Strategy and Sourcing: Energy-Buying Roles
Superheroes don’t always wear capes
Companies need energy procurement. That’s a given. But what do energy buyers do? That’s not a given.
We are in a time of massive changes in energy technology offerings and economics, cast against a backdrop of rapidly evolving state and federal political policy. Add to that the changes in how energy is packaged for sale, and today’s energy procurement involves a level of sophistication never before needed. Decision-makers are operating in an environment that is the most complex ever seen and will only become more so. Today, companies need to see energy purchasing not as simple procurement, but as a strategic imperative. This means energy buyers, and the consultants they often turn to, are more valuable than ever.
There’s no typical profile of an energy buyer
Energy purchasing is evolving, and it’s clear that companies come to their energy-purchasing decisions in a variety of ways. That’s reflected in the fact that companies’ in-house energy-purchasing decision-makers don’t live in the same place. Depending on a company’s priorities and perspective, energy buying may be seen as part of selecting inputs, running a building, managing costs or moving toward sustainability goals. Energy decisions can fall respectively within procurement, facilities management, finance or ESG.
The survey bore out the assumption that there is variance in both who makes decisions and where those decision-makers sit within a company. Of the respondents who shared specific job titles, only some had specific energy-related titles such as energy service engineer. However, the importance of the decisions was reflected by the finding that many more of the decision-makers were in C-suite roles, especially as chief operating officers, while others worked in facilities management or procurement.
Responsibilities range from strategy to implementation
Energy purchasing was defined as having any of the following responsibilities, and all survey participants selected one or more.
Keeping up with changes in the energy space, such as regulations, utility tariffs, etc.
Analyzing trends in the energy space to identify opportunities
Identifying cost-saving opportunities for energy and utilities
Developing or recommending energy and utilities strategies
Seeking out new energy sourcing options or providers
Negotiating and/or executing power supply contracts
Selecting an energy provider
Managing corporate energy projects
Monitoring and/or forecasting energy consumption
It’s a long and varied list of responsibilities, and it’s rare for anyone to check off all the boxes. So, corporations are increasingly turning to energy consultants to help manage the complexities of renewable energy.
Energy consultants’ expertise is valuable Resourcing and knowledge limitations are likely a key driver behind more than half (56 percent) of all organizations surveyed using an external energy consultant and an additional third (33 percent) planning to turn to energy consultants in the next five years. Larger companies are the most likely to tap external expertise. More than three quarters (76 percent) of companies with more than 2,000 employees and almost half (48 percent) of the companies with 1,000–2,000 employees said they turn to an energy consultant for at least some energy-purchasing functions. And in the future? They expect the use of outside consultants to grow.
Consultants complement in-house skill sets Energy consultants are expected to fulfill myriad duties, from analyzing needs, through developing recommendations, to identifying and negotiating with providers. Over time, many companies expect to take responsibility for the latter stages of the energy-purchasing process in house. For example, 41 percent said they use consultants to negotiate and execute power purchases; however, only 16 percent said they expect to use consultants to do this in the future. Counterbalancing that, companies said they expect to become a little more reliant on consultants during the early stages of the process. They need the consultants' expertise for analyzing trends in the energy space to identify opportunities, developing or recommending energy and utilities strategies, and identifying cost-saving opportunities for energy and utilities.
All consultants are not the same
When asked to name the energy consultants that their company used, it became clear that the market is highly fractured. Only two consulting firms were named by enough respondents to reach even a 5 percent share, a remarkably low percentage. This fractured market is more likely a sign of an emerging market in which the offerings and offerors vary greatly. Over time, it’s likely to gel as buckets of offerings become better defined and as energy buyers understand the landscape of offerings.
Director of Origination, LevelTen Energy
“There are two issues that we regularly hear about in our direct conversations with buyers, and through our network of nearly 30 energy advisors. First, buyers shouldn’t underestimate how long it can take to align internal teams around shared goals. Second, buyers need to understand what project developers are going through in order to negotiate contracts effectively.”
The roles of those tasked with energy procurement do not fit a cookie-cutter job description. Their titles vary and their roles range from very strategic to highly tactical, but they have one thing in common: they play an essential role in closing the gap between where we are today and where we need to be to limit the climate crisis. While energy consultants can be very helpful, filling corporate gaps where expertise is lacking or insufficient, there’s no consistency in where their expertise is needed. Their duties range from early-stage analysis and recommendations to negotiating with potential energy partners. At the end of the day, companies need to make a decision about what is needed in-house and what should be outsourced to a consultant.
For smaller companies with fewer locations, it may not make sense to build the expertise to analyze the complexities of energy offerings. However, periodically using a consultant to check they are not overpaying, that they have the right mix of sources and the right level of resilience, is likely to provide a good return on investment.
For larger companies with more complex needs, the leadership team needs to decide whether to invest in someone with strategic skills as a part of their team or pay for consultants to unravel the complexity. The answer should take into account not only the size of the spend, but also the breadth of the decisions and the time we have in which to take them. More geographies, more sites, more reporting needs, more varied uses such as offices as well as industrial or retail facilities… once there are enough “mores,” there’s probably a need to build at least one full-time role with a consultant’s support when needed.
Where energy buying is mission-critical, energy buyers need to help their companies understand the strategic importance of their role and the decisions they make. They may also need to educate the leadership team on where their role best fits in their particular organization: operations or finance, facilities or procurement. For energy consultants, there’s low-hanging fruit in clarifying offerings and building brand awareness. When you are marketing to companies mired in energy markets’ complexity, finding the right consultant should be the least complex part of the process. Energy buyers should not hesitate to reach for help to get where they need to go quickly.