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Energy insightsBest practice energy procurement for businesses
Energy explained

Best practice energy procurement for businesses

14 February 2024 | 5 minutes

The right procurement strategy can help you to manage energy costs and minimise risk. Here we look at some of the best ways to navigate this potentially complex area and get the most value from your business energy spend.

Navigating market evolution

The energy market is continually evolving, which means that keeping abreast of change should remain a corporate focus. While the advantages of managing costs are clear, there are also opportunities to maximise efficiencies, cut spend, reduce risk and decarbonise your operations – but proactivity is key. Ofgem reflects this view, encouraging those involved to take a more flexible approach. 1

Procurement is just one part of the puzzle

We know that organisations are already seeing the links between carbon reduction, risk, and positively impacting the bottom line. Carbon reduction goals can also increasingly be seen as a way to manage future energy supply risks. How much energy we use and the ways in which we use it are essential components of energy security. As the Government’s outlines in Powering Up Britain: Energy Security Plan (March 2023)2 reducing energy consumption by investing in energy efficiency measures helps keep bills affordable and makes us more energy secure.

So, managing consumption, monitoring efficiency, harnessing renewables, considering storage needs and ensuring the capacity to engage with flexible grids or demand side response must all be discussed by the c-suite.

Making change happen

The best place to start to enact positive change is with a complete picture of your organisation’s energy consumption and emissions. Don’t underestimate the power of data. You need to understand your baseline information to be able to effectively implement impactful change and measure progress.

Energy professionals need more information than ever to effectively manage different elements of the procurement process and are investing time into modelling analytics and programmes.

If you’re not already gathering data for analysis, however, you’re not alone. 69% of respondents to a recent survey commissioned by Shell Energy suggested that accessing relevant data was one of their biggest organisational challenges.3 Working closely with your energy supplier will enable you to understand how data can improve forecasting and demand to optimise pricing and contracts. Customer portals like the one provided by Shell can provide granular detail on bills that can help to shape decision making. Knowing that bills vary is not enough, you need to drill down into the reasons, whether this is by site, by job function or by operation.

Contract options

There are three main categories of products available for businesses procuring energy – fixed, flexible, and pass-through. While fixed contracts agree a price up front, flexible purchasing provides the opportunity to take advantage of wholesale price changes in the energy market, depending on your appetite for risk. Pass-through contracts, on the other hand, combine both fixed and flex elements, offering a way to fix your commodity price and choose which non-commodity costs (like distribution and transmission charges) are passed to you.

At Shell Energy we offer renewable electricity and gas options as fixed, flexible and pass-through products, so utilising this is one of the easiest ways a business can reduce their Scope 2 emissions.

Keeping positive momentum

Once you’ve set your strategy for procurement and energy reduction, it’s important to embrace ongoing monitoring processes across your business. Smart technologies are making it easier to manage the finer details of your energy consumption and optimise waste reduction. The more frequently you are reviewing performance and progress, the more agile your approach can be.

Colleagues discussing packaging order

The power of partnership

By working with an expert energy partner, you can navigate the landscape in the most effective way for your organisation. When it comes to procurement, an experienced partner will not only understand the best energy mix but will also have the knowledge to support you in the evolving renewables markets and with on-site energy generation initiatives.

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