Let’s take a look at some important strategies for managing energy efficiently.
1. Evaluate your energy needs and consumption
Understanding your company’s energy profile is the first step in optimizing procurement. A thorough energy audit can help you uncover peak usage times, inefficient procedures and cost-saving opportunities.
For example, if your organization frequently monitors its energy usage and finds out what percent of it is during off-peak hours, this will present an opportunity for demand-side management. Once you have a clear understanding of your energy usage, you can modify your purchase strategy to meet your operating requirements. This will help you decide which type of energy contract suits your business best.
2. Choose the right energy procurement strategy
The three most common types of energy contracts are hybrid, variable-rate and fixed-rate. Every option has advantages and disadvantages; picking the right one for your company will rely on the demands of the market at the moment.
A fixed-rate contract provides stability and security against price increases by locking in prices for a specified period. Even though they would lose out if prices fall, these are perfect for companies that want low-risk, predictable costs. Variations of this type include pass-through contracts and power purchase agreements (PPAs), which provide renewable energy providers with either long-term fixed pricing or more transparency.
You have more leeway and the chance to save money when prices drop with variable-rate contracts because they change in tandem with the market. But they put you at risk of price increases, which makes budgeting more difficult. Flexible purchase contracts that enable purchasing in increments also fall under this category, as do indexed-rate contracts tied to a market index.
By combining fixed and variable rates, hybrid contracts provide companies with the ability to control energy expenses to some extent while also taking advantage of market troughs. Common hybrid strategies are the use of block and index contracts, which allow for some consumption to be set at fixed rates while the remaining portion follows market pricing. Without being completely exposed to market volatility, this alternative strikes a balance between risk and flexibility.
3. Incorporate renewable energy
Renewable energy sources are not only environmentally friendly but also prudent from a financial and risk management perspective. Businesses can reap environmental benefits and price stability in the long run by incorporating renewable energy sources into their buying plans. Power purchase agreements and renewable energy certificates (RECs) allow businesses to purchase electricity from renewable sources — such as wind or solar farms — at affordable rates, mitigating their vulnerability to the unpredictable prices of fossil fuels. The increasing emphasis on sustainability was demonstrated by the fact that, by 2023, more than 60% of Fortune 500 corporations had undertaken renewable energy initiatives.
4. Leverage data and technology
Utilizing data and technology is critical for optimizing your energy buying plan. Advanced energy management tools provide real-time insights into market trends, track usage patterns and identify cost-saving options that businesses may otherwise overlook.
Detailed analytics from these systems enable organizations to make better-informed decisions when negotiating contracts or managing energy consumption. More importantly, this proactive approach reduces risks by predicting market volatility and aligning procurement plans with both current and long-term objectives.
5. Manage energy risk
Factors including weather, geopolitical events and supply-demand mismatches cause price fluctuations in the energy industry, which is inherently unpredictable. If you want to keep your budget stable and avoid energy price spikes, you need to practice effective risk management.
Increasing the variety of energy sources used is one tried and true strategy. To mitigate the effects of market volatility, businesses can diversify their energy sources and use a combination of fixed, variable and hybrid contracts. To further protect themselves from unexpected price hikes, companies might implement hedging strategies, such as buying energy in advance, when prices are low. Working with an energy consultant, your company can create a unique plan for managing risk that takes your objectives, resources and comfort level with uncertainty into account.
6. Consult with energy experts
Getting through the complexity of energy procurement needs skill. Working with an energy expert can help your company get better rates, optimize use and apply risk-mitigation methods. EnerConnex consultants have vast market expertise and access to one of the largest supplier networks, allowing them to customize energy solutions to your unique requirements.
Working with energy professionals also guarantees that you meet legal standards and environmental goals, avoiding penalties and raising your corporate social responsibility profile. If you’re ready to decrease costs, manage risks and align with sustainability objectives, contact EnerConnex to begin optimizing your energy procurement plan.
