Energy Procurement: A Painful Process Made Easy

In this edition of Voices of the Industry, Brian Frazier, Director of Energy Services for Stream Data Centers, outlines the benefits of energy procurement services. 

It’s typical for a company to view energy procurement as simply another cost.  Making the time to understand all of the options and what a company is buying is hard because of the complexity involved with the energy market. Companies often struggle with committing the resources needed to make the best decision, leaving them with an energy service that is the easiest, but not best. It’s a painful process, but it doesn’t have to be.

Difficulties Exist with Energy Procurement

Energy procurement is complex and can be hard to understand. Companies struggling to identify current and future energy usage often sign up for excess unneeded services. With the industry’s volatility and constant change, tracking supply and demand, regulation changes, and new technology is challenging and time consuming for most companies as well.     Because of this, choosing the easiest energy service is often the path forward, instead of choosing the best.

‘Green Power. There’s a lot of interest in ‘green energy’ today, but many companies don’t understand the different types of renewable energy products and their unique attributes. The sources of green energy (solar, wind, small hydroelectric, and geothermal) vary from state to state in terms of availability of resources, environmental impact, and cost effectiveness. If you don’t know what the market factors are, you can purchase green energy products without understanding its potential costs.

The Benefits of an Energy Procurement Service

An effective way to overcome hurdles associated with finding the best choice is through the use of an energy procurement service. For many companies, investing the time and effort to create an in-house understanding of energy procurement isn’t practical. Similar to outsourcing data center services to third-party operators, companies can utilize a third-party energy procurement service for their benefit. Providers of these services have in-depth knowledge of the industry and can work on your behalf to craft a solution ideal for your company. Additional benefits of an energy procurement service include:

• Creating an energy purchasing plan
• Market intelligence
• Risk mitigation
• Negotiating power
• Outsourcing a burdensome task

What to Look for in an Energy Procurement Service

Among other things, your energy procurement service should have experienced procurement specialists who have previously worked for energy retailers and generators. These specialists should have an intricate knowledge of factors that affect the energy market, and should have experience negotiating contracts with energy retailers. In particular, these specialists should have experience working for both regulated and deregulated energy markets, and should understand the unique rules present in each type of market. They should also understand “green” or renewable energy, and how to negotiate cost-effective contracts for it.

Your energy procurement service should provide an unbiased recommendation, and bring a large list of resources to bear, including a robust customer set, a list of major clients and energy providers with whom they’ve negotiated contracts. They should have good relationships with a wide range of local and national energy retailers, as well as contacts within government agencies (i.e. state public utilities commissions).

Interactions with your energy procurement specialist should not be limited to emails every few years to let you know when your services contract is up for renewal. Instead, they should call you regularly to discuss your upcoming power needs, and let you know about new energy opportunities and risks. If you have a contract or billing issue, you should be able to pick up the phone, call your energy procurement specialist, and have them work with your energy provider to fix the problem.

When you use an energy procurement service, a procurement specialist works with your company to help you understand your options, and make better, more informed buying decisions. The result can be a long list of advantages, including optimal long-term purchasing strategies, resourceful uses of Green Power, leveraging market intelligence, risk mitigation, negotiating power… and, of course, outsourcing an otherwise burdensome task to a worth professional.

Utilizing an equipped energy procurement service provides companies with an informed purchasing plan that will produce a new energy service tailored to fit their needs.

Brian Frazier is Director of Energy Services for Stream Data Centers.