How can you manage energy procurement contracts in a volatile market?

1 Understand your energy profile

Before you enter into any energy procurement contract, you need to understand your energy profile. This means analyzing your energy consumption patterns, peak demand, load factor, flexibility, and budget. Your energy profile will help you determine the best type of contract for your needs, whether it is a fixed-price, variable-price, or hybrid contract. It will also help you negotiate better terms and conditions with your supplier, such as volume tolerance, pass-through charges, and termination fees.

2 Choose the right contract length

Another important factor to consider when managing your energy procurement contracts is the contract length. The contract length determines how long you are locked into a certain price and how often you can review and renew your contract. In a volatile market, you may want to avoid long-term contracts that limit your ability to adapt to changing market conditions. On the other hand, you may also want to avoid short-term contracts that expose you to frequent price fluctuations and uncertainty. A balanced approach is to choose a contract length that matches your risk appetite, budget, and forecast.

4 Diversify your energy portfolio

Another smart strategy to manage your energy procurement contracts in a volatile market is to diversify your energy portfolio. This means sourcing your energy from different suppliers, regions, and sources. By diversifying your energy portfolio, you can reduce your dependency on a single supplier or market, and increase your resilience and flexibility. You can also take advantage of the opportunities and benefits of renewable energy sources, such as solar, wind, and biomass, which can lower your costs, carbon footprint, and exposure to market volatility.

5 Review and adjust your contracts

Finally, you need to review and adjust your energy procurement contracts periodically to ensure that they are aligned with your goals and expectations. You should evaluate your contract performance, compare it with the market benchmarks, and identify any gaps or issues that need to be addressed. You should also communicate with your supplier regularly and establish a good relationship based on trust and transparency. If necessary, you should renegotiate or switch your contracts to secure better prices, terms, and conditions.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?