Demand for energy flexibility
23 Jul 2013
As energy prices become less predictable, industrial customers are demanding supplier relationships which give them greater control over purchasing, according to Gazprom Energy.
The business energy supplier, which caters for approximately 10% of the UK’s industrial and commercial gas market, says that as volatility has become harder to predict, customers are demanding greater choice and flexibility.
Mark Eccles, regional director for UK and Europe at Gazprom Energy, said: “We’re seeing the emergence of a new generation of energy buyers who want a relationship with their supplier, (one) that is no longer purely transactional.
We have to manufacture products as and when our customers demand them
“One of the growing requirements is to have forward cost clarity without paying a premium for it. This can only be achieved by giving customers the freedom to buy and sell chunks of energy in accordance with their forecast levels of demand,” he stated.
“The business has structured a contract that allows this level of flexibility for heavy engineering firm Sheffield Forgemasters. The agreement enables Forgemasters to buy chunks of gas well into the future to secure the best price available on the market,” noted Eccles
Today, Sheffield Forgemasters consumes more than eight million therms of gas at its Sheffield plant – with consumption flowing through four different meters across the site.
As production processes have becoming more and more energy intensive, and with the commodity prices for both gas and electricity increasingly volatile, the business’ energy procurement strategy is under a great deal of pressure.
Malcolm Lee, energy and commercial manager at Sheffield Forgemasters, explained: “We have to manufacture products as and when our customers demand them and often this requires actual production to be several years away. This puts an increasing pressure on us to understand the underlying cost of all of our components – and, especially, the energy element.”
However, if they do not use all the gas they have purchased, they have the flexibility to unlock their commitment and sell the gas ‘back’ onto the market.
“Forgemasters frequently bid for work scheduled for delivery months or even years in advance. As such, there is a real risk that it could commit to a gas contract 18 months in the future, only to find an unexpected increase in the energy element of production has made their order commercially unviable.
“To limit this risk we worked with them to design a bespoke and very flexible gas contract. This way of working will become the norm and suppliers need to ensure their systems are adequately sophisticated and flexible to meet customer demand,” concluded Eccles.
For more information, please contact: 08452 302 058 or visit: www.gazprom-energy.com/uk.
