Understanding flexible and basket energy procurement
Flexible procurement is, as the name suggests, more dynamic. Instead of fixing your energy price in one go, you buy it in smaller chunks over time. This gives you the chance to take advantage of dips in the market and potentially save money.
Understanding flexible and basket energy procurement
Most of us are familiar with how energy works at home. You sign up to a fixed-rate tariff, pay the same amount per unit for a set time, and you’re protected from price spikes. It’s predictable and easy to manage, and great for peace of mind.
That’s exactly how standard procurement works for businesses too. You lock in a price per kilowatt-hour for 12, 24, or even 36 months. It gives you certainty, which is handy for budgeting and planning. But there’s a trade-off: if the market price drops, you don’t benefit. You’re committed to the rate you signed up for.
So, what if you want a little more flexibility?
What is flexible procurement?
Flexible procurement is, as the name suggests, more dynamic. Instead of fixing your energy price in one go, you buy it in smaller chunks over time. This gives you the chance to take advantage of dips in the market and potentially save money.
It’s a strategy often used by larger energy users who want more control. But it does require a more hands-on approach. You (or your energy partner) need to keep an eye on the market, assess the risk, and know when to buy. It’s not a ‘set it and forget it’ approach, but when handled well, it can lead to better purchasing decisions and better value.
Why go flexible?
There are a few key reasons businesses choose flexible procurement:
- More control over cost: Buying in phases can help you avoid locking in at a peak price.
- Risk management: Spreading your purchases reduces the risk of getting caught out by a sudden spike.
- Custom budget strategies: With the right structure, you can set parameters to make sure your costs stay within an acceptable range.
That said, it’s not for everyone. You need enough energy usage to make it worthwhile, and the time, or trusted support, to manage it well.
Plus, some businesses simply prefer the stability of a fixed price, especially if they have tight budgets or low risk tolerance.
What is basket procurement?
For smaller organisations that like the idea of flexibility but don’t have the scale to manage it solo, basket procurement offers another route.
Think of it as power in numbers. Basket procurement allows multiple organisations to join forces, pooling their energy demand to buy together. This collective buying power unlocks better rates and gives smaller businesses access to a flexible strategy that’s usually reserved for larger energy users.
The energy is still purchased in phases, just like in flexible procurement, but it’s managed centrally, often by an energy consultancy. That means reduced admin for the organisations involved, with the added benefit of experienced support handling the strategy.
Why choose a basket?
Basket procurement gives you:
- Stronger buying power: More volume means better prices.
- Reduced admin: The consultant manages the strategy, so you don’t have to.
- Access to flexibility: Smaller businesses can benefit from a more agile procurement model without going it alone.
What’s the catch?
Like any shared strategy, it’s not perfectly tailored to one organisation. You’ll be following a collective approach, which means energy might be purchased at times that aren’t ideal for your individual business. Some baskets also come with longer commitments or set strategies that might not align with your internal risk appetite.
But for many, the benefits outweigh the trade-offs, especially with the right partner to manage the process and provide insight along the way.
Finding the right fit
Ultimately, the best procurement strategy is the one that aligns with your business goals, energy usage, and appetite for risk. Whether you want the certainty of a fixed contract, the control of flexible purchasing, or the shared strength of a basket approach, the key is understanding your options and having a partner who can guide you through them.
At Equity Energies, we work closely with our clients to help them choose the right route and navigate the market with confidence.
To find out how we helped Portsmouth City Council improve its energy procurement click here.
