When it comes to energy procurement – whether conventional or renewable – data centers and other companies can benefit from leveraging outside expertise in energy consumption management, retail electricity contracting and strategic engagements with industry or government recognition programs. Through our Energy Procurement Services, we offer all this and more as we strive to help our customers get the pricing, contracts and billing terms needed to drive bottom line savings.
Navigating Competitive Electricity Markets
In deregulated U.S. energy markets, there are two prevailing market structures — energy-only markets that charge customers solely on their energy use, and capacity markets that incorporate fees to pay energy producers for their ability to provide reserve capacity to meet peak demand. Across both these types of markets, volatility continues to push rates upward.
For example, in the energy-only Texas market, prices went up at the beginning of this year in response to the Electric Reliability Council of Texas’ (ERCOT) decision to retire 4,200 megawatts of capacity from three plants. As a result, we have seen many companies pegged with higher pricing quotes than they have been used to. Even without specific factors like the ERCOT ruling, the Texas market is no stranger to price fluctuations. For a brief period this January, prices went from as low as $20-30 a megawatt-hour to a $9,000/MWh price cap. With this type of volatility, companies need to be aware that their budgets could be impacted significantly if surges like this occur more frequently and for longer durations.
Similarly, capacity markets offer their own price challenges. Here, customers pay for the energy they use as well as a capacity and transmission cost/obligation; this is based on their historic power usage as a data center, hospitality company, manufacturing facility or other commercial entity. In some capacity markets, the customer’s capacity obligation is determined in part by calculating the five peak hours of use over summer months. For new facilities, this can result in an artificially low capacity price that will likely rise over time as their actual demand gets calculated by the grid operator. Thus, customers that can manage their demand in peak summer hours can reap long-term benefits of keeping their capacity obligations consistently affordable.
With Stream’s expertise in energy consumption management and pricing negotiations, we can help ensure our clients achieve reasonable, best value rates in the competitive markets where they have a presence. Of course, price is not the only aspect of energy procurement that enterprises need to consider.
Getting the Right Energy Products
Many companies view energy products as “one-size-fits-all” with competing prices being the only difference between energy providers. As a result, they run the risk of buying energy products that don’t fit their business needs or goals. For example, a retail energy supplier may offer a data center owner a “fixed-rate full requirements” package, which means they pay a fixed rate for power as they use it. A company which is a large-scale power user, however, could benefit more from the cost-effectiveness of making a block purchase of power. For example, a 10 MW data center might buy 9 MW of power, with the capability of scaling up later if they use it all. You can find out more about all the issues to consider when purchasing energy by reading our free white paper on energy spending here.
Even more complex is the issue of adding green energy into a data center’s power mix. Recently, 451 Research released a report on how data centers are beginning to show interest in renewable energy generation to lower carbon emissions and reduce dependency on fossil fuels. However, procuring the right type of renewable energy to add to conventional sources can be tricky. In fact, despite almost 40% of survey respondents claiming that they are considering using renewable power, less than 20% of enterprises reported adopting it.
The low adoption rate can be attributed to the unfortunate reality that many companies do not fully understand the different types of renewable energy products and their unique attributes. The sources of green energy (solar, wind, small hydroelectric and geothermal) all vary from state to state in terms of availability of resources, environmental impact and cost effectiveness. That’s where a Stream Energy Procurement Specialist can assist; they help their clients fully understand their energy options so that they can develop an optimal energy purchasing strategy. Getting it right is crucial. Picking the wrong types of renewable energy can be costly and even result in a need to increase dependency on conventional sources.
The Stream Commitment
When it comes to buying electricity, many companies with large power consumption needs are “price takers.” They don’t have the market experience or the time necessary to understand the ins and outs of energy procurement, the terms of their power contract or how energy market trends affect the prices they pay. Therefore, they often take whatever deal an electrical retailer offers them, without questioning if the pricing, terms and timing are right for their business and its goals.
The answer to this problem is to trust the experts! Our professional energy services complement customer procurement efforts by arming them with an unbiased data-driven view of market conditions, retail electricity providers and energy-efficiency opportunities. Stream’s energy procurement philosophy is based on a market-driven approach, positioning customer teams as active participants in volatile energy markets. So, give yourself the peace of mind to remain focussed on your business. Take advantage of our expertise, our strong relationships with energy providers, our dedication to providing an unbiased view and our impeccable customer service. Contact us today!