Putting energy into change

1 November 2012
Changes in the energy sector mean this is becoming an increasingly interesting area for supply chain management, procurement professionals and their organisations. Why, you may ask? Let’s take a closer look at the reasons and their implications for everyone involved. The sector is at the beginning of an impressive investment programme that could hit £200 billon over the next decade. Between 2010 and 2011 alone, employment in the energy sector grew by 6 per cent and investment by 10 per cent to £10.3 billion, according to Ernst & Young’s latest report Powering the UK. But let’s get back to the bigger picture. A large proportion of this decade-long programme will end up coming under contract, either for the significant amount of smart grid, smart meter and generation infrastructure, or for the services that will be needed to deliver these and other initiatives, such as the Green Deal. Getting the best value from this investment will drive a greater focus on cost and value for money throughout the supply chain. This focus is likely to come in different ways from different stakeholders. Shareholders will always seek greater returns for their significant investments, and regulators and consumer groups will continue to get under the lid of utilities cost bases. These strong forces, combined with other government initiatives, are likely to continue driving additional competition in the markets that serve the sector. This is good for utilities and good for consumers, but supply chain management and procurement capabilities will also need to increase to cope and get the most out of this changing landscape. Finally, although not directly linked to the energy sector, the indirect consequences of the G4S Olympic security and West Coast Main Linetenders are likely to mean added scrutiny on process, compliance and controls, incentives and performance management for every future high-value and high-profile tender. So brace yourselves for an interesting decade ahead. Even if it feels like not much is changing in the short-term, supply chain and procurement in the energy sector will be going through a quiet renaissance. ☛ Paul Bakstad is advisory director at Ernst & Young
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