Business energy: SMEs must lead the charge in procurement strategies

In today’s world, where the pressures of a burgeoning climate crisis meet the harsh reality of rising energy costs, small businesses find themselves at a pivotal crossroads.

Recent actions by Ofgem, such as the reduction of the energy price cap for consumers, have provided a glimmer of hope for households grappling with ever-increasing bills. However, the same reprieve does not extend to businesses. Government support for them remains static – anchored only by the Energy Bill Discount Scheme (EBDS) introduced at the start of the year – and timelines to achieve key green pledges have been dragged out. This contrast underscores the critical need for businesses to take their sustainability and energy procurement strategies into their own hands. 

The current energy landscape

In the ever-evolving energy landscape, the recent surge in oil prices has sent shockwaves through global markets. Huge inflation, partly prompted by the catastrophic invasion of Ukraine, and exacerbated by turmoil in the Middle East, has seen per barrel oil prices reach huge levels. But, even as pricing has fallen, this hasn’t translated to cheaper electricity and gas for SMEs.

As the world’s energy dynamics continue to shift, businesses are confronted with the urgency of proactively managing their energy procurement strategies in an environment marked by heightened price volatility. 

Government support and its limitations

The EBDS has been a help to businesses – but the government has shown a lack of agility in adapting to the dynamic energy market. As it gradually scales back its support – EBDS ends in March 2024 – businesses must actively seek alternative solutions to their energy woes. Fundamentally, the situation requires a change in mindset – from one of reliance on external assistance to one that prioritises active management of energy procurement strategies.     

Seizing control: the imperative for businesses

In short, a forward-thinking approach to energy sourcing and pricing involves businesses evaluating their energy mix, exploring innovative technologies, and adopting sustainable practices. This is the way to mitigate the impact of energy costs – all while aligning operations with sustainability objectives. 

Good energy procurement is an opportunity – not a burden. By investing in the right strategies and technologies, businesses can reduce costs and enhance sustainability – a duality that serves as a linchpin for long-term success, both from an economic and environmental standpoint. 

The intersection of savings and sustainability

Let’s explore this in more detail.The pursuit of greener and cheaper energy sources is not a zero-sum game. The reality is that renewable energy solutions, energy efficiency enhancements, and demand-side management practices  are all cost-saving measures and crucial contributors to a more sustainable future. 

Plus, in a world where customers, investors, and stakeholders increasingly demand businesses to take an assertive stance on environmental responsibility, integrating sustainability into energy procurement strategies can bolster a company’s reputation and market position. 

The holistic approach to energy procurement

Effective energy procurement strategies encompass a holistic approach that extends beyond simply selecting the lowest-cost energy source. Instead, businesses should consider various factors, such as the reliability of energy supply, the environmental impact of their choices, and the potential for future cost volatility. 

This requires a nuanced understanding of the energy market, which can be facilitated through data-driven analytics and expert guidance. Calling upon energy procurement specialists and real-time data modelling on energy consumption ensures that businesses can remain flexible and adaptable in their approach to energy sourcing. The energy landscape is in a state of constant flux, with regulatory changes, technological advancements, and market dynamics continually reshaping the terrain. Staying ahead of the curve demands benefiting from the expertise of specialists with a willingness to innovate and embrace new opportunities for negotiating competitively priced energy contracts – such as Power Purchase Agreements (PPAs) and decentralised energy solutions – in a way that best suits the specific needs and energy usage patterns of each business.

The road to long-term success

In a world where the climate crisis intersects with a volatile energy landscape, businesses face a pivotal moment. Government support, while valuable, is not a long-term solution, placing the responsibility squarely on small businesses to take the lead in managing their energy mix. 

The good news is that energy procurement, when approached effectively, can reduce costs while championing eco-responsibility. And in the modern business world, a convergence of economic prosperity and environmental stewardship is the key to enduring success.  

As the energy landscape evolves, those who actively manage their energy procurement strategies will not only weather the challenges but also emerge as changemakers in a new era of energy sustainability and resilience. 

Ruari Cairns - Director of Risk Management and European Operations at True, powered by Open Energy Market

Open Energy Market are a provider of energy procurement services and Net Zero technologies, established in 2012 with the aim of making the energy industry more transparent and accessible to businesses. We specialise in utilising data and insights to inform our Risk Management, Trading and Sustainability experts, bringing cost savings, confidence and control to clients in a volatile market.

True