Strategic energy procurement: How and when are you buying electricity and gas? 

Energy procurement is not just an energy manager’s concern, but a strategic business decision. Every business needs to power their everyday operations, which places energy procurement at the centre of organisational decision-making.  

However, energy is an intricate and instantaneous landscape to navigate, whether we examine what drives gas and electricity prices in the UK, the industry information that makes up your bill or choosing the right energy procurement strategy for you.  

Every organisation is unique in requirements and ambitions, which in turn determines the energy procurement options available to you. For example, do you want to: 

• Free up internal resources by being less involved in the direct decision-making during your contract? 
• Ensure you are taking advantage of the whole market – even if it requires making decisions at short notice?
• Bolster your sustainability ambitions by only choosing renewable energy sources?

How and when are you buying electricity and gas?

Energy is one of the most volatile commodity markets in the world – continuously subject to sudden price changes driven by numerous factors such as the weather, geopolitics and global supply chains. Despite prices moving down from the highs of recent years, daily price volatility remains double that of the pre-energy crisis norm.

Simultaneously, it’s a dynamic space where swift informed decisions allow you to take advantage of sudden market movements. Therefore, how and when you buy does matter.

However, your options are tied to the type of energy contract you have. Each energy procurement option comes with considerations, advantages and disadvantages and is dependent on your organisation’s appetite for risk. 

What are the most common energy procurement solutions?

A fixed price contract locks your energy unit rates in for the duration of your contract – offering budget certainty and requiring less involvement.  

However, the changing nature of the energy market means there is a risk of locking in at the wrong time – which increases if you let your existing contract run close to its expiry and need to make quick decisions to avoid out-of-contract rates.  

A flexible contract allows organisations to spread the risk associated with energy price volatility across multiple purchasing points. This means making several purchasing decisions throughout your contract – the price you pay will be the weighted average value of those purchases.   

While flexible procurement offers greater control and the potential for cost savings, it can be more complex to manage. Moreover, if you are a smaller energy user, your available options can be more limited.