Market knowledge ‘essential’ when buying energy – CPO

Paul Snell is managing editor at Supply Management
15 May 2015

Energy buyers need extensive knowledge of both the marketplace and what is important to their organisation to be successful, according to the CPO at the International Renewable Energy Agency.

Speaking at the CIPS Middle East Conference in Abu Dhabi, Luay Shalkhoub said the increasing cost of electricity and gas was a concern to most businesses worldwide.

“The energy market is very complex and generates significant commentary. We in procurement should always monitor and keep updated on energy prices, international economics and world events in areas where oil is produced which can affect prices. And businesses need to decide how much time and effort they need to invest in securing supply to meet their requirements,” he said.

He added purchasers needed to think beyond securing a few quotes and choosing the cheapest short-term deal.

“The clear benefit is you have price assurance, as well as the best price on that day. But would you have got a better price if you had tendered a week, or a month, or a year earlier? Or should you have split your price risk by buying over a number of days instead of just one?” Shalkhoub asked attendees.

He advised buyers to consider what is most important to the organisation. “Is the cost the most important objective? And if it is, how long are you willing to pay a price premium to secure this?”

Shalkhoub also said purchasers needed to boost their knowledge on buying from renewable energy sources.

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