It’s tough being an energy expert
July 04th 2007 Energy Buyers and Managers can expect to face increasing turmoil over the next 12 months. It will become a time when energy becomes even more the centre of attention and associated disciplines scramble for better positioning.How energy procurement has changed and where it is heading is a key question we will all ponder says Robin Hale, director & general manager,meuc
The comfort of long-term fixed contracts – Energy purchasing has seen a huge change from the comfort of long-term fixed contracts a couple of years ago. Then once a decision to buy had been made that was it, and in many cases of a few that was it for three years or more. Energy Managers could focus on other aspects of the job and Energy Buyers could get back to the real purchasing problems such as the raw materials for their products. It’s true to say that although it didn’t seem like it at the time, energy was a simpler affair.
Flexible arrangements are the in-vogue option The market has moved on and energy contracts embrace more complex flexible arrangements that need constant care, attention and decisions. Flexible arrangements are the in-vogue option but they too involve contracts that see the customer and supplier staying together for three years or more.
The difference is the work needed to monitor the arrangement.Tranches of your consumption during the term can be fixed how and when you want and depending on your arrangement you can make this easy or complicated. This has created a dilemma within organisations. Should extra staff be taken on to monitor the market? Can the current Energy Manager cope with the added responsibilities? Should the task be outsourced? The smartest energy consultancies have seen this opportunity and taken on board experts in trading and markets to develop efficient ways of monitoring these flexible arrangements, tying up with suppliers of choice and providing solutions on all aspects of purchasing and carbon reduction. What is your view on risk?
There is one thing that ties all of these arrangements together – a simple question but not a simple answer. What is your view on risk? Risk has become the single most used word in the energy market and will determine your outlook and ability to play the game.The wholesale energy market is where the action is and whereas in the past you made either a good, bad or no decision you can now do that on a more regular basis. How much or your portfolio you risk is now entirely up to you.
At the mercy of market forces
The past 12 months have not provided the volatility that may you have expected.The winter was mild and supply has been available so flexible arrangements and the associated risk has not been explored fully. You are at the mercy of market forces, politics and the weather. If Russia stems the flow of gas, LNG is diverted to the US, the weather in the UK is cold and renewable generation is low we could see energy contracts really tested.Will flexible arrangements stay the course? Will risk management keep the heat down? Will new contracts include trigger clauses? One thing is certain – the customer always pays so close relationships with your supplier is vital to share the burden.
Information is power
Keeping on top of the market is the only way to stay ahead of the game. Energy Buyers and Managers need to be shrewd. Market information, benchmarking, legislation, regulation both here and in Brussels, new technologies and sharing experiences with your peers has never been more vital. Information is power. Sitting in your office behind your computer is a lonely business. It’s time to get out, come to a meeting of the Major Energy Users’ Council and see how the industry leaders are succeeding in this changing market. To attend a meeting without charge, email me now – robin.hale@meuc.co.uk | 
