At the end of March, Inspired Energy took part in a webinar, hosted in partnership with Procurement for Housing (PfH), on exploring the use of ‘collectives’ in energy management.
Let’s review what the experts said during the session, which is available to watch here.
What’s happening in the energy market?
In recent months the market has seen a lot of volatility due to geopolitical events unfolding. This has caused a spike in energy prices, however, due to mild weather and record levels of LNG, prices may be stabilising in the coming months. Storage levels are now back within our 5-year norms and oil and carbon remain strong.
Looking forward to Summer ’22 and Winter ’22, the increases are not as high as what we saw during the run up to Christmas, despite the differing conditions. We have seen larger spikes in pricing across some individual months. For instance, gas prices in April ’22 saw spikes as high as 800p per therm, the equivalent of paying 27p per kWh. Within the same day, the price dropped to 530p per therm and as of the timing of this webinar, we’re seeing around the 300p per therm mark.
In the last few days, the prices have spiked again by around 20% as a result of Russia demanding payment for commodities in Rubles, which will be difficult for some European countries due to the sanctions. Germany also submitted an early warning over a gas emergency if they were to demand payment in Rubles.
You can see how challenging it is in this market to plan because prices are so volatile at the moment.
There is still heavy backwardation in the market, meaning there is more attractive pricing further ahead, which could help justify looking at longer-term contracts. Especially on a flexible contract where we’re able to pick and choose different periods of time to purchase energy.
What is a ‘collective’?
When trading flexibly on the market with a supplier, it requires a minimum volume that you must trade each time you make a purchase. Typically, consumers using over 20 GWh of power or gas per year would have ample volume to do so. Those providers could then opt to have their own strategy on the market and create a bespoke solution to the needs of their business. But for many smaller housing associations and other organisations who have under 8GWh of power or gas, it’s unlikely that anything would be offered because of the minimum volume requirements.
The ‘collective’ enables an energy partner, like Inspired Energy, to group together lots of housing providers to give one group volume, which can then be used to purchase on the wholesale market. Giving access to housing associations of all sizes to spread the risk without the requirement of a large trading volume.
What are the benefits of the PfH collective?
Procurement for Housing (PfH) and Inspired Energy have tailored a strategy for housing associations, where we fix the wholesale energy and the industry costs in yearly intervals. Whilst we still spread the risk of those purchases over time, we still finish making those purchases before each annual period starts. Meaning we’re able to deliver budget certainty on an annual basis and avoid any risk within the year of the contract.
There are many other benefits to the PfH collective including:
- Protection on volume tolerance from group volume
- Compliant tender process completed in advance, reducing the burden of individual processes, and increasing speed of execution
- Low fees negotiated with multi-site specialist suppliers and high service levels agreed
- 100% renewable power included as standard
If you’re a social housing provider looking for support with your own energy management strategy, speak to our energy experts today on 01772 689250 or email email@example.com.