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Energy Procurement For Large Businesses Explained

CHRIS RICHARDS | 30 JUNE 2021

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You need "energy" to power your large scale business. This could mean oil, gas, electricity, or some combination of these.

Unfortunately, large scale businesses often don't think about their power contracts opting instead for the reliability of a tried and tested provider. The trouble is, this attitude erodes revenue and wastes power.

The modern approach to large scale power management is procurement. This uses an analytic approach to energy usage in your business and finds a supplier who offers the best energy deal. This includes fixed pricing and budget certainty for your business energy contract.

In this guide, you will find all the information you need on making your own energy procurement strategy.

What is energy procurement?

An energy procurement strategy is an act of obtaining something; in this case, it refers to obtaining energy for your business. In particular, large-scale businesses require efficient sourcing to provide reliable power for their tools and manufacturing processes without overextending their budgets.

Typically energy management for large scale businesses comes from two sources - renewable and non-renewable energy.

These days there is a shift towards a fixed price renewable energy supplier as it provides better value and salability. That said, non-renewable sources can still be more efficient, making it a less time consuming process.

There are several factors an energy procurement team must take into account when procuring a fixed-price energy supplier for large companies. They must consider the supplier, the type of energy needs, the price, and how to procure energy. So naturally, power sourcing is what drives the success of your company.

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How does energy procurement work?

Power sourcing aims to find energy management suppliers who can supply energy in a reliable and cost-effective way. To achieve this, a power sourcing team or external service will begin by conducting an internal of the company's energy usage. This involves analysing your electricity bill and company processes.

Following an internal analysis, a power sourcing team will draw up a list of energy providers that could potentially supply the business. Below is a list of the common UK providers:

When selecting suppliers, teams will take account of the supplier's price, reliability, and quality and safety control methods.

When the vendor has been selected, a contract can be drawn up to supply an energy price to the business. This contract is usually valid for a term, after which the contract will be assessed and revised based on the energy market.

Following power sourcing, the team will continue to provide gas and electricity bill auditing services, market updates, utility assistance, and renewal pricing.

How can an energy procurement strategy cut down your energy costs?

Many large businesses are inefficient when it comes to energy consumption. They haven't optimised their consumption patterns and don't have a power sourcing process. This erodes revenues and wastes energy that could be translated into higher profits. An effective process can make a huge difference.

Firstly, a strategy will plot your consumption patterns and identify the precise energy requirements of your business. This knowledge allows you to modify your energy contracts for better efficiency and identify energy suppliers that can offer you the best deal on your precise energy purchasing needs.

But an effective strategy doesn't stop with basic analytical data; there is a continuous monitoring and feedback process to ensure your business receives the best price on the energy markets.

You can expect your power sourcing team to review your contractual terms regularly and switch suppliers where necessary to maintain optimal prices.

Are there any drawbacks?

Whether internal or external, working with a power sourcing team is recommended if you want to build power efficiency in your business. It will help you save money and optimise your large scale business for success. However, there are a few obvious drawbacks to power sourcing.

Naturally, a tendering team costs money. This must be factored into the hiring decision and cost management strategy. Moreover, your management team needs to conduct appropriate research on the power sourcing team to ensure ongoing success and optimisation.

There is a further drawback worth consideration, especially if you hire a third party service. Some power sourcing teams might have preferences or agreements with power companies that aren't in the best interests of your business.

Always ensure your tendering team operates within the agreed parameters of your contract.

Frequently Asked Questions

The short answer is yes! A power sourcing service can be set up internally by your management team and tasked with procuring and optimising your business power requirements. Alternatively, you can partner with a power sourcing service like Business Energy UK. But, of course, there are pros and cons to each approach.

There may be lower costs involved in setting up your tendering team internally. But that is not necessarily the case. You will still have to assemble a team of salaried staff who may not be as experienced or knowledgable as a dedicated service. An internal team also takes time to research and assemble.

When you partner with a dedicated power sourcing company, you know you are getting a high-quality service dedicated to large scale tendering. However, you have to weigh up the prices and benefits of working with a dedicated service to see if it's in your company's best interests.

Yes, it is! No matter the size of your company, it can benefit from an effective buying energy strategy; as with other areas of your company, the power you need should be optimised to your requirements. This reduces inefficiencies and supports revenue potential regardless of the size of your company.

Smaller companies might have smaller electricity and gas running prices and therefore stand to lose less from inefficiencies. But everything is relative. If you want your small company to grow in the right way, establish best practices early on for power tendering.

While it is recommended to review your gas and electricity tendering team and your power sourcing processes regularly, it can be beneficial for a small business to establish utilities processes and connections early on.

Then, as your small business grows, you can benefit from ongoing relationships with dedicated sourcing companies like Business Energy UK.

As with domestic procurement, the quoted price largely depends on the procured utility company and their market expertise, though these are subject to change.

The key elements of energy procurement for business are energy price, reliability, and a flexible contract. A good deal on procurement will score highly in these areas.

Instead of scouring the market yourself, it's best to partner with a power broker. A procurement broker has the best access to the market. They also have current knowledge of market prices, suppliers and energy procurement. Business Energy UK uses contact details to compare the market for you in under 60 seconds. It is the best strategy for many businesses or large organisations.

Effective energy prices should result in lower prices in the short term. At the point of procurement - if carried out correctly - your energy supplies should closely match the usage of your business for best energy management. However, the electricity market is constantly changing - on a nearly hourly basis - and there is no guarantee you will obtain consistently low prices.

This is why electricity flexibility is a key element in your purchasing. The global energy markets of oil, gas and electrical energy constantly fluctuate, so you need a power management method that allows for these ongoing changes. In short, you will obtain lower prices consistently if you have the right fixed contract in place.