Blog

June 22, 2012

Budget Certainty or Cost Savings When Purchasing Energy Competitively?

On June 14, SR Inc presented our latest management best practice research on Managing Energy Procurement Risk to Member-Clients at an Executive Meeting in Sunnyvale, CA, hosted by NetApp. This report is premised on numerous SBER Member-Client interviews with executives leading RE portfolios, including both corporate users and owners, and with leading energy management service providers.

This research and the discussion by over forty participating companies is part of SR Inc’s year round Sustainable Business & Enterprise Roundtable (SBER) business service on energy management and sustainability, which assists Member Executives responsible for managing more than one billion square feet of real estate (RE). Featured case studies include SBER Member-Clients Brandywine Realty Trust, Equity Office Properties, Genentech as well as City Sports, Dell, GameStop, Kohl’s, Bentall Kennedy, The Tower Companies, UBS and Vornado Realty Trust.

Key takeaways from the research include:

• Leading companies are achieving annual cost savings, on average 3-6%, through energy procurement risk management.
• To maximize savings, executives purchase RECs at little or no additional cost as part of the initial bidding, rather than as a separate contract at a later date.
• Executives managing national and international portfolios find that partnering with experts is key to navigating the complexity of regional energy markets.
• Lack of building staff expertise and building management systems continue to limit opportunities to participate in demand response programs.

Companies face increasing risk in U.S. and global energy markets due to price volatility, policy changes, and significant public pressure to transition to cleaner energy sources. Leaders are taking advantage of emerging opportunities to source energy competitively directly from suppliers, assisted by service providers, or through energy management companies.Many companies use competitive sourcing to ensure budget certainty. Through negotiation of alternative rate structures and beneficial contract terms, leaders can also achieve significant cost and time savings.

Companies operating in regulated markets also have the opportunity to achieve savings by creating an accurate load profile, optimizing their utility tariffs, and leveraging utility incentives instead of relying on regional utilities to provide accurate billing based on a default rate structure. Leaders also take advantage of declining prices of renewable energy certificates (RECs) to manage reputational risks and comply with regulatory changes.

The slide presentation and research presented at the 2nd Quarter Executive Meeting are available in SR Inc’s Member-only Digital Library. Member-Clients who do not have a username and password may request an account. You can also download an executive summary  of Managing Energy Procurement Risk.

SR Inc’s Research & Consulting Team (research@sustainround.com)