Developing Your Electricity Purchasing Strategy
3 min readToday’s competitive electricity markets are experiencing market volatility that hasn’t been seen for over a decade. To be successful, decision-makers need to be market savvy in their purchasing. There are many reasons why commercial and industrial organizations should be interested in an electricity purchasing strategy including potential cost savings, risk management, and meeting sustainability goals. It’s easier than you may think to design an electricity purchasing strategy optimized for your business, and developing a comprehensive strategy is imperative to achieving your organization’s goals.
Understand Your Load Profile
Load profile typically refers to the pattern of electricity usage over time. Think of it as the how and when you use electricity. Your usage may vary depending on factors such as time of day, day of the week, and season.
Know Your Usage Patterns
Your energy usage pattern refers to the unique pattern of energy consumption over a given period of time and is influenced by a variety of factors, such as the type of building or facility, number of occupants, weather conditions, time of day, and the day of the week.
For example, an office building may have a different energy usage pattern during the workweek compared to the weekend, as the building’s occupants and energy needs will be different. Similarly, a manufacturing customer may have a different energy usage pattern during the winter compared to the summer, or during times of high manufacturing. Usage, as well as heating and cooling needs will vary depending on the season.
Energy usage patterns are important data for energy providers like Constellation. By evaluating your energy usage pattern, we can develop a tailored solution to that may reduce your energy costs or may help identify areas for efficiency improvements.
Example of a Customer Monthly Load Profile
Next: Define How You Want to Purchase Your Electricity
Once you have a good understanding of your energy needs through your load profile and usage patterns, it’s time to build your purchasing strategy. Constellation’s research has confirmed that “the how” or choosing the correct purchasing strategy is essential to successful electricity management. Constellation evaluated 73 purchasing strategies (using a baseline load profile across 4 ISOs for a period of 11 years), factoring in varying market conditions, we found a managed purchasing strategy that divides purchases into planned intervals over time, minimizes risk while maximizing cost savings.
A personalized, managed strategy can be as sophisticated or simple as your goals but should consider how to optimize your costs (price), timing decisions on when to buy, and how much of your usage to buy with each purchase decision. The chart below shows the example of how Constellation’s research tested buying strategies.
Benefits of an Electricity Purchasing Strategy
Cost savings: Electricity is a significant expense for commercial and industrial customers and developing a purchasing strategy can help optimize energy usage and reduce costs. By taking advantage of market trends and price fluctuations, customers can purchase electricity at lower prices, which can result in significant cost savings over time.
Risk management: Developing an electricity purchasing strategy can help manage risks associated with energy price volatility. By locking in prices for electricity, or layering in purchases over time, customers can avoid unexpected price increases and better manage their energy costs.
Sustainability goals: Customers may have sustainability goals related to energy usage and carbon emissions. Designing your electricity purchasing strategy to incorporate emission-free supply, renewable energy certificates (RECs) or purchasing from new-build renewable energy sources, customers can reduce their carbon footprint and contribute to a more sustainable future.
Customers with effective power purchasing strategies can better manage their energy costs and reduce their carbon footprint. A well-designed electricity purchasing strategy can help customers achieve these goals and enhance their reputation as a responsible and sustainable business.
Download Constellation’s electricity purchasing strategy whitepaper and connect with a Constellation representative today to start building your plan today.