10 July 2020
The measures that have been put in place to manage the spread of the Coronavirus pandemic have had huge impacts on all aspects of our daily lives and the UK’s energy market has been going through high levels of turbulence as a result of the recent lockdown.
As more and more organisations closed their workplaces, and large parts of the economy ground to a halt, the demand for energy plummeted which has resulted some of the lowest energy prices we have seen for 5 years or more
This high level of turbulence in the energy market over the last few months is likely to continue into the near future. Demand is likely to slowly increase across most of the globe but with the recovery varying markedly in terms of its “U” or “V” shape from market to market – and the ever-present risk of second spikes, further lockdowns and subsequent dampening of the recovery. One of the basic rules of markets is that what goes down must inevitably go up; the challenge is to forecast “when”.
Taking a fresh look at your energy purchasing strategy now, can help mitigate any financial risk later when prices will inevitably rise.
Don’t become complacent
Your organisation’s energy requirement may look very different to what they did before the start of the pandemic, as more and more workplaces have closed, production has slowed, and people work from home.
With energy prices being so low, there are many opportunities within the market to secure low prices but its important not to become complacent, as we know with the energy market, prices don’t stay static for very long and decisions made at any point can have a lasting impact on your costs.
Often when energy prices are high, those organisations who don’t have an energy strategy in place can be left with very little room for manoeuvre as the financial risks are at their highest. As the prices start to reduce, it can be easy to think that they will continue to go down and often it becomes very difficult to make decisions about your organisation’s energy procurement at this stage as the tendency is to hold out for the best offer. However, experience tells us that prices don’t stay low for long so it’s often best to act decisively when the prices are in your favour.
We have already seen, from the very steep decline in March, that the price of energy has been slowly increasing so its important that your energy procurement strategy is closely looked at now, to make sure that you are able to make the most of the opportunities that are still available.
Below is a chart showing how energy prices have increased since the 1st April this year.
Defining and managing your purchasing strategy
Finding the right time to procure your energy will all depend on your organisation’s objectives. It’s not always about just securing the best price, your priority may be to secure price stability, or to minimise the impact your organisation has on the environment and these are all things that can be managed with an effective energy management strategy.
Taking a fresh look at your current energy consumption, as well as the organisation’s appetite for risk, as this may have changed over the recent months, is the best place to start.
Many of our clients have already been able to take advantage of the market fall in March through our pro-active approach to energy management. In doing so, they have managed to secure very competitive pricing for future contract periods and have the peace of mind that Inenco are supporting their business to be as competitive as possible in what will probably be some extremely tough times ahead.
Having supported our clients through more than 50 years of market turbulence Inenco can support your business to understand the key risks and opportunities in the marketplace now to secure your business for the future.
Our consultancy team are available to provide you with a consultation and undertake an analysis related to your specific data and priorities. To find out more call us on 08451 46 36 26.