Counteracting rising energy prices is a business necessity and a key part of any energy strategy, but today this requires a radical new approach to supply optimisation. That's because traditional procurement and cost mitigation methods are losing their effectiveness in the rapidly changing energy market; for example:
Despite the diminishing returns of traditional energy procurement and cost mitigation methods, the new decentralised energy landscape offers exciting opportunities for UK businesses.
For those who can transform their approach to energy procurement and supply optimisation, there's an attractive upside to market volatility and network instability. These businesses can profit from dramatic swings in wholesale prices, while maximising revenue from network balancing services.
The big challenge for 2019 and beyond is maximising your flexibility and aligning your procurement strategy with the way markets are changing. This means shifting from a traditional commodity based procurement model to a real-time trading strategy and combining this with Demand Side Response actions. In this way you can capture more value from your assets, including on-site generation and storage and real-time flexibility in your processes.
Taking supply optimisation all the way
Some organisations are already using flexibility to avoid peak time costs and earn revenue from DSR markets. Few, however, are taking this all the way and leveraging full value from faster response DSR, real-time wholesale markets and through grid balancing opportunities.
The extreme turbulence of today's wholesale energy markets, which can see prices as high as £1,500/MWh or as low as -£70/MWh creates opportunities for those businesses that can fully optimise their supply.
For example, it's possible to take advantage of significant imbalance price forecasts by selling any hedged energy (that's been purchased ahead at an advantageous rate) back to the grid at a high imbalance price. The business would then take a demand response action to compensate for the short duration power increase or decrease. Imbalance opportunities can generate revenue of hundreds of pounds per MWh.
Supply Optimisation positions customers to access emerging wholesale market opportunities, such as the Balancing Mechanism. Helping industrial and commercial organisations to reduce unnecessary exposure to these third-party levies and optimise around 70% of the cost of each kWh of power they consume.
Contrary to popular belief, it's also possible to reduce many non-commodity costs by using flexibility to capture multiple different revenue streams and avoid costs. We are helping industrial and commercial organisations to reduce unnecessary exposure to these third-party levies and optimise around 70% of the cost of each kWh of power they consume.
Barriers to progress
These new and exciting supply optimisation opportunities are vastly under-exploited because combining demand side response with real-time trading is incredibly complex. Few organisations have a dedicated energy trading team to navigate turbulent and risky wholesale markets, or the advanced technology and risk management systems to support decision making in real time without impacting productivity.
New artificial intelligence (AI) technology is breaking down the barriers to supply optimisation. By combining AI with real-time trading strategies, businesses can start converting their energy supply from a cost centre to a value stream.
Our AI technology uses intelligent algorithms to forecast and capture wholesale opportunities in real-time. When the price of electricity is too high or too low, it will automatically dispatch flexible assets to capture value – all within operational constraints and production planning. The software automatically visualises and monitors real-time flexibility and then manages and steers assets accordingly, thereby maximising cost savings and revenue generation.
Centrica Business Solutions has launched the UK's first Supply Optimisation contract, which represents a step change in energy procurement. Our end-to-end solution combines our patented AI demand response platform and industrial expertise with real-time wholesale trading capabilities from our 24-hour trading team.
By combining our industry-leading technologies and services, we provide automatic identification of market opportunities, linked with effortless trading.
In this way we are reinventing the supply contract and unlocking greater energy performance for our customers. We give you the power to choose when to consume or generate based on optimal market prices and lower overall energy cost – enabling you to not only save money but generate income, reduce carbon emissions and improve productivity.
As the UK's largest electricity and gas supplier with superior access to 27 European wholesale markets and as Europe's number one Demand Side Response provider, Centrica Business Solutions can deliver an innovative supply optimisation solution.
If you think your existing energy contract is 'flexible'... Think again! To learn more about our UK's first supply optimisation contract, get in touch.
Louis is an energy specialist, with over 11 years’ experience of leading innovation and driving adoption of new technologies across the full energy lifecycle in the UK and Europe. Louis is the Head of Strategic Sales and Optimisation for Centrica Business Solutions in the UK&I