Gas 101 Series: What New Energy Buyers Need to Know
2 min readThere has been a shift in the energy industry where energy buyers are no longer solely focused on purchasing commodity. New energy managers entering energy management are coming on board with the responsibility to create an integrated energy management strategy, which might incorporate commodity with energy efficiency and sustainability solutions, for example.
Because of the energy buyers’ widened scope of responsibilities, regularly navigating energy market intel and trends becomes a pertinent part of the role yet a challenging one. Constellation can help new energy buyers identify the areas on which to focus their attention. Topics such as the fundamentals of natural gas, how the markets work and purchasing options to create a diverse portfolio are just a few.
In this blog post, we break down each of these topics to keep our customers well-informed and well-suited to become effective energy decision makers.
1. Natural Gas Fundamentals
Natural gas fundamentals include understanding the origin of natural gas and how it’s processed and delivered to commercial and industrial customers. But on a deeper level, understanding market fundamentals – like driving factors that impact price – is important for developing a successful energy management strategy.
If you’ve ever tuned into our Energy Market Intel Webinars, you’ve heard Constellation energy market experts cover energy supply and demand, weather, natural gas storage and production. These are some of the driving factors that impact energy price, and the factors impacting natural gas can also influence power prices.
For a sneak peek of helpful information to come in the blog series, watch the video below to better understand the changing role of the energy manager and to learn the basics of natural gas.
2. The Components of Natural Gas Price and Knowing Your Purchasing Options
Customers should understand the components of their total energy price to guide them in their natural gas purchasing strategy. We talk about two components of energy price: basis (e.g., transportation and storage are two elements of basis) and commodity price, which is typically based on the NYMEX Henry Hub futures price.
Since transportation is a part of the energy price, energy buyers might want to learn how natural gas flows through a transportation system – from a wellhead to the utility and then to the customer. Transportation costs vary depending on pipeline, location, availability, pipeline constraints and the level of reliability desired.
Customers should be reminded that even though natural gas prices are currently low, there are many factors that could have an impact on prices, such as transport. Staying apprised of these influencers allows energy managers to remain proactive in modifying their energy strategy to capitalize on price and risk.
Customers can choose from fixed natural gas solutions to achieve budget certainty or a flexible buying approach (e.g., floating and managed solutions) to allow businesses to take on more risk and take advantage of market opportunities. We will go into more depth on this topic in the final blog of the series.
By proactively engaging and educating our customers through market trends and analysis, we empower them to make more informed energy decisions. Visit www.constellation.com/gas101 to get access to the educational videos and other helpful resources for energy buyers.