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Energy buying performance: can you measure it?
As all energy purchasers will know, seemingly minor fluctuations in the wholesale price of electricity can have a rippling effect for the larger energy users – pushing up overall operating costs and having a detrimental impact on competitiveness.
Let look at why this is the case. The graph below shows how the GB winter wholesale power prices have fluctuated over the last five years. For power purchased for winter 2014, prices peaked in April 2012 at £60/MWh, and hit its lowest point in July this year for £45/MWh: this is a 33% difference in the wholesale cost of power – and the knock on impact of this is profound.
Take for example Company X, who uses 50GWh of electricity a year, with a total energy cost of approximately £5,000,000. With these variations, their annual spend could vary by approximately £750,000 – and this is before we account for the costs of transmission, distribution and other factors, which can also be fairly changeable.
Furthermore, as can be seen below, winter 2014 isn’t even a comparatively volatile wholesale power market. Particularly turbulent periods can see prices vary by around 50% each way – a change which could mean a £1,250,000 increase in Company X’s annual bills. This is a figure unlikely to be easily absorbed by many businesses.
To mitigate against these fluctuations, many large organisations have experimented with different purchasing strategies to manage the risks surrounding wholesale energy price fluctuations. Most companies have accepted they measure their performance against an average market price or budget. But increasingly businesses want to know how they are performing competitively and whether their chosen strategies actually work.
Independent consultant Cornwall Energy is aiming to answer these burning questions and provide tailored advice for energy buying organisations looking to further develop their strategies for engaging with wholesale power markets.
Through your completing a simple questionnaire and providing data on your energy purchases, we want to discover which tactics consistently secure the lowest prices and address some of the burning questions:
– Does lock/unlock reduce the money spent on purchasing energy, increase the time spent on purchasing energy, or both?
– Does a structured hedging plan consistently achieve good prices? and
– Do other non-physical buying strategies improve overall price performance?
The study is open to large energy consumers with flexible contracts and TPIs who are buying on behalf of larger users either directly or through “basket” contracts.
For more information, please contact Bethany Blake via email or on 01603 604414.
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