managers are under intense pressure to reduce energy consumption and expenditure in their commercial premises and an energy procurement strategy can help them to do this by choosing the right energy supplier. As competition amongst energy suppliers continues to grow so does the range of energy contracts available, with boundless options on offer for UK businesses, making the search for the provider a tricky process.

With the trend of energy purchasing moving away from the traditional fixed price approach, businesses can take a more flexible method for procuring gas and electricity for their building.

Flexible Energy Procurement

In today’s energy market, with gas and electricity prices fluctuating by as much as 40 per cent in a year, a flexible contract allows businesses to take advantage of rises and falls in a volatile market to ensure they get the right price at the right time.

Typically suited to large consumers of energy, flexible energy procurement offers more freedom than a fixed price strategy that can be restrictive, but also carries with it a degree of risk.

By taking this approach, commercial property managers can spread risk over multiple purchasing points, rather than gambling on a single price point. During flexible procurement the market is analysed to identify the best time to buy, ensuring commercial property managers get the best price available on the market at that time.

Although the benefits of a flexible strategy are clear, it remains a complex process and carries a greater level of risk than a fixed energy procurement strategy; so seeking the advice of industry experts is advisable. With the correct support a strategy and budget can be set before any purchase is made and daily value at risk analysis and warning emails based on the agreed budget parameters can be provided.

Fixed Energy Procurement

For businesses looking for stability and security within their purchasing strategy, fixed energy procurement is often the best approach. This strategy allows property managers to sign up to long-term contracts at a fixed price, offering a level of budget certainty that can’t always be achieved through a flexible procurement approach.

By employing a fixed strategy, commercial property managers can lock in a long-term price to buy energy in bulk and ensure they remain risk free throughout the duration of their contract.

In today’s fluctuating energy market energy procurement strategies are vital, not only to reduce energy consumption but also the costs associated with commercial property. For property managers looking to take advantage of a fluctuating energy market, the opportunities are boundless, and with the advice of an experience energy consultancy they can get the best deal available and make significant savings.