There are several important parts of the conversation surrounding your business’s energy usage and efficiency, and the resulting costs are naturally one major piece of most such discussions. Energy costs and prices will depend on several different important variables, and understanding these and how they impact your business is very important for both short-term and long-term needs.
At Onsite Utility Services Capital, we’re happy to provide energy management and procurement services to numerous entities, from grocery stores and manufacturing facilities to healthcare facilities, schools and various municipalities. We work with a variety of clients on the major factors that impact their energy costs, plus how to keep these low without negatively impacting the way your facilities run. What are some of the key variables to be considering here on a regular basis? Here are several.
Your Energy Plan and Contract
One of the broadest and most important things to consider is your energy plan and contract. You may be on a standard variable rate with your local utility, or you could have a more sophisticated plan in place that’s customized to how your business actually uses energy.
There are many options here – and the right one can save you considerable sums of money annually while ensuring you always have the energy you need to power your facilities. This is one area where working with an energy management company can be very helpful, as they can help you understand all the options and make the best choice for your business.
For instance, a facility like a school might budget their energy use by the month, meaning a little more costs upfront but stable pricing that doesn’t change with market conditions. On the other hand, a grocery store might choose to go with real-time pricing, which can be cheaper – but only if market conditions cooperate. In either case, these choices must be made with care and an understanding of how your business uses energy.
Fuel Sources Used
Another major variable here will be the fuel sources used to generate the electricity your business needs. In many cases, this is natural gas – but it could also be coal, solar, nuclear or hydroelectric power.
The fuel source used can have a big impact on how much you pay for energy. For instance, nuclear and hydroelectric power are very stable in terms of price, while solar energy prices can be highly variable. Even within natural gas, there can be big swings – and this is one reason why it’s often best to work with an energy company that can help you lock in a good rate.
Proximity to Energy Supply
While it may not seem like it, another big factor impacting your energy costs will be proximity to the actual energy supply. This is most often seen in cases where a business is on the fringes of the electrical grid, and must pay more to have electricity brought in from further away.
This is less common than it used to be, but can still crop up from time to time – especially with rural businesses. In these cases, working with an energy company can often help you find ways to lower your costs and get the energy you need at a price you can afford.
Energy Market Cycles
Like many other markets, the energy world fluctuates throughout the year – and these cycles can have a big impact on your costs. Understanding when prices are low and lock in a good rate can save you big money over time, while also ensuring you have the energy you need when prices are high.
Most of these changes are based on temperature, both local and across the country. For instance, a hot summer will often lead to higher energy prices as everyone cranks up their air conditioners – but if you’re prepared for this and have locked in a good rate, you won’t be affected.
On the other hand, a cold snap can sometimes cause problems for businesses that use natural gas for heating. If there’s a sudden spike in demand, prices can rise quickly – but if you have a contract in place, you may be protected from these increases.
Working with an energy company can help you understand all the different market cycles and how they might impact your business. This is vital knowledge, and one of the key reasons working with pros is so valuable.
The way the general economy is doing will also have an impact on your energy costs. When times are good and businesses are expanding, demand for energy is often higher – leading to higher prices.
Conversely, when the economy is struggling, demand falls and prices usually follow suit. This is one reason why energy costs tend to be lower during recessionary periods.
Finally, did you realize that government entities like the Department of Energy can also have an impact on your business’s energy prices? It’s true – and it’s one more reason why understanding the conversation around energy is so important.
For instance, the Department of Energy can influence things like fuel sources and energy efficiency standards. These decisions will then filter down to businesses like yours, affecting your costs in one way or another.
In some cases, these changes can be positive – like when the government introduces new incentives for using renewable energy sources. But in other cases, they may end up pushing prices higher.
Paying attention to all these different factors is vital for any business that wants to keep its energy costs under control. For more on this, or to learn about any of our energy management or energy procurement services for your business, speak to the team at Onsite Utility Services Capital today.
June 28, 2022
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