Key Elements of an Effective Energy Procurement Strategy

In the current business climate, cost-effective energy management is becoming increasingly complex, and energy prices can be variable.

FREMONT, CA: Energy procurement is a major budgetary issue for many large organizations. With so many moving aspects requiring daily attention, energy can be relatively low on the budgeting priority list. While energy usage continues to eat away at budget funds, organizations may be wasting money on energy. It is advantageous to be aware of energy requirements and prices and to proactively establish an energy strategy that matches the budgetary and business objectives. As a CFO in manufacturing, healthcare, education, or property management, it is advisable to include energy on their risk management map to save costs through strategic energy procurement and management.

Measure outcomes and adapt as necessary: After determining who is responsible for the energy procurement plan, it is essential to set some criteria, such as analyzing the property's energy usage patterns, finding waste areas, making improvements to increase energy efficiency, and monitoring energy expenditures. The information can get obtained from various sources, including building management systems, utility or supply bills, and metered data from the providers. Measuring a company's energy usage and expenditures monthly is the most effective method for determining how the approach affects the bottom line and identifying improvement opportunities.

Identify cost-saving energy opportunities: In deregulated energy markets, CFOs can reduce their energy expenses by utilizing the competitive bidding process and the correct energy supply product. Some services can lower energy use, including demand response, energy efficiency measures, and the usage of renewable energy, such as onsite solar or renewable energy credits (RECs). The energy plan should comprise the optimal combination of strategy and services based on the energy markets they operate and particular usage conditions. Energy procurement is one of those duties that fall anywhere on an organization's list of top priorities.

Choose based on empirical evidence to optimize savings and minimize risk: Electricity and natural gas costs are affected by several variables. Energy procurement decisions encompass both the known and the unknown. Evaluating energy consumption and its effect on costs is essential. Knowing budgets and goals can assist in mitigating risks and preparing for the unknown, such as future energy prices. A strategic analysis will influence energy purchases' strategy, product, and duration. Not every company has in-house energy procurement knowledge, so seeking outside counsel and consulting can yield substantial returns.

Comprehend the specifics of the energy contract: Energy supply cost comprises numerous components. It is essential to comprehend all the details of contract pricing and if an energy contract assigns the risk of price fluctuations. The energy contract should also account for building expansions, relocations, closures, onsite and off-site generating, and other efforts that may alter rates or result in penalties. Monitoring the energy business to capitalize on favorable market shifts is also essential.