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17 September 2012 | Anna Reynolds
Energy buyers are “grappling with new government initiatives and are under pressure to come up with sustainable, economical and price resilient solutions” according to Gary Worby, managing director at energy brokers EnergyQuote JHA.
Speaking exclusively to SM at the Energy Event 2012 last week, Worby highlighted the impact of the government’s Electricity Market Reform and rising energy prices on procurement, which he said is one of the biggest challenges for buyers.
With 50 per cent less gas expected to be produced from the North Sea over the next decade and government initiatives to phase out the use of coal and nuclear power, energy procurement behavior is changing.
“Procurement has turned into a full risk management portfolio structure rather than a one-off purchasing activity. Energy is no longer a buy-only product, it’s a buy and sell product,” said Worby.
Increasingly he has identified a trend of buyers producing a risk management strategy where they can ensure greater security through longer-term contracts that enable them to buy, sell back and buy again, taking advantage of the best energy market prices.
Further, many buyers are looking to introduce ‘power purchase agreements’ into their procurement strategies where the buyer negotiates directly with a generator, rather than a supplier. This not only often offers a more attractive price but also has benefits in guaranteeing a company’s corporate social responsibility.
But Worby said buyers are delaying decisions and investors are reluctant to put money into in green energy projects, fearing financial loss due to the lack of government certainty over subsidies.
He added larger consumers are moving towards a ‘total energy solution’ that involves using waste from production processes to generate fuel, reduce carbon emissions, cut waste management costs and earn money by exporting energy back to the grid.