Whether you’re shopping for energy plans or negotiating contracts with your suppliers, knowing the fundamentals of supply and demand can help you make better choices that benefit your organization. With a deep understanding of energy pricing, you can align your procurement strategies with market dynamics, unlocking significant savings.
Your energy rates vary based on what the wholesale price is for electricity on your power grid. This includes the costs to generate power, but also other factors such as:
Infrastructure: Rates go up when the local or regional grid needs upgrades or repairs. This is often the case when there’s an accident, a natural disaster or another event that causes damage.
Fuel Prices: Power plants need to buy the fuel that drives their generators, so when prices rise, it’s passed on to consumers in the form of higher rates. The most expensive fuels are oil, coal and natural gas.
Weather: The climate in your region impacts the cost to supply energy because power plants need to run more to keep up with customer demand during high temperatures. Prices also go up when the weather is cold and customers use more electricity to heat their homes or businesses.
Using less energy is the simplest way to cut your business’s electricity costs. You can do this by plugging electronics into smart outlets, choosing energy-efficient appliances and using line-drying and insulated windows. These tactics are good for the environment and will save you money over time because they reduce the need to purchase additional energy from your supplier.