What is business energy procurement?
Making purchasing gas and energy easy
Business Energy Procurement is the process of purchasing gas and power on behalf of a commercial user. When done well, it will ensure the contracts secured meet the needs of the business and are at the best value rates.
Businesses with high energy usage directly or indirectly, employ the services of a specialist energy procurement professionals to help them secure gas and power contracts.
Agreeing the wrong contract or buying at the wrong time can be expensive. Conversely, buying well and at the right time will ensure cost savings. For high users, these differences have a significant impact on the bottom line.
But it’s not just high users that engage with energy procurement professionals. SME’s often outsource this responsibility as procuring energy can be complex and time consuming.
There are a myriad of energy suppliers offering varying prices and contract types. Comparing quotes is not simple. Attractive low prices are not always the best fit as they often come with hidden extras buried in the terms and conditions.
A good broker will make sure the quotes obtained are easily comparable, or if they are not, they will explain the difference between quotes. This means consumers can make informed choices. Resulting in no unwanted surprises being received during the contracted period.
With so many options available to business consumers, it’s vital the appointed broker understands the needs, wants, and expectations of each client. On many occasions the client will not be aware of what they need to consider. Both parties working together, will ensure the right procurement strategy is chosen. Purchasing under those requirements will ensure the right fit contract is secured at the best possible rates.
If your business needs advice on building a business energy procurement strategy, contact a member of the Ginger Procurement team, they will gladly give advice on how to get started.
Why is business energy so expensive?
Around 50% of the overall price of business energy procurement is made up of the commodity cost e.g: the cost of the gas or electricity on the open market. The commodity cost is extremely volatile and can be affected by:
- Supply and demand.
- Oil prices.
- Global politics.
As the world tries to return to normality after the Covid pandemic, there are huge supply and demand issues. On top of the pandemic, the weather in 2021 was not as predicted as expected. Renewable energy didn’t give the UK enough electricity, so our gas reserves were used. This means we now require more gas than anticipated. This is the same for many countries, adding pressure to demand.
Those countries which heavily invested in nuclear plants, have avoided this crisis as they do not have a high demand for gas.
There are many ways for a business to ensure they avoid purchasing when the commodity is being traded at the peaks of the market. By working with an Energy Procurement Specialist, you can formulate a purchasing strategy, which will suit the requirements of your business and mitigate the risks of market volatility.